Draft EU-Canada Trade Agreement Order

Geraint Davies Excerpts

Tuesday 26th June 2018 Commons Chamber

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

I beg to move,

That the draft European Union (Definition of Treaties) (Canada Trade Agreement) Order 2018, which was laid before this House on 21 May, be approved.

I am delighted that we have the opportunity once again to debate the comprehensive economic and trade agreement between the EU and Canada, known as CETA, and that this is taking place on the Floor of this House. This follows on from the thorough and constructive debate last year and the overwhelming support shown by the full House in a subsequent deferred Division. I note that a majority of those on the Labour Benches who voted in that Division chose rightly to vote in favour of the agreement, and I hope they will continue to do so, because this debate comes at a crucial point in world trade, with the potentially destructive rise in protectionist sentiments.

Free trade is the means by which we have collectively taken millions of people out of abject poverty in the last generation, and we must not put that progress into reverse. We should also realise that trade is not an end in itself, but a means to widen shared prosperity. That prosperity underpins social cohesion and, in turn, political stability. That political stability, in turn, is the building block of our collective security. To interrupt the flow of prosperity is to risk creating a torrent of instability. We have an opportunity today to reaffirm Britain’s commitment to the principles of free trade and the application of an international rules-based system.

[Geraint Davies (Swansea West) (Lab/Co-op)]

Does the Secretary of State accept that after exit day, we will be bound by these treaties with Canada and hopefully Japan, but that there is no legal obligation for Canada and Japan to honour their obligations to us, because we will be out of the EU? That is the big problem with leaving the customs union.

[Dr Fox]

We already have had substantial bilateral discussions with Canada, and it agrees with the United Kingdom that CETA should form the basis of a bilateral agreement between the UK and Canada as we leave. However, we will have greater leeway to look at what additional elements we might want to include when we are no longer tied to the European Union.

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[Barry Gardiner]

The hon. Lady makes a false premise. Many parts of this deal would be welcomed, but there are essential parts of it that cannot be welcomed and which would stop us, therefore, being able to ratify it in the way she suggests.

The ISDS mechanisms give superior legal rights only to foreign investors to raise disputes against our Government to petition for compensation when their profits, or even their potential profits, are impacted by legislative or public policy decisions. This effectively allows companies to sue Governments when they are legislating in the public interest; for example, by introducing plain packaging for cigarettes, national insurance, minimum wages or even banning fracking. These provisions have become increasingly commonplace in new-generation trade agreements and this is what has resulted in such widespread international public outcry against deals such as the Transatlantic Trade and Investment Partnership, the Trans-Pacific Partnership and CETA.

The proliferation of investor-state dispute settlements can encourage treaty shopping, whereby investors restructure their activities to establish in countries where they may benefit from ISDS mechanisms, should they seek to effect policy change or petition for compensation. While the Government have previously argued that the UK has only ever been subject to four such dispute cases, and that the UK never lost such a case, it begs the question: why does the Secretary of State feel that this mechanism needs to be incorporated in a deal with a country such as Canada?

[Geraint Davies]

Will my hon. Friend give way?

[Barry Gardiner]

I will give way to my hon. Friend in just a second.

The Secretary of State spoke about the need to give investors protection and security and he has boasted many times in the past 12 months about the record number of FDI deals that he has been able to achieve. Unaccountably, he failed to report that those deals, though record in number, showed a 92% drop in value. Today’s figures also reveal a drop in the number of deals, and the number of jobs saved by such investments is down by 54% year on year, according to his website.

Indeed, many Canadian companies have used investor-state dispute provisions in trade agreements to challenge foreign Governments, whether it has been the closing down of mines in El Salvador following a moratorium to protect unpolluted drinking water, or the Obama Administration’s decision to suspend the Keystone pipeline over concerns about potential damage to the environment. The very threat of facing such a case, even when the chance of winning is in the Government’s favour, can clearly act as a deterrent to Governments from pursuing actions in the public interest—a regulatory chilling effect. This may well have been President Trump’s view when he reversed his predecessor’s decision and greenlighted the Keystone pipeline, thus avoiding costly legal action and the chance of a substantial payout.

Having watched cases taken against the Uruguayan and Australian Governments by the tobacco giant, Philip Morris, many countries are cautious about introducing plain packaging in tobacco product laws. It is not just European Governments who have expressed concerns about ISDS.

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[Greg Hands (Chelsea and Fulham) (Con)]

I rise to speak very much in favour of ratifying this agreement, and I welcome the opportunity to support my right hon. Friend the Secretary of State for International Trade and President of the Board of Trade, and to record my thanks to him for doing so much good work in the last two years to establish the Department for International Trade. I also thank the superb officials at the Department, who have worked tirelessly to get our independent trade policy up and running and heading in a successful direction. I also congratulate my successor as Minister for Trade Policy, my hon. Friend the Member for Meon Valley (George Hollingbery), who I think will be leading the next debate. I welcome him to his position and wish him every good fortune in his important role, in which he has a lot coming up in the next couple of weeks.

I want to reflect on the extraordinary contribution by the shadow Secretary of State. It was an abuse of procedure to speak for 35 minutes in a 90-minute statutory instrument debate and to leave others, who actually want to speak about the content of the agreement and its implications, with just four minutes each. I listened to his explanation of what happened, or did not happen, in 2016, and I thought it not really in his interests, as we could also go back to his position in 2016 and 2017, when I think he said that staying in the customs union, which I believe is now his party’s policy, would be a disaster for the country. I should have thought he was the last person to want to draw attention to what people said two years ago.

Most importantly, we heard the shadow Secretary of State speak for 35 minutes but never got a straight answer as to what his position on the agreement actually is. I think he said he would like to renegotiate it. Now, not only would that have implications for an agreement that is already in place—the provisions have been in place since September—but is he also saying he would renegotiate all the other 40-plus EU agreements, rather than seek their transition into UK agreements? [Interruption.] I think he is saying from a sedentary position that he would like to renegotiate the whole lot.

[Geraint Davies]

rose—

[Greg Hands]

I will not take any interventions because there is no time.

I want to say three things. First, CETA itself, on its own merits, is a very good deal. It could be worth as much as £1.3 billion per annum to the UK economy. It removes all tariffs on industrial products and wines and spirits, and eliminates customs duties on ciders, wines and spirits. On the investment provisions, we must remember, as the Secretary of State laid out, that the UK is the fourth-largest source of investment into Canada and the UK is the second most popular destination for Canadian investment. It is also important for the EU’s trade agenda, as it will be the first EU trade agreement to be ratified since that with South Korea some six years ago. The UK is supportive of the EU’s trade agenda, partly because we believe in breaking down barriers ourselves, and partly because the UK will seek to maintain the substance of these agreements as we go forward after Brexit.

Last time around on CETA the official Opposition split three ways. We look forward to seeing what the official position of the Opposition is and what the practical position is of their various MPs.

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[James Cleverly (Braintree) (Con)]

I apologise in advance if my speech is rather chopped up. Unfortunately, due to the huge discourtesy that the shadow Front-Bench spokesman displayed to the House, I shall have to heavily curtail the points that I wished to make. In a paper that I co-wrote with Tim Hewish entitled “Reconnecting with the Commonwealth: the UK’s free trade opportunities”, I made the point that because of our shared history, our common language, our basis in common law, our shared recognition of professional standards and our shared attitude towards human rights and standards in general, a trade agreement with Canada should be one of this country’s priorities, post-Brexit. I am therefore pleased to hear from both sides of the Atlantic that CETA will be the foundation stone for a UK-Canada trade agreement, post-Brexit, and it is appropriate and welcome that this House should be debating this issue today.

The hon. Member for Swansea West (Geraint Davies) suggested earlier from a sedentary position that the UK was a minnow. I think that that was the word he used. Well, I have news for him. In 2016, this particular minnow had exports combined to a value of £8.3 billion—up by £2.1 billion on the preceding decade. In 2016-17, there were 72 foreign direct investment projects from Canada to the UK, accounting for something in the region of 1,700 jobs.

[Geraint Davies]

Will the hon. Gentleman give way?

[James Cleverly]

No, I am not giving way—

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[Geraint Davies]

But the hon. Gentleman mentioned me—

[James Cleverly]

I am not giving way. We have so little time.

CETA is the first major trade agreement signed by the EU since the one with South Korea in 2011. It is therefore entirely appropriate to welcome its arrival. This morning, I had breakfast with Stephen Harper, the former Prime Minister of Canada. He reinforced the point made by Canada’s current Prime Minister, who has said that a UK-Canada trade agreement would allow a larger and—this is a Canadianism rather than a British turn of phrase—“more impactful” trade relationship than the current EU agreement. Just this week, we have heard reports that Italy is now expressing concerns about the ratification of CETA.

This debate provides us with an opportunity to welcome CETA and the work that our own Department for International Trade, led by my right hon. Friend the Secretary of State for International Trade and President of the Board of Trade, has done to forge relationships between the UK and Canada, and more widely. Most importantly, it gives us the opportunity to be vocal and passionate proponents of free trade and the good work that it does. We must not be tempted by the siren song of protectionism. We remember from Greek mythology what happened to those who were seduced by the song of the sirens: they sailed on to the rocks and their ships were dashed to pieces. They floundered and drowned. We must not let that happen to us. We must embrace free trade and we must welcome the CETA agreement.

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[Geraint Davies (Swansea West) (Lab/Co-op)]

What these trade deals show is that we are stronger in team EU, negotiating big deals, than alone. What will happen is that those on both sides of the House will say that they will do their own deal afterwards in different ways. We will be in a weaker position and subject to all sorts of problems. Finally, on the court system, the EU and Canada are both mature democracies, judiciaries and economies. We do not need an investor court system; the investors are already protected. Things could be improved, but there is a lot in CETA and we need to keep trading.