Trade (Comprehensive and Progressive Agreement for Trans-Pacific Partnership) Bill [Lords]

Debate between John McDonnell and Liam Byrne

2nd reading
Monday 29th January 2024 Commons Chamber

[John McDonnell (Hayes and Harlington) (Lab)]

I will raise three issues: the scrutiny process, ISDS and my ongoing concerns about the impact of the measures.

I am a member of the Public Administration and Constitutional Affairs Committee. I am the sole Committee member present in the Chamber because the others are on a delegation to Berlin at the moment—I am sure that they are working hard at this time of night, and not having a dinner. As has been mentioned, we published our report today; it is a comprehensive report, agreed by all parties. We have been looking at the overall parliamentary scrutiny process for treaties and free trade agreements and, to be frank, we have unanimously found that the current process is unfit for purpose.

At the moment, Parliament—I do not disparage the Government for this; it has happened consistently in the past—is treated as an afterthought in trade policy. We have not been able to find any meaningful mechanism by which Parliament can influence the negotiating objectives at the beginning of the overall process or oversee negotiations as they proceed, and we are never guaranteed a vote on the final agreement at the end of the process—a point that has been made on a number of occasions by Members across the House.

That contrasts with what happens in other legislatures, particularly the US Congress, where legislators play an incredibly proactive role. I do not think the Government should see the parliamentary process as an imposition with regard to future treaties, but as a method of improving the trade negotiations by allowing Members of Parliament to have an early and ongoing voice in those discussions. It is interesting that other Members—including the former Secretary of State for Environment, Food and Rural Affairs, the right hon. Member for Camborne and Redruth (George Eustice)—made exactly the same point during a debate in this House on the Australia free trade agreement, way back in November 2022. The right hon. Gentleman set out how during talks with Japan, the Japanese negotiators used parliamentary motions that their Government could not breach to protect their country’s interests.

People will see from the report that we have put forward a fairly comprehensive process by which the House can efficiently and effectively engage itself in such negotiations, with a sifting committee and a scrutiny committee. The House would always have the right to a vote at the end of the day, but more importantly, it would have an influence at the beginning of the negotiations when the overall objectives are set. The proposed process is part of an overall attempt to create greater transparency and, indeed, greater interest within the House in trade negotiations. I hope that the Government will take the Select Committee report away and come back with a positive response, because it contains some very constructive recommendations.

I now turn to the much discussed investor-state dispute settlement procedure. In debates in recent years, Members from across the House have expressed concern about the investor-state dispute mechanism, and those concerns have moved into the mainstream—not just in this country, but in other countries that are moving away from that system. As we have heard, Australia and New Zealand have committed to exclude the ISDS procedure from future trade agreements on the basis that in many instances, that procedure is not in the public interest. I cite the energy charter treaty. That has been the biggest vehicle for ISDS claims, and it is collapsing, with France, Germany, the Netherlands, Spain and others withdrawing. President Biden has now come out and criticised the ISDS procedures, and has basically excluded them from any future US trade agreements.

As the Minister knows, I have raised this matter in the House a number of times. I am sometimes perplexed: we are told that the Government are committed to the ISDS process, but on the other hand, they have acceded to both Australia and New Zealand exempting themselves from that process with regard to the UK. The last time I raised this issue, the Minister responded by saying—exactly as the Chair of the Business and Trade Select Committee, my right hon. Friend the Member for Birmingham, Hodge Hill (Liam Byrne), noted—that the UK has never been successfully challenged under ISDS. That is true, but there is an element of hubris in that position.

[Liam Byrne]

My right hon. Friend is making an excellent speech, and he is absolutely right to flag this issue. The UK Government have not hitherto been successfully challenged under ISDS, but for the first time, countries with very significant foreign direct investment into the UK are involved in this treaty. The figure for Canada alone is $56 billion. When it came to Japan—the other big investor—ISDS was excluded from the UK-Japan bilateral investment treaty. We need an awful lot more reassurance from the Government on this point, given the scale of investment from countries such as Canada in our country in general, but in sectors such as the water industry in particular.

[John McDonnell]

I do not know how excellent my speech is—I will just ramble on as usual, I think.

The argument that was put to me by the Minister responding today, the right hon. Member for Chelsea and Fulham (Greg Hands), was that if we cannot trust Canada in these deals, who can we trust? That is precisely the point, though: Canada will now have a parallel system, and Canadian firms will be able to take legal action in their own country. As a result of that statement by the Minister, I went away and had a look at the figures for Canadian firms under this process, and those firms stand out as being particularly litigious. They have brought over 65 ISDS cases in recent years. I therefore think that there is a chilling effect, exactly as the Chair of the Select Committee said, which at the end of the day can have implications for the UK’s right to regulate. If a number of cases are waged against the UK, that may undermine our ability to act more freely when it comes to regulation of the water sector, and also policy development, particularly on issues around water and future public ownership.

Again, I have previously raised this matter with the Secretary of State. What I cannot completely understand is that at the same time that the UK Government are defending the ISDS process with regard to the CPTPP, in the negotiating process for the bilateral free trade agreement they set out a specific objective to exclude the provisions of the ISDS system. That is a contradiction, and the Government’s thinking on that matter has not yet been explained to me. As the Minister will also know, there is a remarkably broad range of concern about the ISDS: in October 2023, a letter was submitted to the Government—supported by 30 non-governmental organisations and trade unions and over 50 academics and legal professionals from both the UK and Canada—calling for the immediate negotiation of a side letter between the UK and Canada to disapply the ISDS provisions between the two countries. That is exactly what happened with regard to New Zealand and Australia, and for the life of me, I cannot understand why the Government have not gone down that path for this particular negotiation.

I also want to express some concerns that have been raised about environmental issues and about labour standards. The CPTPP includes a number of countries where abuses of labour rights are widespread. To give a few examples, independent trade unions are banned in Brunei and Vietnam, while forced labour has been widely documented in Malaysia in various pieces of research, and a number of CPTPP member states have not ratified some of the core International Labour Organisation conventions.

The protections for labour rights within the CPTPP are particularly weak: a member state can only challenge another member state over a failure to uphold labour rights if it can be demonstrated that such a failure affected trade, which is notoriously difficult to prove in such cases. The ineffectual nature of that chapter is demonstrated by the fact that since the agreement’s conclusion in 2018, no Government have challenged another for abusing rights. The TUC has described the risk of CPTPP making it

“easier for unethical companies and investors to do business with countries where it’s easier to exploit workers”—

a risk that it considers to be significant. I do not think we have addressed that issue sufficiently.

There are also concerns regarding standards in partner countries. For example, as has already been said, pesticide standards could be undermined. Some 119 pesticides that are banned in the UK are allowed for use in one or more CPTPP member states. Although accession to the CPTPP does not necessitate any lowering of UK standards in this regard, when the peers debated this issue, there were really practical questions about the sufficiency of the UK’s border testing regime in keeping banned substances out. Again, it is an issue that needs further consideration in more detail as we go through the whole process.

The issue has been raised—and I know that the Chair of the Select Committee said that this may well have been exaggerated or overestimated in some of the debates—that the UK has acceded to Malaysia’s demand to lower tariffs on palm oil to zero. I have to say that the evidence I have seen and the representations I have received from the Trade Justice Movement and others is that this is highly likely to increase palm oil exports and, with that, the risk of deforestation, which will serve to undermine indigenous and local community land rights and threaten natural habitats for species such as orangutans. We have seen the various research and the range of evidence mounting on this particular issue. Again, it was debated in the Lords in the context of the potential protections afforded by the UK forest risk commodities legislation, under section 17 of the Environment Act 2021, but it is unclear when these regulations will actually come into effect, and therefore many believe that the protections are not in place at this stage.

There is also a view that accession to the CPTPP will bring risks of the erosion of preferences, under which current preferential trade agreements afforded to exporters in one country will bring negative development impacts on others. One example cited by the Trade Justice Movement is that Afruibana, the association representing banana exporters across Africa, has set out concerns regarding the potential impacts of tariff liberalisation in South and central America for those they represent.

Finally, one of the reports sent to me was a health impact assessment produced by Public Health Wales. It identified a range of diverse potential impacts, including the worsening of global air pollution due to transport distances for goods, the loss of employment for some population groups and, of course, the risk of ISDS cases being brought against regulations that seek to support public health outcomes. It is an important impact assessment that needs further scrutiny and examination. It leaves me with the impression overall that there has been a lack of impact assessments, so I look forward to the Select Committee report, which will go into further depths on this.

I come to the conclusion that, with all the risks involved and with such doubt surrounding the CPTPP, it will achieve what we could not even describe as a marginal economic gain over the length of time it will be in place, and I fear to tread on treaties and agreements of this sort. I just think that, although there is not going to be a vote tonight, I might be tempted at a later date to vote against the Bill—so I had better let the Labour Whips know that.