Future Free Trade Agreements

Drew Hendry Excerpts

Thursday 21st February 2019 Commons Chamber

[Stewart Hosie (Dundee East) (SNP)]

I start by agreeing with what the Secretary of State said about looking to have trade deals with developing, emerging and growing markets. That is absolutely right, whether the UK or the EU does it. He made big play of Australia and New Zealand, which we just heard about from the hon. Member for Mole Valley (Sir Paul Beresford). Australia takes about 1% of the UK’s exported goods—half of what we sell to Turkey. New Zealand takes 0.1%—about the same as we sell to Algeria—so however important Australia and New Zealand are, they are not developing growth markets. They are mature, established markets.

The Secretary of State also spoke about being dictated to by the EU—I much prefer the language of “working together with our European partners”—and even that language tells us a great deal about where some of this is driven from. Of course, he made big play of a potential deal with the US. I visited the US last year with the Treasury Committee. We were told in no uncertain terms by anyone who spoke to us about trade that the UK would be required to put everything on the table and that the US would be required to put nothing on the table.

[Drew Hendry (Inverness, Nairn, Badenoch and Strathspey) (SNP)]

My hon. Friend is making a great point about the demands made by countries such as the US. A lot of constituents are rightly worried that we will have to sacrifice such things as a public NHS to get a deal done with countries such as the United States. Does he agree that that is a clear and present threat?

[Stewart Hosie]

I am going to say more about the ISDS component—the arbitration competent—of these things later. I do not want the public sector to be impacted on in any way by trade globalisation with the US. If there is to be some deal cut, there is language that can be used—for example, that used to exempt military and intelligence operations. That should be included rather than the vague protections for the NHS that many of our constituents simply do not believe are robust enough.

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[Angus Brendan MacNeil]

The hon. Gentleman makes an interesting point. There are 40 such agreements with about 70 countries, and the UK’s hope is that we can stand on the shoulders of the European Union and roll over that work, which of course relies on 70 other countries not seeing a possible advantage in getting better trading terms, as a number of them certainly do. A negotiator who wants to be promoted within their trade negotiating structure will, when the UK appears over the horizon with probably not the most experienced negotiators—they certainly will not have the same track record on international negotiations—see too great an opportunity to resist.

Interestingly, I note that the countries that have concluded the much-trumpeted trade agreements are ones with a tremendous balance of exports in their favour. Chile’s is about £150 million to £200 million in its favour, but the outstanding winner here has to be the Faroe Islands; I like to blow the Faroes’s trumpet as chair of the all-party group on the Faroe Islands, but my goodness! It exports £229 million-worth into the UK while importing only £16 million-worth back. So not only have the Faroes got themselves up the scales of acknowledgement, but they have done themselves a fantastic piece of business by rolling over what was already a very advantageous trade agreement. So well done the Faroe Islands, and I hope the welcome in Tórshavn will be as good as it always is.

Let me now look at UK-US trade relations. When we went to the US the farm lobby asked, “Why folks? Why have you done this?” They were just bemused. Ford said that for it, “The UK-US is incremental, but the UK-EU is existential, particularly the interplay with the UK-EU and Turkey. The tariffs that could be accumulated in that direction could be problematic.”

The International Trade Committee’s key recommendation was that

“the Government should undertake detailed work modelling the potential effects of a UK-US agreement on the economy.”

Evidence to the inquiry regarding the impact on GDP varied, but it was about 0.2%. We also have to make decisions about whether we have some increase in regulatory barriers with the EU in exchange for the removal of barriers with the US, and what the overall benefit of that is. As someone who keeps a few sheep, as I mentioned to the hon. Member for Mole Valley (Sir Paul Beresford), I can see a huge problem if we find ourselves putting up barriers to the EU to please some Americans and the American Administration in order to wave a piece of paper and say, “Trade agreements in our time.” That huge danger presents itself to a UK Government who might rush into trade agreements for the sake of it.

[Drew Hendry]

My hon. Friend is making a point about trade agreements having an impact on sheep farming in the highlands, but if those kinds of conditions are written into these trade agreements, could they not have a massive effect on trade and exports across the whole of the highlands and islands in respect of a range of different goods and services?

[Angus Brendan MacNeil]

Absolutely. My hon. Friend is correct about that. This whole area needs to be fully assessed, as the impacts are as yet unclear. If the Government are looking for trade agreements in our time, we might wake up some while after we have concluded these agreements with whole areas of the economy that we currently rely on being devastated and with the shock of having to realign, which would take a number of years to do. This would have huge impacts on people’s lives, as we saw in New Zealand. There may have been an idea that with New Zealand agriculture an easy and seamless change could be made, but that certainly was not the case.

Before entering into any free trade agreements, the Government must be clear about the relative weight they intend to give to different sectors in the UK economy and about the geographical spread. I could say a number of other things about the UK-US agreement, but I recommend to you our report on it as bedtime reading one of these fine evenings, Mr Deputy Speaker. Of all the reports that any Committee has produced, the International Trade Committee’s reports are the best, and the UK-US one is one of the better of the best, so I am sure you would enjoy reading it from cover to cover. I can see nodding and I am very pleased.

To keep the bedtime reading going, my Committee is currently working on an inquiry on trade with Australia and New Zealand. This is a keen inquiry and, since its launch, we have received 46 pieces of written evidence and heard from 10 witnesses, over two evidence sessions. We have focused on wine and agriculture to start with. Something interesting came up about wine exports from Australia and New Zealand to the EU. A number of these exports come to the UK in bulk, where they then get bottled in England and are exported on to the EU. Of course, the problem might be that if the UK is outside the customs union and single market, the wine that is coming from Australia and New Zealand, and currently providing jobs in England, might have to be re-routed elsewhere in the EU to enable it to be bottled without picking up tariffs as it crosses the border into the EU member states. The dairy industry in the UK felt that such an agreement might not be a huge priority for it, but Fronterra, a New Zealand-based dairy company, said:

“We see a New Zealand-UK FTA as a great example for setting a benchmark for a high-quality, ambitious FTA for the UK.”

We are also fortunate that George Brandis, the Australian high commissioner, has been paying attention to this, at least he was when he was here earlier. Australia is very keen to have a fairly simple FTA with the UK that has few carve-outs. Agriculture is said by the Australians not to be a major interest for them, as they have so much else of the world to service. Perhaps therefore we might, just like the Americans did with them, carve out a number of areas, and so agriculture might not be part of it. Australians say that it is not such a huge concern for them, but it is a concern for us. When they dealt with America, over 14 months, a number of carve-outs were made by the Americans, on pharmaceuticals, on the investor-state dispute settlement and on sugar access. So people will pursue their own interests and needs in trade agreements.

You will be upset to know, Mr Deputy Speaker, that the Committee has not looked very much at the CPTPP. We have not had time to do that, but we will be addressing it. It will certainly be discussed with the Secretary of State, who is due to appear before us again on 6 March. There are a number of areas where trade is being altered by the political choice made by two of the nations of the UK to take the whole United Kingdom out of the EU. This is seen, by all sides, as being damaging to the economy. The one thing that gives me hope is that even Brexiteers nearly all agree that the option of a hard Brexit on 29 March is damaging to the economy. The Secretary of State himself said it would damage the economy. Others have said it would be catastrophic, and a number of other adjectives have been used to express the same fear. At least Brexiteers are starting to see that some Brexit options are bad. When we give them the hard percentages, they see also that the upsides of trade deals and trade policies are not quite the same as trade. I hope and pray, and appeal to them even at this late stage, that the thing they really want to do, to save the upheaval and damage to the economy, is simply revoke article 50. An amendment to that end will be tabled next week. I appeal to Liberals, Greens and those who have talked about the people’s vote or extending article 50: it is too late, the damage is under way. They are all agreed that economic damage is coming. The revocation of article 50 could be done in an afternoon and it would save us all. So, Mr Deputy Speaker, 21 minutes after starting my speech, I am finished.

European Affairs

Drew Hendry Excerpts

Wednesday 14th March 2018 Commons Chamber

[Ross Thomson (Aberdeen South) (Con)]

As someone who actually represents, I hope, the young people of the next generation, I do not share the pessimism of the hon. Member for Streatham (Chuka Umunna), because the great Brexit prize will be regaining our ability to strike new free trade deals across the world. Not only will Britain rejoin the rest of the world, but we will have the opportunity to lead the rest of the world as a global free-trading nation, championing trade liberalisation and taking on the voices of protectionism. Let me be clear that we are not leaving Europe or turning our backs on our European neighbours and partners. Rather, the Prime Minister has been explicit that the Government are seeking a deep and comprehensive trade deal with the EU that covers goods and services.

By leaving the customs union, the UK will regain its ability to set its own independent trade policy. Our trade with the EU is in deficit and declining. As the Minister stated in his opening remarks, it was 56% in 2006 and is now down to 43%. However, our trade with the rest of the world is in surplus and rising. We should not play down the importance of Europe as a trading market and partner, but we must orient ourselves towards the thriving economies in the rest of the world, such as in south and east Asia, and their growing demand for goods and services. Fifty-seven per cent. of Britain’s exports are now to outside the EU compared with only 46% in 2006. Furthermore, the International Monetary Fund estimates that 90% of global economic growth in the next 10 to 15 years will originate from outside the EU.

International demands for British goods is growing, and Aberdeen, which I represent, is well placed to take advantage of that as 90% of the city’s manufacturing, which is mainly in oil and gas and environmental engineering, gets exported. The oil and gas industry is truly global, and anchored right here in the UK. Current industry exports accounted for 43% of the UK supply chain turnover in 2017, up from 41% in 2016. Oil & Gas UK’s “Vision 2035” has the ambitious aim of doubling the supply chain share of the global market from 3.7% to 7.4% in 2035.

The Balmoral Group, based in my constituency, provides an example. It was established back in 1980 and specialises in sub-sea buoyancy, renewable energy and engineering solutions. It employs about 500 people in Aberdeen. It is highly dependent on the export market: it is currently focusing on west Africa, South America and the gulf of Mexico. Its representatives have been clear with me that their only opportunity for growth is in the export market. They have already been working closely with the Department for International Trade on trying to exploit those opportunities.

Thanks to the investment from the UK Government, the Oil & Gas Technology Centre in my constituency was set up. It is working with the oil industry in developing solutions, new technology and innovation to maximise the full potential of the UK North sea—from asset integrity to maximising recovery from small pools, from drilling to decommissioning. The technology, developed in my constituency, is exportable and the opportunities are massive.

As my hon. Friend the Member for Banff and Buchan (David Duguid) highlighted, the north-east is home to a thriving food and drink industry. It is also known for its whisky exports. The story of whisky is well known; perhaps a less told story is that about our other domestic exports. Here are just a few examples. In fishing, there are companies such as Macduff Shellfish, Denholm Seafoods and Lunar Freezing, which export to countries such as Nigeria, China, Vietnam, Uruguay and Ukraine.

[Drew Hendry (Inverness, Nairn, Badenoch and Strathspey) (SNP)]

During the EU referendum campaign, the hon. Gentleman was pictured outside the Scottish Parliament with a placard saying, “Vote leave to bring control of our fishing back to the democratically elected Scottish Parliament”. Will he be recirculating that image?

[Ross Thomson]

I am grateful to the hon. Gentleman for raising that. As is so clear, we are leaving the European Union and taking back control of the more than 200 nautical miles of our waters, giving us the opportunity to rejuvenate our coastal communities. We are supporting Scottish fishermen. The party that wants to sell them down the river back to Brussels, handing all the powers right back and keeping people trapped within the confines of the common fisheries policy, is every single Member from the SNP. I will take no lectures from those on the SNP Benches about the benefits of Brexit for fishermen.

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[Drew Hendry (Inverness, Nairn, Badenoch and Strathspey) (SNP)]

My hon. Friend the Member for North East Fife (Stephen Gethins) gave a compelling exposition of what we have and the benefits that we enjoy within the single market and the customs union, and what we stand to lose from being outside them. I again urge the UK Government to have genuine, not token, engagement with the devolved Administrations.

My hon. Friend the Member for Dundee East (Stewart Hosie) pointed out why it is absolutely vital for the Scottish Parliament to bring through a continuity Bill to protect the laws of Scotland. He also highlighted the naivety over trade with the US—the hope, and the “rainbows and unicorns” that the hon. Member for City of Chester (Christian Matheson) spoke about—and again urged the UK Government, as I will, to engage meaningfully with the devolved Administrations. It can still be done, even at this late date.

Everybody is getting a bit frustrated by the idea that a bespoke agreement is going to be magically produced here. There is a “hit it and hope” attitude from Government Front Benchers, completely ignoring the realities of the modern world. The UK Government tell us that all will be well, and we are supposed to take it on trust that that is the case, yet through this entire process to date, they have sought to exclude Parliament. They have had to be forced to share impact assessments. They have not listened to or respected the position of the devolved Governments. In this place, we still do not have answers even about the process, never mind what the impacts will be.

As the hon. Member for Greenwich and Woolwich (Matthew Pennycook) mentioned, there will be a vote, but that vote in itself is a bit like Brexit: it is shrouded in confusion. How much time will there be between the publication of the final agreements and a vote in this place? Nobody knows. Will Committees be able to take evidence and publish reports on the final agreements? Nobody knows. How long will there be between the vote and exit day? Nobody knows. What additional documentation will the Government publish to accompany the agreement and declaration? Nobody knows. There are lines and lines and lines of things that to date nobody knows about this process. It is yet another Brexit boorach.

We do not have answers to these questions on the parliamentary process, never mind answers to the key questions being asked by business and constituents. That is why the Scottish Government have introduced the continuity Bill and why everyone in the Scottish Parliament, apart from the Tories, understands the need for it. It retains in domestic law the EU law currently operating in devolved areas. [Interruption.] Scottish Conservatives can chunter from their Benches, but it is clear that they are not standing up for Scotland. The Bill gives Scottish Ministers the powers needed to ensure that devolved law continues to operate effectively after the UK withdrawal, and that is a very important point, given the range of powers that so far have not been agreed to be devolved directly. These powers should go straight back to the Scottish Parliament. Just today, an Ipsos MORI poll showed that the Scottish people are unconvinced by the UK Government’s position. One in eight people in Scotland think it will damage the economy. Only one in seven think there will be any benefit.

What do we know about the economy and trade? The analysis by the Financial Times that my hon. Friend the Member for North East Fife mentioned suggested that Brexit was already costing the economy £18 billion a year, or £350 million per week, as he pointed out. That is not money on the side of a bus; it is money thrown under a bus—lost to us completely. The London School of Economics estimates that Brexit has already cost the average household £404 a year as a result of the fall in sterling and the higher inflation since the vote. The UK Government’s own leaked impact assessment confirms that under all scenarios the UK will be worse off after leaving the EU and that the UK could be forced to borrow £120 billion more after Brexit between 2019 and 2033.

Leaving the EU customs union and single market would be disastrous for Scotland’s trading position. It will create barriers to trade, such as EU tariffs, customs checks, rules of origin and divergent regulatory regimes, and could impede Scottish trade with the rest of the world, as we stand to lose the benefit of 36 EU free trade agreements covering 53 markets. When the UK Government talk about trading with nations outside the EU, they should remember that those very agreements have been facilitated by our being in the EU. So there are many benefits to lose. For the food and drink sector in Scotland, we know that a hard Brexit risks access to Scotland’s biggest overseas regional food and drink export market; it risks Scottish competitiveness and increased costs for business; it risks the value and reputation of Scottish produce; and it substantially risks food production through the loss of our workforce.

We know that there is no trade without transport and that maintaining and improving physical access to European countries and allowing transport operators and service providers registered in the UK to operate across the EU, and vice versa, remains a vital component of trade. Minimising administrative arrangements for crossing borders for international freight and logistics is vital, as is access to labour. They are crucial for our transport network.

If I had more time, I would talk about what will happen to rural Scotland or the energy market if we do not get a meaningful deal, but I will finish by saying that so far we do not know what will happen about Parliament’s role. We know that the continuity Bill is a much-needed piece of legislation to protect the interests of the Scottish people and their devolution settlement. We know that the protections businesses seek and the questions they still have remain unanswered by the UK Government. We know the impacts and concerns for our economy and trade. Similarly, we know the impacts and concerns for the food and drink sector, health and social care, transport, rural Scotland and our energy market and tourism, among much more. We do not need more rhetoric from the Government about “scaremongering”. These are genuine, real concerns, and we need answers.

Will the Minister answer the questions about the parliamentary process, so that we can do our job of representing our constituents and ensure that there is a transparent and open process? Will he recognise that the Scottish Government are being asked to sign away the Scottish Parliament’s powers with no idea how UK-wide frameworks will work, how they will be governed and how we will proceed from the temporary restrictions that the UK want to agreeing longer-term solutions? In doing so, will he accept that this is not a constructive way in which to engage with the devolved Governments?

Trade Bill

Drew Hendry Excerpts

Tuesday 9th January 2018 Commons Chamber

[Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)]

It is a great pleasure to speak in this debate as the Chair of the International Trade Committee. My Committee took evidence on the Bill in November to aid the House in its scrutiny, but as yet we have not taken a position on the legislation, as often happens with Select Committees. The views I express today are my own, not those of my Committee colleagues.

This is a significant day for the current UK’s future as a trading entity. The Bill is one of a suite of legislation promised by the Government to establish the framework for an independent UK trade policy. It must be noted that the current UK has not operated an independent trade policy since 1973, when I was three years old. To create a new trade policy after a 40-year hiatus is an immeasurable challenge. It is paramount that we get it right and have in place the right legislation.

According to the background briefing to the Queen’s Speech, the Trade Bill was intended to create the

“necessary legislative framework to allow the UK to operate its own independent trade policy”

after Brexit. The Government said that the legislative framework would include two key features: first, a power to strike new trade deals with third countries, and secondly, the establishment of a UK trade remedies system. On reflection, it is interesting and striking to see how little of the original stated purpose the Trade Bill achieves. There is nothing in it about striking new trade deals with third countries, and the establishment of a UK trade remedies regime is largely left to the Treasury to achieve in the Taxation (Cross-border Trade) Bill. The point made by my hon. Friend the Member for Livingston (Hannah Bardell) was also striking: we need the Bill not to have a London-centric point of view.

I have three observations that concern the breadth of the powers conferred by the Bill; the lack of parliamentary scrutiny offered in the Bill; and the relationship between the Trade Remedies Authority and the Secretary of State—sadly, just the Secretary of State. On the breadth of the powers, the Government are seeking to maintain their trade arrangements with third countries with which the EU has trade agreements.

[Drew Hendry (Inverness, Nairn, Badenoch and Strathspey) (SNP)]

The UK Government are seeking to strike a deal with South Korea. Has my hon. Friend noted, as I have, that that might not be as straightforward as was hoped by the UK Government?

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[Angus Brendan MacNeil]

Indeed.

This is to be done by the UK establishing partner agreements with third countries that correspond as closely as possible to the agreements the EU has with those countries. As my hon. Friend the Member for Inverness, Nairn, Badenoch and Strathspey (Drew Hendry) pointed out, South Korea is a particularly striking example because the 55% provision on rules of origin in the automotive sector cannot be replicated by the UK because the UK cannot produce the 55%. That would give South Korea licence to export to the UK automotive sector and disadvantage UK manufacturers. If we want to change that percentage, any Korean trade negotiator who hopes to keep his job for a further week is not going to just nod his head. He is going to look for some sort of quid pro quo. The question then becomes whether that is the ceramics of Stoke-on-Trent, Harris tweed or Stornoway black pudding. What could it be? Is it the whole of agriculture? We just do not know. That is the reality of how trade works. If I give something, I want something back in return. I do not just give something for nothing in a trade agreement.

The trade agreements to which the Bill applies include free trade agreements and international agreements that relate mainly to trade, other than free trade agreements where the other signatory and the European Union are signatories to the agreement immediately before exit day. Furthermore, all but five countries around the world are involved in regional trade agreements. Therefore, the UK would be joining company with East Timor, Somalia, South Sudan, Mauritania, and São Tomé and Príncipe in the gulf of Guinea. More strikingly, the UK will find itself with higher trade barriers with 27 countries in Europe, plus another 67 that are covered under another 40 agreements with the EU, making a total of 94 countries. When I asked the Prime Minister about that in the Liaison Committee, she seemed unaware that the UK could be disadvantaged in its trade with up to 94 countries.

Much could be said about the breadth of the powers that the Government are taking, but I think that the point should come from the Department for International Trade, whose second permanent secretary told my Committee that replication

“will depend as much on whether the party at the other end is prepared themselves or will seek to have some agreement that will allow common content. Until we have that detailed discussion on the replication, neither we nor they will be 100% sure of exactly how you will define what is as close as possible to what we have had with the EU.”

Time is against me, as I had hoped to have 10 minutes but have only two and a half remaining. One of the major issues that we have to consider is parliamentary scrutiny. Many countries allow parliamentary scrutiny of their trade Bills, including the United States, Australia, New Zealand and Canada—even the European Union allows that—so we are not asking for anything new. In the United Kingdom, whether it is Henry VIII powers or James II powers, which the Williamite revolution got rid of, this is the situation we might be left in. In trade negotiations there is give and take, with winners and losers within the negotiating countries.

[Drew Hendry]

My hon. Friend makes a powerful point about the need for proper and effective scrutiny. Does he agree that it is reckless to embark upon this course without first ensuring that Parliament has proper powers of scrutiny?

[Angus Brendan MacNeil]

My colleague is again absolutely correct.

In here, there are Members representing many constituencies—today they are on the Government Benches—who think that they will be okay. Governments change over time. Who makes the decisions and according to what criteria? Will decisions be made such as the bilateral aid agreements run from 1945 to 1985, in which the UK Government had a deliberate policy to support only London airports, for example? When Iceland wanted flights to Scotland, the UK Government tried to get them to fly first to London and then north to Scotland. It was Iceland that broke that. That was a deliberate policy of the UK Government. London is not the place it is today because of anything magical about London; it is the result of UK Government policy over many years. Other areas of the UK could be sacrificed in future, just as they have been sacrificed in the past, for the benefit of London or elsewhere. If there is no parliamentary scrutiny, on what basis will that be done? Will it be on the basis of the Secretary of State having a meeting in an airport departure lounge? It is not at all clear.