UK Trade and Investment Strategy

Bill Esterson Excerpts

Tuesday 23rd July 2019 Westminster Hall

[Bill Esterson (Sefton Central) (Lab)]

It is always a pleasure to serve under your chairmanship, Mr Davies. I congratulate the hon. Member for Hornchurch and Upminster (Julia Lopez) on her thorough speech. In her stout advocacy for the right hon. Member for Uxbridge and South Ruislip (Boris Johnson), whom she mentioned more than once in the course of her remarks—

[Julia Lopez]

Only once.

[Bill Esterson]

Was it only once? It felt like so much more—I cannot think why.

The hon. Lady called for the merger of the Department for International Trade and DExEU. I wonder where the Minister might fit in the brave new world of the new combined Department—whether, indeed, he has a place in it. I wondered also whether the hon. Lady’s challenges to him were part of his job application for one of the roles among the new Ministers. Perhaps how well he does in that job application will depend on his responses to her questions.

I agree with the hon. Lady about the need for a coherent and global world trade strategy that is attractive to investors. We probably diverge a bit after that point, but we agree about the importance of a strong trade and investment strategy.

The folly of the Government’s strategy—or lack of one—was shown in the comments of their Canada trade envoy, who set out the stupidity of publishing zero tariff schedules. It is now pointless for the Government of Canada to spend time negotiating an agreement with us, as it will not be better than the deal that we have already unilaterally given away. Zero tariffs mean opening up to importers with no guarantee of anything in return. An effective strategy would, of course, ensure the best market access to our main trading partners and build confidence among investors.

We are about to have a new Prime Minister—I am assuming it will be the right hon. Member for Uxbridge and South Ruislip—who advocates a no-deal Brexit and is keen on the idea of undermining our economic relationship with our nearest neighbours and a trading bloc that accounts for well over half of our trade, either directly or through agreements with 70 countries to which we are party through our membership of that critical trading bloc. It is madness to be considering no deal. It is the opposite of the robust, considered and credible strategy that is needed. It is an act of economic self-destruction, and Parliament must do all in its power to prevent such an outcome.

Investors want us to have the best access to the EU, and so does the Labour party. Businesses need frictionless trade and regulatory alignment, and so do workers. The prospect of no deal is causing enormous damage, as businesses and investors wait or decide to move elsewhere while we delay. No deal must be ruled out. It is in our strategic interest to do so, and it is what business organisations and trade unions are calling for.

The fall in inward investment shows what is happening as a result of the lack of certainty. There has been a massive fall in investment projects and new job creation, while the number of jobs saved through investment has fallen by nearly 80%. The number of foreign direct investment projects has also dropped sharply. On the point about uncertainty, Kent County Council said in its evidence to the International Trade Committee that there is no doubt that the UK’s reputation has been significantly damaged by Brexit-related uncertainty.

The British Chambers of Commerce says that we lack consistency in provision of trade support for both imports and exports, and ADS draws attention to the poor funding of the British presence at trade shows; other countries have much larger pavilions and a more coherent national offer to prospective customers. They also give a strong signal that the Government back their domestic sector. The Society of Maritime Industries made the same point in its evidence to the International Trade Committee. It submitted a photograph of the German pavilion, which was much larger than the neighbouring British pavilion. It asked: which country’s message is more effective—the simple “Made in Germany” in large letters or “Innovation is GREAT” in much smaller letters? It also asked which pavilion made the companies more attractive to visit. It was in no doubt that its German competitors had better support. Our reputation has been damaged through Brexit incompetence. There is a lack of support for exporters, and no sign anywhere of a strategy for trade and investment.

To succeed in international trade, we must align our domestic and international strategies. That means delivering on the Government’s stated aim of moving to a zero-carbon economy. Labour recognises the benefits to be had in jobs and prosperity from investing in the $26 trillion global opportunity of moving to a zero-carbon world. That figure comes from the Intergovernmental Panel on Climate Change.

The Government say that they are committed to net zero by 2050. However, that does not stack up when we remember that we are funding fossil fuel development overseas; 99.4% of UK Export Finance provision in the energy sector went on fossil fuel development in places such as oil refineries in Bahrain. Just £1 million was spent on renewables, but £4.8 billion went on oil and gas. Raiding the international development budget—something announced yesterday by the Secretary of State—is not the answer. We should use aid to help developing nations, not to give further support to the fossil fuel industry.

UK Export Finance should be helping with the development of renewables; otherwise, we are just exporting our emissions to the developing world and elsewhere, as of course is the case when we do not include emissions from shipping and air freight in our carbon reduction targets. The emissions do not go away as if by magic just because we pretend they are not part of our carbon footprint. Christian Aid rightly says that the support for fossil fuels is incoherent. We have world-leading marine technology in tidal energy. Where is the focus on renewable energy at the heart of an exciting and financially rewarding export strategy?

Under article 2(c) of the Paris agreement, the Government’s policy priority should be:

“Making finance flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient development.”

The figure of 99.4% going to fossil fuels from UK Export Finance is the exact opposite of the stated policy of our Government. As Global Witness told the Select Committee, UK Export Finance should measure the greenhouse gas impact of the projects it funds. The US Overseas Private Investment Corporation adopted a greenhouse gas cap for its projects in 2007, and it is no surprise that it has shifted towards clean energy investments. If the private sector in the United States can do that, why cannot we? Labour believe we can.

Global Witness says that, for trade and domestic policies to match, UKEF should no longer invest in fossil fuel projects. Ministers like to remind us that UKEF is an award winner—but why should it not win awards for its low-carbon policy? The Canadian and French export credit agencies have more stringent controls on fossil fuel support. One of the two Swedish agencies did not lend to any fossil fuel projects in 2015 or 2016. If they can do that, why cannot we? Global Witness also says that the Department for International Trade should realign export support to renewable energy. There is an export opportunity for us, if we want to grasp it, in what it describes as floating offshore wind. Why not? UKEF has stopped investing in businesses that rely on child labour. Why not take the same approach to global warming?

The Government have woefully underprepared the UK for operating an independent trade policy. Trade remedies legislation is still not ready. There is no sign of the Trade Bill passing through Parliament. Existing trade deals are vulnerable to lapsing without replacement, not least because of the incompetence of the International Trade Secretary in announcing zero tariffs, as the hon. Member for Brigg and Goole (Andrew Percy) reminded us in his resignation statement as the Canada trade envoy. He described it, let us remember, as “cack-handed” planning and felt patronised by the Secretary of State when he warned of the dangers of a no-deal tariff schedule and its impact on the prospects for the roll-over of trade agreements. As the hon. Gentleman has asked, why would those who are already getting 95% of what they want rush to sign up to what the UK want in the event of no deal? It does not bode well when a Back Bencher has a better grasp of international trade policy than the Secretary of State.

Labour will align our trade and industrial strategies to promote sustainable low-carbon export growth. We will introduce a transparent and consultative framework for the development of trade agreements, and be a strong and supportive partner of our small and medium-sized enterprise exporters. We will use trade policy as a tool to elevate rights and standards domestically and with our international partners, to ensure that the benefits of global trade are shared through society—whether that is in moving to a zero-carbon world or in enhancing the achievement of the sustainable development goals.

Trade must not be used to lock future Governments into a deregulatory agenda or to erode the capacity of Governments to legislate in the public interest. Neither can trade strategy be a series of controversial arms sales. In stark contrast to the present Government and their new Prime Minister, it is only Labour that is committed to delivering the robust trade strategy that our country needs. We will play a leading role in demonstrating that trade can be the force for good that it should be.

--- Later in debate ---

[Bill Esterson]

I am glad that the Minister mentioned numbers and outcomes. Let us look at some. Jobs saved through investment fell, from 2016 when they were 28,000, to just 6,000 in 2019. That is an 80% fall. Those are numbers. They are not exactly encouraging, are they? They are not exactly a sign of the Government’s success. Meanwhile, 13% of Asian investors have reduced their investment and 14% have put activity on hold, and there are similar figures for north America—slightly lower for western Europe. How is that a record of success on the numbers?

[Graham Stuart]

I am grateful to the shadow Minister for that intervention. The danger is in selectively seeking those things. On every possible measure, we see the UK—[Interruption.] I hope the hon. Gentleman will stop barracking; he knows what is coming. Even though he pretends not to, he must have seen the UNCTAD numbers—the official UN numbers—for 2018. What did they show? They showed that in 2018, according to the UN, the global stock of foreign direct investment—the yearly amount of total flows—fell.

[Bill Esterson]

What, by 80%?

[Graham Stuart]

The overall stock fell. The hon. Gentleman is talking about flows; he should try and get to grips with this. Maybe this will be a useful seminar for him to do so.

If the hon. Gentleman looks at the stock line for Europe, which is the accumulated level—not at the flow line, as flows go up and down year by year and are essentially volatile; they always have been and I project they always will be—he will find that it fell in Europe too. The net amount fell; there was net disinvestment in Europe and in the world. What happened in the UK? It went up again, but not quite as quickly as it did before. It is the global context. By every possible measure—flow, stock, greenfield, mergers and acquisitions—we lead Europe.

We have strengthened our position in Europe. Why has that happened? It is because of the business-friendly policies that we have put in place. As the shadow Minister is feeling so aggressive, I put it to him: in what possible parallel universe in which there is increasing competition for mobile global investment, with the massive number of jobs and the prosperity that brings, would jacking up corporation tax rates lead to more jobs, more opportunities and more prosperity for people in this country? That is the trade and investment strategy of Labour.

We do not need to think just about what Labour’s current policies will do; we can look back at every previous Labour Government. By the end of the 2000s, France was just about overtaking the UK; now we have more than twice as much as France. Just think of the hundreds and hundreds of thousands of jobs—I am most interested in that number. While the hon. Gentleman and his party play politics, we deliver the investments that lead to prosperity and jobs. If he is interested in going further into the subject, he should look at Ernst & Young and the pattern over the last few years. What have we seen? We have seen an increase in investments outside London and the south-east, and an increase in the share of the FDI going into manufacturing, which has been maintained and strengthened in this country.

That is the exact opposite of the picture that the hon. Gentleman tried to lay out. It is there in every figure—from the OECD, UNCTAD, the Economist Intelligence Unit, Deloitte and fDi Markets. That is a fascinating one. Some people say, “If you include mergers and acquisitions, and you include intra-company transfers, that is not real FDI. We should look at greenfield and new start-ups, not someone buying a factory. What difference does that make? What about creating a new one? Let’s look at that.” Who looks at that? That would be fDi Markets. What did it show last year? From memory, it showed that the UK got 1,268 projects, that France temporarily overtook Germany, with 580 projects—well done President Macron, who has put a lot of work into that—and that Germany had 560 projects. In other words, despite Brexit uncertainty, in 2018 the UK had more greenfield investment projects than Germany and France combined. On what basis would anyone other than the most devout and misguided socialist try to suggest that those figures are not good?

[Graham Stuart]

My hon. Friend is a particular champion of industries in his area, not least ceramics in Stoke. I thank him for speaking in my constituency last Friday and talking about the success that has come from the effort put into that local economy to help to turn it around and strengthen it.

Since 2010, we have been working to turn around the toxic economy legacy bequeathed by the last Labour Government and to support the pioneering, innovative, entrepreneurial brilliance of British business once again. Success has come from policies designed to promote the dynamism, openness and flexibility of our economy. A further important step was taken by the Prime Minister when she established a dedicated trade Department for the first time in British political history. The Department for International Trade has just celebrated its third birthday and is crucial to the delivery of trade and investment success.

Given that this could be a valedictory performance by me, as we get a new Prime Minister later, I pay tribute to the Secretary of State for International Trade and President of the Board of Trade, my right hon. Friend the Member for North Somerset (Dr Fox), for the brilliant work he has done leading and establishing this Department of State. Its work will become even more vital after we leave the European Union. We must build a global, outward-looking Britain that is a dynamic and independent champion of free, fair, rules-based international trade.

Our trade and investment strategy seeks three basic things: higher exports, greater foreign and outward investment, and reduced trade barriers. Contrary to what we have heard, exports are booming. Total UK exports now stand at a record high of £647 billion, bearing out exactly what my hon. Friend the Member for Stoke-on-Trent South (Jack Brereton) just said. They are up in real terms—[Interruption.] Maybe the shadow Minister only looks at numbers that suit his narrative? They are up 25% in real terms.

In 2017-18 alone, the Department for International Trade helped UK businesses to export goods and services worth around £30.5 billion, which is a year-on-year increase of 4%. We are proud of our work in encouraging more companies to export, as my hon. Friend the Member for Hornchurch and Upminster said in her excellent opening speech. A lot of the difficulty is in overcoming the timidity and the concerns that companies have in exporting. Nearly 111,000 firms exported goods in the first quarter of 2019, which is 5,000 more than in the same period last year.

I have talked about the foreign direct investment numbers, but the latest figures from UNCTAD show that the UK hit a record high of almost £1.5 trillion in FDI stock by the end of last year, which is more than Germany and France combined, creating 76,000 new jobs and safeguarding 15,000 more. That was in one year and in marked contrast to 2010, when France was close to overtaking us.

To put the FDI numbers into further context, UNCTAD’s figures show that FDI flows—flows not stocks; I hope the hon. Member for Sefton Central (Bill Esterson) knows the difference—fell by 19% globally in 2018. [Interruption.] I am now talking about flows as opposed to stocks, so it is repetition, but about a different aspect of something that I hope the hon. Gentleman would take an interest in. FDI flows fell by 19% globally and by 73% in continental Europe. What happened to FDI into the UK? The flows increased by 20%. So much for the negative effects of Brexit uncertainty.[Official Report, 3 September 2019, Vol. 664, c. 2MC.]

The pace of change in the global economy is increasing but, for the agile, opportunities abound. The Department for International Trade provides the platform to give the UK a unique trade advantage, by locating export promotion, trade finance, trade remedies, export licensing and international negotiations all in a single Government Department.

I want to respond to some points made by my hon. Friend the Member for Hornchurch and Upminster. She asked about the 100 days. We will continue to prepare for no deal to be the outcome, which is not the avowed intent of either of the leadership contenders for the Conservative party. We prepared and were in a good position ahead of 29 March, and we are working with the Department for Business, Energy and Industrial Strategy to be able to meet questions coming in from businesses. We are ready to meet any surge in demand at that level.

My hon. Friend asked about state-level engagement with the US. The Secretary of State and I met with Senators from Florida and Texas the other day. As we expand and strengthen the Department’s reach, we recognise that it is not all about working at the national and federal level, whether in the US or elsewhere, such as in Brazil. I was pleased to meet the Governor of São Paulo, which itself has more than 30% of the GDP of Brazil. There is a lot more to be done at that more granular level in order to identify barriers and overcome them.

My hon. Friend made an interesting point about language. Given our national weaknesses on foreign languages, I hope that officials may be able to follow up on that point. She also touched on the DIT working more closely with the FCO and DFID. We are absolutely trying to do that. I am delighted that we are becoming an official development assistance Department. We have to bring trade and development together. That is how people get out of poverty. This involves so many countries. There is now the Ghana Beyond Aid initiative; I visited Ghana’s investment conference in London last year. These countries do not want to be seen primarily as aid recipients. They want to be seen as countries with great entrepreneurs, great technology and great capability. That is why, after the Prime Minister’s speech last year in Cape Town, I am helping to organise the Africa investment summit on 20 January 2020. It is precisely to ensure that, cross-Government, we are able to support increased investment in Africa and take advantage of the opportunities there.

My hon. Friend touched on the subject of regulators. Whether further changes are required in their missions as defined by Government is something that I will leave for others to wrestle with, but I can say that our regulators really are stepping up to the mark. The Financial Conduct Authority, with whose representatives I have met, is making a major difference. People can look at our FinTech bridges. We lead the world on FinTech—financial technology. It is enormously valuable, and we are creating FinTech bridges with a number of other countries. For instance, we are deepening our engagement with Hong Kong and Australia. In both cases, the FCA has been a fundamental part of the team as we try to ensure that start-ups there can more easily come to the UK, and vice versa. It is precisely that kind of opening up of markets that is so important.

I am not sure that I have ever given a speech from my iPad before. When the screen goes blank—

[Bill Esterson]

Your mind goes blank.

[Graham Stuart]

It is better to have your screen go blank than your mind go blank, as may have happened to the hon. Gentleman when he started to talk about FDI, on which we are doing so well.

Last year we launched a new export strategy to encourage, inform, connect and finance businesses of all sizes, with the goal of increasing our exports from 30% to 35% of GDP, which would move us to the top of the G7. We are committed to working with the devolved Administrations in doing that. I will follow up on any suggestions. I hope that, if there are problems, we can immediately sort them out. It is certainly not this Government’s policy in any way to inhibit the effectiveness of the devolved Administrations in trying to promote business in their areas. We work together hand in glove. I remember that at MIPIM, the world’s largest property conference, last year, I launched the Scottish capital investment portfolio. We worked closely together on doing so, and we can do so again. That is very important, particularly in the Scottish context, because, if my numbers are still correct, exports as a percentage of GDP in Scotland are only around 20%, whereas for the United Kingdom as a whole the figure is 30%. That shows the importance of helping the Scottish Government to do a better job in promoting Scottish exports, because there is huge capacity there.

I am proud of what we have done with UK Export Finance. We have doubled its appetite since 2010 and we have revolutionised its performance as a world-leading export credit agency. It now has a capacity of £50 billion and its offer has been extended; it is now available in 62 international currencies, so when support is provided, that can be done in the local currency, thereby reducing risk. That has helped too. We have run it at no cost to the taxpayer, lowered its cost ratio since 2010 and ensured that no UK export fails for lack of finance or insurance. Earlier this year we went further. Now, companies that are not exporters themselves but are part of the supply chain of companies that do export can access UKEF finance too.

We have convened the Board of Trade for the first time in 150 years to promote a culture of exporting and investing, spreading the benefits and prosperity of international trade to every corner of our United Kingdom. Whether I have been in Stirling or Belfast with the Board of Trade, I have been delighted to see the local response and people’s enthusiasm for what we are doing at the DIT to promote trade from those areas.

Time has passed, and you would probably like me to bring my remarks to a close, Mr Davies. If I may, I shall continue just briefly. We have created an overseas network of Her Majesty’s trade commissioners, the most recent one being for Australasia. There are 10 of them and they have been selected for their expertise in particular markets. They are building our regional export plans and working to secure market access across the globe.

Whether it is on promoting exports with our export strategy or promoting foreign direct investment—for which we remain the No. 1 destination in Europe, well ahead of our competitors; in fact, we are third in the world, behind only the United States and China/Hong Kong—we are determined to go further. And of course in the area of trade policy, there is not only the issue of free trade agreements; my hon. Friend the Member for Hornchurch and Upminster was right to say that we should not fetishise them. As our second permanent secretary and chief negotiator has noted, for every one person working on FTAs, we want three or four working on market access.

Therefore, whether it involves opening up Taiwan’s pork market, cosmetics in China or lowering duties on Scotch whisky going into Latin American countries, we are, across the piece, upping our game. Having a dedicated trade Department—this might be my last speech while a member of it—was a significant and important step forward, particularly given the growing importance of trade and investment to the prosperity of this country and the world. The Department—with or without me—will continue to be an advocate for an open, rules-based, liberal trading system. It will continue to work to reverse the negative impacts on manufacturing and so much of our other trade and investment performance that happened inevitably—it happened in almost all cases—under the last Labour Government. We must ensure that Labour never comes into government again, and that this Government can go out there and continue to strengthen the DIT and strengthen our prosperity in the world. I thank my hon. Friend the Member for Hornchurch and Upminster very much for securing the debate today.