Trade Deals and Fair Trade

Geraint Davies Excerpts

Wednesday 11th March 2020 Westminster Hall

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

I beg to move,

That this House has considered trade deals and fair trade.

It is a great pleasure to move the motion during Fairtrade fortnight. The debate is about how to hardwire the ethics of fair trade into future trade deals as we break out of Europe. I stand here as a Labour and Co-operative MP. The Co-op has a proud tradition of fair trade, solidarity and social justice, and, on the retail side, promoting Fairtrade coffee, bananas, wine, chocolate, and so on.

I represent Swansea West, and I am pleased to say that Swansea has been a Fairtrade city since 2004. In fact, Wales became the first fair trade nation in 2008, and a lot of that work was done by the Swansea fair trade forum. I am also a supporter of the Fairtrade Foundation, which has tended to focus on cocoa producers in the Côte d’Ivoire and Ghana, where there are issues surrounding living incomes, gender inequality and environmental standards.

Coming to the crux of the matter, we are all aware that we face opportunities and risks in striking trade deals. Naturally, a lot of focus has been on the removal of subsidies and tariffs, and some of the focus has moved on to standards of products and services. However, I wish to talk about standards in relation to the environment, labour, and crop diseases and the like, which can be used to undermine free and fair trade by providing unlevel playing fields.

In a nutshell, fair trade is the principle that market actors should not gain a competitive advantage by adopting practices in other states that would be unlawful or unethical in their home states. The fair trade principle is that we should not outsource abuse—whether in terms of human rights or environmental standards—and then import products made under such conditions, creating unfair competition for domestic producers, who have to live up to high environmental and ethical standards. It is important that we do not import products that are produced below our standards and by virtual slave labour. Such imports naturally lead to people complaining locally that trade is uncompetitive, and to rhetoric about stopping trade and how everything is unfair to domestic producers, who miss out.

[Nick Thomas-Symonds (Torfaen) (Lab)]

I congratulate my hon. Friend on securing the debate in Fairtrade fortnight. Does he agree that Britain needs to be a real example around the world in standards, and would it not be a good idea if the Government set out clearly that they intend to remain a signatory to the European convention on human rights?

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[Geraint Davies]

Yes, that is crucial. There has been some ambiguity over whether we will continue with the European convention on human rights. Ministers have simply said, “We’re still in it,” when questioned. They have not ruled out leaving it, and that is of great concern. If we, as a country, decide on our own definitions of rights and human rights, other countries, such as China, Russia and others, will say, “Oh well, Britain is doing that.” We became a signatory 60 years ago. Winston Churchill was an architect of the convention. It is very important for our standing that we remain a signatory to it.

There used to be a commitment to including dynamic alignment on environmental and labour standards in our agreement with the EU, but that is no longer the case. If those commitments are not given, the EU will consider imposing restrictions based on the presumption that non-alignment might be a doorway to providing uncompetitive trade and an unfair advantage, by undermining rights, the environment and labour standards. I certainly would not want to see that.

International agreements tend to be policed by independent tribunals invoked by investor-state dispute settlements. Those settlements focus very much on the interests of the inward investor, and on any profit that they might lose from the host nation’s introduction of laws and restrictions. Such laws and restrictions are often introduced to protect the host environment, workers’ rights and so on, and such settlements make it possible for a fine to be levied against the host country. The Minister will know of cases such as Lone Pine fracking in Canada, which sued Canada for hundreds of millions of dollars because Quebec decided to have a moratorium on fracking. There are cases of companies suing Mexico on the grounds that it introduced a tax on fizzy drinks to protect people from diabetes. There are cases of such mechanisms being used against Slovakia when it tried to roll back privatisation.

The point that I am making is that such arrangements contain a chapter for the investor that completely overwhelms the balance of power in relation to human rights and the environment. There may be an environmental chapter in some of the agreements, but it will not have the enforceability that investor-state tribunals do. The Government should look at that in order to hardwire labour and environmental standards into trading agreements, and to help to sustain and grow fair trade. It would also be ideal to hardwire the Paris agreement and the convention on human rights into new trade deals. We know that in the US-UK negotiations, the US explicitly wants to rule out climate change and the Paris agreement, and that is of great concern.

I am moving towards suggesting to the Minister that trade agreements should allow states to penalise social and environmental dumping as well as economic dumping. At the moment, under World Trade Organisation rules, most trade agreements allow players to penalise other countries that overtly subsidise and dump products on their marketplace by way of tariffs, and so on, or they allow referral to a dispute resolution mechanism, as I mentioned. They do not include similar mechanisms for social and environmental dumping. I ask the Government to look at such mechanisms to ensure that countries are not undermined by the abuse of human rights and environmental conditions, thereby undermining prices in the market and providing unfair competition.

Some trading agreements include references to some of those things, but they are essentially unenforceable. There are warm words about hoping to look after workers and the environment, but they are not enforceable. When push comes to shove, that leads to disaster, particularly in very poor countries. If we are serious about taking back control when we leave the EU, we need a trade policy that respects the environment, public health, social justice and democracy.

[Jim McMahon (Oldham West and Royton) (Lab/Co-op)]

I congratulate my hon. Friend on securing this important debate. Does he share the Co-operative party’s concern about the mooted winding up or merging of the Department for International Development? We need it to grow in order to tackle inequalities around the world.

[Geraint Davies]

That point is very well made. This is a critical time, during which DFID needs to be closely engaged in the whole issue of negotiating trade deals. It is helpful for DFID to be separate from the Department for International Trade. We do not want DFID to be absorbed, eliminated, pushed into the Foreign and Commonwealth Office or whatever; we want it to be a strong voice in a difficult time as we move forward, so that Britain can be seen to champion these values for others to follow, rather than undermining standards and leading people in the opposite direction.

Coming back to the point about democracy, it is important that we are all in this together, so to speak, by virtue of having democratic scrutiny and a vote on the mandate. The process should be as transparent as is sensible, and then there should be final scrutiny and a vote on the deal in Parliament. That is something that the US Congress enjoys, and democracy in trade deals is not much of an innovation. The US Congress looks at trade deals, and there is public consultation. Of course, the European Parliament also has a vote on trade deals. If we are taking back control, we should have similar or better rights ourselves.

[Preet Kaur Gill (Birmingham, Edgbaston) (Lab/Co-op)]

My hon. Friend is making an excellent speech, and I congratulate him on securing this debate. Does he agree that the current avenues for public and parliamentary scrutiny of future trade deals are not fit for purpose; that the Government must be transparent about their negotiating priorities to ensure that social and environmental protections are adequate; and that they must provide scope for genuine parliamentary debate and influence in any and all trade deals?

[Graham Stringer (in the Chair)]

Order. Can I just say to the hon. Lady that it is normally good practice to not intervene on a speech when you have not heard the beginning of it? The hon. Gentleman gave way, so I allowed the hon. Lady to speak, but it is not good practice to come in midway through a speech and intervene.

[Geraint Davies]

Thank you very much, Mr Stringer, and I thank my hon. Friend very much for her intervention. I agree with the points that she made, because in a mature and open democracy such as ours we do not want to have trade deals done in secret, and then find out that they contained all sorts of strange things that we did not want. By way of example, we would not want to wake up one day and find GM food scraps on our shelves. Neither would we want chlorinated chicken or hormone-impregnated beef, which provokes premature puberty in children.

We would not want certain things to be negotiated on the grounds of regulatory co-operation. That might include moving away from REACH—a process that the Minister will know about—on the chemical front. Under that process, if he were to produce a chemical, he would have to show that it was safe. If I were to produce a chemical in the United States, however, the Environmental Protection Agency would have to show it was hazardous. That is why asbestos is still for sale in the United States. We would certainly want to debate and scrutinise whether regulatory co-operation would lead to a much higher incidence of hazardous chemicals or poor food, which I would not want to see.

I know that the Government have committed to maintaining our standards of food production. However, the threat now is that while our farmers are delivering good food, the doorway will be left open for American farmers to pump in low-grade, low-price products that are consumed by poorer people who are under the hammer of austerity, and who end up feeding hormone-impregnated beef to their children, with strange medical side effects. I would not want that, and we would certainly want an open debate and discussion about it, so the intervention by my hon. Friend the Member for Birmingham, Edgbaston (Preet Kaur Gill) was well made.

In addition, we do not want our NHS to be undermined behind closed doors. The Government have said, “The NHS is safe in our hands,” and all that sort of stuff, but as we already know, the Americans will want to compete in areas of the NHS that are nationalised. They want access to patient data, and in fact a lot of patient data has already been leaked to private companies. They also want to increase medicine prices by protecting patents more effectively, and the World Health Organisation also promotes higher medicine costs. At this tragic time when we face the threat of coronavirus, and when we are talking about public health and equality of availability of drugs to deal with this and any future threats, such protections are essential.

We need democracy to shine a light and blow out the bugs in the system, so that we know what we are doing. Indeed, we want to eliminate any clauses about ratcheting and stand-still that are basically designed to stop the renationalisation of privatised utilities and industries. Clearly, people have different political views, but in a democracy the balance between public and private should be a matter of debate, discussion and public mood. It should be a moving target, rather than being fixed in one place or continuously going towards privatisation.

I will say a couple of words about what we might want to change and retain as we leave the EU. The Minister will know that the EU offers certain developing countries tariff rate preferences through its general system of preferences on everything but arms schemes. There is a risk that our bilateral trade agreements with other countries will lead to a relative erosion of those standards, or that developing countries will lose out as we carve up arrangements with developed countries.

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[Stewart Hosie]

Nor am I, but I am surprised and slightly disappointed that the UK Government’s stated intention is to exclude certain important matters from dispute resolution or arbitration. But—and this is a big but—not all arbitration and dispute resolution mechanisms are the same. Although the SNP will continue to support the inclusion of all the aspects of modern trade deals that I have mentioned, we would be deeply concerned if other future trade deals implemented the one-sided ISDS-type mechanisms that the hon. Member for Swansea West mentioned.

[Geraint Davies]

I am following the hon. Gentleman’s speech closely, and I agree with what he is saying. Does he agree that it is imperative that the UK stands up for dispute resolution mechanisms that include social and environmental matters and other areas beyond investment, as a precedent for when the EU—and indeed the UK, which is in a much weaker position—talks to the US or China? The EU will be the future of fair trade globally.

[Stewart Hosie]

Of course I agree with that. It is important that the wide range of issues that form the basis of modern trade deals—not simply tariffs and quotas—are included. As I have said, however, not all arbitration mechanisms are the same, and I would not want one that operated on the basis of the secret ISDS-type schemes that we have seen.

That is primarily because of the potential restrictions that such mechanisms could place on Governments, including the UK Government, in legislating even on public health, for example. To demonstrate, I will give two brief examples of how ISDS-type arrangements are unfair and limit the Government’s ability to act in the interests of citizens. The examples are not new and the information has been around for some time.

In the first case, between 1995 and 1997, the Canadian Government banned the export of toxic polychlorinated biphenyl waste to comply with their obligations under the Basel convention, to which the United States was not a party. Waste treatment company SDMyers sued the Canadian Government for $20 million in damages under chapter 11 of the North American free trade agreement, which included an ISDS-type arbitration scheme. The claim was upheld by a NAFTA tribunal even though Canada had acted to comply with an international treaty—that is quite extraordinary.

In the second case, in April 1997, the Canadian Parliament banned the import and transportation of the petrol additive methylcyclopentadienyl manganese tricarbonyl, because of concerns that it posed a significant public health risk. Ethyl Corporation, the additive’s manufacturer, sued the Canadian Government—again under NAFTA chapter 11—for $251 million, to cover losses resulting from the “expropriation” both of its plant and its “good reputation”. The claim was upheld by the Canadian dispute settlement panel, and the Canadian Government repealed the ban and paid Ethyl Corporation $15 million in compensation.

Those cases involved toxic PCB waste and a petrol additive that was deemed to have an impact on public health. In my view, it is quite wrong and unfair for large corporations to be able to sue Governments simply for taking steps to protect the wellbeing of their citizens, or for enacting public health measures that they believe to be right and fair, and for which they may well have an electoral mandate.

Although we welcome new trade deals, they need to be fair. As has been said, the process of agreeing them needs to be transparent and inclusive. For example, it must formally involve, at all stages, the Scottish Government and other devolved Administrations; and approval must be sought from and granted by Members of Parliament. That mirrors the point about democracy that the hon. Member for Swansea West made.

A clear understanding is required that although genuine dispute resolution mechanisms are vital for delivering fairness, free-trade agreements that include secret ISDS-type courts that limit, or appear to limit, the ability of Governments at any level to act in the best interests of their citizens are wrong, unfair and profoundly unacceptable.

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[The Minister of State, Department for International Trade (Conor Burns)]

It is a pleasure to serve under your chairmanship, Mr Stringer, for my first speech as a Minister in Westminster Hall. I congratulate the hon. Member for Swansea West (Geraint Davies) on securing the debate, and other hon. Members not only on their contributions but on their ingenuity in using this occasion at the end of Fairtrade fortnight to widen the debate into one about our future free trade agreements around the world, in particular with the United States. I also congratulate the hon. Gentleman on having been such a doughty advocate for the cause of fair trade over the years—a position that the Government share.

The Department for International Trade works very closely with the Fairtrade Foundation; indeed, the foundation serves on the strategic trade advisory group—the STAG—which I chair as the Minister responsible for trade policy. The global fair trade system reaches more than 1.5 million farmers and workers in more than 73 countries, many of which have historical ties to the UK, principally through the Commonwealth. The UK market for Fairtrade certified goods, which is underpinned by fair trade standards, minimum prices and direct payment of premiums to producers, has grown into one of the world’s largest. The Fairtrade mark continues to be trusted highly by the UK consumer, with more than 80% of the public saying they trust it.

Working towards a living income in domestic and global value chains is one of the keys to driving poverty reduction and economic development, and fair trade plays a crucial role in that. It also provides a means to create wealth, jobs and prosperity in local communities, in turn driving a country’s development and allowing it to grow into a trading partner of the future.

I will give some examples of how the Government, across various Departments, support free and fair trade. Between 2010 and 2016, the Department for International Development provided £20 million to Fairtrade International to help it to have a greater impact through its work and to make the global fair trade system stronger. DFID has also supported fair trade by investing more than £30 million in the responsible, accountable and transparent enterprise programme. That programme has helped to fund Shift, which works to improve companies’ human rights reporting through capacity building in business and human rights, and a new reporting database. It has also piloted and promoted Fairsource, a suite of supply chain mapping tools for use by companies to improve the sourcing of agricultural commodities such as flowers and cocoa, which was referred to by the hon. Member for Strangford (Jim Shannon). Fairsource dashboards are now available for more than 410 businesses and have been used by household names such as Ben & Jerry’s, Marks & Spencer and Starbucks.

Achieving the UN sustainable development goals by 2030 means achieving inclusive economic growth and decent jobs. The Government are committed to supporting that to spread opportunity ever more widely. We have the trade and investment advocacy fund to build developing countries’ capacity to participate in trade negotiations and fully engage at the World Trade Organisation. We have the SheTrades Commonwealth programme to enhance the competitiveness of women entrepreneurs in Commonwealth countries by connecting them to international markets. We have the Commonwealth Standards Network to increase awareness and the use of international standards across the Commonwealth in order to boost trade.

[Geraint Davies]

The Minister mentioned the good work of DFID in promoting fairness. Will he confirm, or press the Government to ensure, that DFID’s work continues and that it is integral to trade negotiations? There is some concern that the Department for International Trade is working in isolation and in the interests of investors, while DFID may be thinking about fair trade. It is important to hardwire the interests of fair trade into future trade arrangements.

[Conor Burns]

I agree with the hon. Gentleman. I know that my right hon. Friend the Prime Minister, when he served as Foreign and Commonwealth Secretary —I was his Parliamentary Private Secretary at the time—was frustrated to a degree by the disconnect that sometimes existed between DFID and the Foreign Office in pursuing Britain’s overall development and foreign policy objectives. It absolutely makes sense that we should try to co-ordinate our activity across all the international Departments of Government to get maximum influence for the United Kingdom and, most importantly, the most positive outcomes. One of the key drivers that motivates us in the Department for International Trade is the opportunity of trade with some of the poorest countries in the world to increase the opportunity for wider prosperity there. That will be at the heart of trade policy as we develop future free trade agreements.

We give £15 million to support the implementation of the trade facilitation agreement programme, which helps developing countries to reduce inefficient border processes, excessive red tape and administrative bottlenecks, which are hindrances to effective trade. The UK is the largest donor to the WTO’s enhanced integrated framework, providing technical and financial support to build trade capacity in 51 of the poorest countries in the world and to increase agricultural productivity for both local consumption and export. Through our support for the Impact Management Project, more than 2,000 organisations are harmonising a global approach to managing impact, including robust global standards on measurement and reporting. We are also examining the potential for fair trade standards to encourage businesses to be more responsible and reach vulnerable people in their supply chains.

Let me turn to a point raised by the hon. Member for Strangford—who is currently being interfered with by my hon. Friend the Member for Beckenham (Bob Stewart), who has just arrived in his coat. The hon. Gentleman mentioned the terrible conditions in which some people work in some of the poorest parts of the world. We are absolutely clear that those people and providing them with opportunities are at the heart of our trade policy. That means engaging across the whole supply chain, working in partnership with businesses, NGOs, producers, investors and consumers to be more responsible and reaching vulnerable people to ensure safe and decent opportunities for all.

Now that we have left the EU, we have a superb opportunity to advance the agenda further. It will enable us to build a fully integrated training and development package, encompassing trade preferences for developing countries alongside our existing aid spending. We know that trade is a key driver of economic growth, helping to raise incomes, create jobs and lift people out of poverty. That is why the Government are working to place development and global prosperity at the heart of UK trade policy.

Free and fair trade has been a great liberator for the world’s poor. Between 1990 and 2015, the number of people living in extreme poverty globally fell by more than 1 billion, but as the hon. Member for Strangford indicated, there is still so much to do. I say to the shadow Minister, the hon. Member for Sefton Central (Bill Esterson), that fair trade also means free trade. Let me tell him and colleagues that by free trade we mean supporting the international rules-based global trading order to ensure that trade works in the interests of all countries, large and small. As an independent trading nation, the United Kingdom will prioritise fair trade and, in particular, trade that helps developing countries to lift themselves out of poverty. That starts with working to ensure continuity in our trade agreements with those developing countries.

Following the transition period, the UK will put in place its own trade preference scheme granting duty-free, quota-free access to 48 least developed countries and tariff reductions to other developing nations. Far from rowing back, as was suggested, we intend to use our new independence to go forward. I contend that while DFID is the Department spending 0.7% of gross national income on development, the Department for International Trade is also, in a very real and profound sense, a Department for development by providing opportunities for creation of wealth and prosperity through trade.

We have signed four development-focused economic partnership agreements with the Southern African Customs Union, and Mozambique and other specific eastern and south African states. We continue to work with our partners on arrangements for the remaining countries covered by EU economic partnership agreements, including Cameroon, Côte d’Ivoire, Ghana and Madagascar. As was alluded to by the hon. Member for Halifax (Holly Lynch), we are absolutely determined to get those over the line. In fact, only last week I met representatives from some of those countries to discuss how we could get those agreements rolled over by the end of the year. We are also using our influence in organisations such as the WTO.

[Geraint Davies]

The Minister will know that the history of investor-state dispute mechanisms is basically about protecting investors who invested in countries without established systems of law and protection for investors. These days, we need a system in which people can invest in the knowledge that the host nation will also protect its environment and workers’ rights. Will he endeavour to strike deals that ensure that those social and environmental rights will be protected alongside investors’ rights, with investors’ rights not trumping those rights and attempts in host countries to protect those vital interests?

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[Geraint Davies]

It has been an interesting debate My response to the Minister is that if we agree on ensuring social justice, ensuring environmental protections, ensuring that human rights are protected and so on—we may do—we need to build those commitments into our trade agreements and not just hope for the best. Investor-state dispute systems are specifically focused on the interests of investors. Let us ensure that those values persist as we look at those relationships with the EU and, in particular, in the interests of the poorest—

[Graham Stringer (in the Chair)]

Order.

Motion lapsed (Standing Order No.10(6)).