EU-Singapore Free Trade Agreement (FTA) AND INVESTMENT PROTECTION AGREEMENT (IPA)

George Hollingbery Excerpts

Monday 10th September 2018 General Committees

[The Minister for Trade Policy (George Hollingbery)]

It is a pleasure to serve under your chairmanship, Mr Bellingham. I am delighted to be here today to debate the EU-Singapore trade and investment agreements ahead of votes in Council on signature and conclusion. The EU has negotiated a broad and ambitious package with Singapore, which offers tangible benefits to the United Kingdom. The Government have long supported efforts to strengthen trade relations with Singapore, and I welcome the opportunity today to set out what was negotiated and what the Government’s future plans are with respect to Singapore when we leave the European Union.

As I have said before, free trade plays a vital role in stimulating economic growth, creating jobs and providing greater consumer choice and confidence. The Government are clear that the UK will continue to be a beacon of support for free trade globally. We will continue to support the EU’s ambitious trade agenda while we remain an EU member state. That includes some 40 trade agreements, including that with Singapore. As we leave the EU, UK support for those agreements will send a positive message about our commitment to global free trade.

Hon. Members will have seen from the Government’s detailed and comprehensive impact assessment that, as my hon. Friend the Member for Mid Dorset and North Poole said, the EU-Singapore FTA is estimated to be worth up to £95 million annually to the UK’s GDP in the long run. As he noted, UK imports are indeed due to grow by approximately £600 million per year in the long run. That will mean consumers benefiting from lower prices, and businesses from reduced input costs. That, in turn, will help businesses proudly to export and champion their final products around the world.

Imports and their associated gains can and do contribute positively to GDP, as in the case of the EU-Singapore FTA. As I have already noted, it is estimated that those gains, in addition to the nearly £300 million increase in UK exports driven strongly by UK services, will result in a long-term benefit to UK GDP of £95 million per annum.

Singapore is already one of the most open markets globally, regularly featuring towards the top of the World Bank’s “Ease of Doing Business” awards. The gains from the FTA are not on the scale of other EU trade agreements of similar scope and depth, such as the Comprehensive Economic and Trade Agreement or the EU-Japan Economic Partnership Agreement, because of the nature of the business environment and trade. Nevertheless, there are tangible benefits for the UK, in addition to long-term benefits associated with fostering closer ties with a leading member of the Association of South East Asian Nations, whose region is expected to continue to experience strong economic growth. Indeed, as my Department never fails to point out on occasions such as this, some 90% of the world’s growth is going to happen outwith the European Union in the future.

I want to make it clear today, as I and the Government have done previously with respect to other EU trade agreements, that the delivery of public health services and public utilities is safeguarded in the trade in services aspect of all EU free trade agreements, including with Singapore. For the avoidance of any doubt, that includes the NHS, for the UK; it will remain in the domain of UK Governments, not our trade partners, to control. As confirmation of that, I direct Members to chapter 8 of the free trade agreement and chapter 2 of the investor protection agreement, where it is made real. I also want to make it clear that commitment to labour rights and environmental standards is explicitly referenced in the agreement, and neither party will seek to reduce those thresholds to boost trade. In that respect, I refer Members to chapter 12 of the free trade agreement.

I am confident that the benefits of the free trade agreement can be enjoyed with a clear conscience, with British businesses free to tap into the Singaporean market with ever greater ease and to benefit from greater access across a range of service sectors, improved access to Singapore Government procurement markets, increased protection for intellectual property rights and, among other areas, the removal of remaining tariffs in Singapore, such as for stout beer, in which the UK has a long tradition of excellence to rival even the biggest players—as I am sure you agree, Mr Bellingham.

The FTA is accompanied by the EU-Singapore investment protection agreement. Unlike the FTA, the IPA will require ratification by all member states before it comes into force. The Commission has been clear that it does not intend to provisionally apply any aspects of the agreement before that. The IPA contains the Commission’s preferred model of investor-state dispute settlement mechanism—the investment court system.

It is not envisaged that the IPA will enter into force before the UK’s exit from the EU in March 2019 nor, in fact, before the end of the implementation period. Other EU trade agreements that have required ratification by member states in addition to EU conclusion and third-country ratification have taken several years to enter into force following signature, such as the EU-Korea FTA, which took close to five years for all members states to ratify.

Although it is not anticipated that the IPA will apply to the UK as we move to leave the EU, the Government have no intention of getting in the way of the EU embarking on the process of signing and concluding the IPA. We intend to vote in favour of signature and conclusion of the IPA when we support signature and conclusion of the FTA next month.

With regards to future investment policy, we continue to review our trade and investment policy more generally, and are considering a wide range of options in the design of future bilateral trade and investment agreements. Of course, the UK-Singapore bilateral investment treaty is still in existence, but it is worth pointing out that in the years that it has existed, since 1975, it has never been used.

I turn now to the Government’s future ambitions for our trade relations with Singapore once we have left the EU. As has been communicated extensively, the EU and the UK agreed at the March European Council that international agreements that the UK is party to through its EU membership should continue to apply to the UK during the implementation period. Text to that effect has been agreed in the draft withdrawal agreement. On that basis, the EU-Singapore FTA will apply to the UK during the implementation period once it has entered into force, although, as I said, it is not envisaged that the IPA will enter into force in time to apply during the implementation period. The EU is due to notify third countries of that approach, and the Government are satisfied that legal clarity for that approach is sufficiently underpinned by international law and practice, including by the provisions of the withdrawal agreement itself.

At a bilateral meeting with the Prime Minister at the Commonwealth Heads of Government meeting in April, and in the accompanying public statement, Singapore’s Prime Minister Lee welcomed the approach of providing continuity during the implementation period. That was further confirmed during the Secretary of State’s recent visit to Singapore. The Government are working towards new bilateral arrangements with Singapore that will ensure continuity for the effects of the EU-Singapore FTA beyond the implementation period via a straight- forward technical process.

A dialogue with Singapore also seeks to address our future approach to investment protection and investor-state dispute settlement. We are working with our Singaporean partners on the best way to achieve that. The existing UK-Singapore bilateral investment treaty otherwise remains operational, as I have pointed out.

Although it is only right that our immediate priority is to secure continuity of trade agreements, Singapore is like-minded with the UK in its ambitions for free trade, so a transition deal with Singapore also provides a firm basis for developing trade arrangements further in future. That is fully in line with the model set out in the White Paper, under which the UK will be able to pursue an ambitious bilateral trade agenda that takes full advantage of the flexibility that is proposed for the future economic partnership.

On 16 July, the Government put forward proposals about the future parliamentary scrutiny of UK trade policy when we have left the EU. The package includes a strengthening of collaboration and consultation with all corners of this great country and a range of stakeholder demographics with a vested interest, including consumers, civil society and business. We also recently released four online public consultations on our intention to seek free trade agreements with the United States, Australia and New Zealand, as well as on our interest in the UK’s potential accession to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership—CPTPP—of which Singapore is a key member. I want all voices to be heard to ensure that our future trade policy works for everyone, and I encourage anyone interested to take part in those consultations. We will also consult with the devolved authorities and many other interested parties.

While the UK remains an EU member state, the Government remain committed to working with Parliament, via engagement with the European scrutiny Committees, to facilitate thorough scrutiny of EU trade agreements. That is particularly the case for EU-only agreements, such as the EU-Singapore FTA that we are looking at today and others that Parliament will not be required to debate and vote on, in the absence of the need for member state ratification. It is partly for this reason that I am pleased to be here to debate the Singapore agreements ahead of their signature.

In line with the Government’s commitment to transparency, my Department will continue to work with the European scrutiny Committees to identify appropriate ways to ensure thorough scrutiny of EU legislation and agreements both now and during the implementation period. In line with that, the Government are continuing negotiations regarding the UK’s and EU’s rights and responsibilities during the implementation period, including on the UK’s continued access to EU documents.

While we are not yet in a position to formally announce arrangements, I can be clear that the Government support a strong scrutiny process and will continue to support and facilitate this for as long as EU legislation continues to affect the UK. The Government will engage in dialogue with the Committees as to how this may best be achieved on the basis of the detailed arrangements for the period agreed between the UK and the EU. I understand that official-level discussions have already begun and that the Department for Exiting the European Union will write to the European Scrutiny Committee presently to take this matter further.

To conclude, I thank Committee members, and Parliament more generally, for their engagement in this debate. We have the opportunity today to demonstrate strong support for free trade. The EU-Singapore FTA is an excellent agreement for the UK that will benefit UK exporters, importers and consumers, and Singapore has committed to transitioning it when we leave the EU. The Government will continue to engage with Singapore on other trade-related matters, including future investment arrangements.

I am confident that we will be able to build strong ties with an important player in the ASEAN region and a key ally in support of global free trade now and in the future. I look forward to the opportunity to support the signing and conclusion of the agreements when the Council votes later in October.

[The Chair]

We now have until 5.36 pm for questions. Are there no questions? In that case, I call the Minister to move the motion.

Motion made, and Question proposed,

That the Committee takes note of European Union Document No. 7966/18 on the signature of the proposed agreement along with Addenda numbered 1 to 13 and European Union Document No. 7967/18 on the conclusion of the proposed agreement along with Addenda numbered 1 to 13; welcomes the proposed signature and conclusion, on behalf of the EU, of the EU-Singapore Free Trade Agreement; further notes European Union Document No. 7973/18 on the signature of the proposed agreement along with Addenda numbered 1 to 2 and European Union Document No. 7974/18 on the conclusion of the proposed agreement along with Addenda numbered 1 to 2; and further notes the signature and conclusion of the proposed Investment Protection Agreement between the EU and its Member States and Singapore.—(George Hollingbery.)

--- Later in debate ---

[George Hollingbery]

I would like to correct the record if I may, Sir Henry, because I called you Mr Bellingham throughout my remarks, which I am sure others noticed but I am afraid I did not, and I apologise.

With the leave of the Committee, I will respond briefly to the points raised by the hon. Member for Brent North. Non-tariff measures are very important, but it is not our analysis that they are better for Singapore than they are for the UK in these agreements. I refer the hon. Gentleman to graph 5 in paragraph 1.30 of the economic impact assessment, where he will find a considerable number of areas where Singapore imposes non-tariff measures—for example, instruments, clocks, recorders and reproducers, vehicles, aircraft and vessels, machinery and electrical equipment, base metals and articles, textiles and articles, and paper and paperboard.

The list goes on and on. Hon. Members may not have this document to hand, but by comparison there is another graph that shows the number of non-tariff measures applied by the UK on Singapore. There are almost none at all that we can evidence. The impact assessment absolutely does assess that, and it is quite clear to me on reading it that there are many more measures to be washed away by Singapore than there are by the UK. I will give a few more examples. Banks will be able to increase the numbers of branches, which was previously controlled. Insurance sales will be able to be made online in ways that were not possible before because of regulations. Substantial procurement opportunities will be opened up that hitherto did not exist because the entities being addressed were not included in the procurement schedule. There are all sorts of areas where the FTA opens up opportunities for British business.

On the sectors most affected by increased imports, I do not have the evidence to hand to give the hon. Gentleman, but my impression is that a good deal of what will occur in this area is import substitution, because an awful lot of what Singapore supplies to the UK is intermediate goods that go on to make other goods. I would expect the impact to be greater on substitution than on British companies. That is not to deny that there will be an impact; indeed, the impact assessment addresses that. I should probably say to him that the costs identified in the impact assessment, which he finds so risible, are about the cost of compliance or using the FTA. They are not costs to the British economy; they are simply the costs to businesses of taking on board the FTA and understanding it so that they can participate in that market. The actual net costs, as the FTA will affect the United Kingdom because of potential job losses and reductions in GDP, are accounted for in the £95 million figure. Therefore, they are properly modelled.

There are issues with the model, and I would not disagree with the hon. Gentleman that it is not entirely ideal, but the effects for the UK consumer and businesses as a whole, and for UK GDP, are undoubtedly positive. Furthermore, the estimates use bound figures for the liberalisation of services; basically, all they do is lock in calculations as to the certainty of the old rules now being completely complied with. They do not look at the potential for new services coming into the Singaporean market from UK companies and, despite the fact that this is a sensible, reasonable and rational estimate of £95 million, we believe that if we really bottom out, there are potentially much greater benefits to be had.

The hon. Gentleman asked questions about the participation agreements and whether they are confirmed in the EU mechanism, which I think I addressed in my opening remarks. The answer to the question about changes to the agreement, and whether we will use clause 2 powers from the Trade Bill to radically change this agreement, is unequivocally no. The clause 2 powers are there to transition agreements. That is not to say that there will not be some circumstances where it might be appropriate to use clause 2 powers to change that agreement; if they change slightly, if there are bodies that arise and fall away, that might well be something that we would look at in the future. However, it would be by far and away our preference to use clause 2 powers for transition alone. I do not rule out the fact that clause 2 powers exist and can be used for further work at a later date.

If and when it is agreed that both sides in this bilateral relationship feel it is appropriate for more work to be done on a future trade agreement that would substantially modify what has been transitioned for the sake of continuity for business and consumers, that will almost certainly come back as a future trade agreement and will therefore engender all the mechanisms that the Government have described around those. That would be made clear at the time; we make no judgment at the moment, but that mechanism exists to look at new free trade agreements and the Government will come forward with proposals at the time for what they want to do.

Of course, the clause 2 powers also carry with them substantial obligations to inform Parliament about how an agreement has changed, what the substantial nature of that change is and how any delegated legislation will enact the changes described. Parliament will remain totally informed of any changes that the Government propose under clause 2 powers. That is the compromise that was reached on the new clause 6 argument, which the hon. Gentleman will well recall. I believe the House accepted that as a sensible, transparent way of dealing with this issue, and of course it must be agreed in both Houses. If we have a new free trade agreement, that will undoubtedly come forward under the new mechanism that the Government have described, some elements of which are still being developed.

[Barry Gardiner]

I appreciate that the Minister is trying to answer the specifics of the questions I have posed. Do I take it that what he has just said is confirmation that the Government have not received formal confirmation from Singapore that Singapore will not seek to negotiate any substantive changes to the terms of this agreement? If that is the case, given that we have an existing bilateral investment treaty with Singapore, does he not see that there is a certain convolution—to put it no more strongly—in moving from an existing bilateral investment treaty to a future treaty that we are seeking to take as a roll-over now, which will then be subject to further clauses of negotiation to be a substantive further treaty in due course? Does he not see that as a somewhat otiose methodology?

[George Hollingbery]

I think all I want to add is that we currently have the bilateral investment treaty in place and any future trade agreements or any changes will go through the mechanisms. On our attitude to future investment treaties that go along with the free trade agreement, the thinking is not set on either side and those negotiations continue. I understand the hon. Gentleman’s concern, but I do not believe it is a concern; I believe it is very straightforward. The Singaporean Government, through the Prime Minister, have made very clear indications to us that they will be willing to accept a technical replication and then—at a future date yet to be agreed and through conversations yet to be had—we will discuss future arrangements, but nothing is set in stone in that way.

On investment protection arrangements more generally, Committee members will know very well why these exist. If one signs free trade agreements and one wants one’s companies to be able to invest in a foreign territory where there is the slightest question about the rule of law in that area—I do not necessarily apply that to Singapore in any way, shape or form, but there are plenty of companies out there looking for that level of confidence, which is a good thing to put in place—or simply if a company or investor decides to make an investment in a third-party country whose Government have undertaken to have in place certain arrangements that the business relies upon, then it seems reasonable to have in place some mechanism to pursue a dispute where promises have not been kept, if the investment was made on the basis that certain regulations or agreements would be implemented in a certain way.

I think this is probably just a difference of principle between us. It seems to me that the Labour party has an issue with this. I believe that such a mechanism makes it a great deal easier for companies to consider investing abroad, and I would have thought that it was something that we would want to encourage.

I thank the hon. Member for Nottingham East for his comments. I will be happy to engage with him on the rolling-over of existing trade agreements at some stage—although I note that I already have, in the International Trade Committee last week; in which case I will finally wrap up.

Today we have discussed the benefits of the EU-Singapore FTA. We have also heard the reservations and concerns of hon. Members. I truly believe that the FTA is a positive agreement for the UK, and that it is in our national interest to see that it is signed and concluded. Although it is not anticipated that the IPA will apply to the UK before we leave the EU or during the implementation period, it is only right that the UK ensures that fellow member states can get on with the business of ratifying the agreement by supporting signature and conclusion of this agreement. After all, we remain members of the European Union and we have obligations that we must fulfil.

As the UK asserts its position as a global champion of free trade, now and as we leave the EU, we will continue to play an active and supportive role in the development and delivery of EU trade policy. We will also continue to work together to ensure continuity of our trading relationship as we leave the EU. I have been clear about the Government’s commitment to engaging further with Parliament as we develop our independent trade policy, and we will continue to work with stakeholders across the whole of the UK. I commend the Government’s motion to the Committee and urge members to support it.

Question put.