EU-Japan Economic Partnership Agreement

Kevin Hollinrake Excerpts

Tuesday 26th June 2018 Commons Chamber

[Barry Gardiner]

Indeed. I absolutely agree with my right hon. Friend. The Japanese investment into our country over many, many years has been hugely beneficial not simply in creating those jobs, but in sustaining them into the future. We absolutely cannot afford the Government’s red line, which puts that in jeopardy.

As I was saying, Japan accounted for £12.5 billion of our exports in 2016—it was our fifth largest export market. A Labour Government would certainly want to do a trade deal that builds on the commercial and diplomatic ties that bind our two countries together. The Government have been forced into calling this debate by the European Scrutiny Committee, chaired by the hon. Member for Stone (Sir William Cash). The Committee rightly said that the agreement raised

“complex legal and policy issues for the UK”,

which remain unanswered.

[Kevin Hollinrake (Thirsk and Malton) (Con)]

On a point of clarification, I think that it is the official position of the hon. Gentleman’s party—I am not sure whether he is fully signed up to it—that it would remain part of the customs union after leaving the European Union, which would inhibit his chances of striking a free trade deal anywhere, as the EU would be required to negotiate that deal on his behalf. Bearing in mind his reservations about the EU-Canada comprehensive economic and trade agreement discussed in the previous debate, and his potential reservations in this debate, is he confident that the EU will negotiate those trade deals to his satisfaction?

[Barry Gardiner]

Clearly, while we remain a member of the EU, we have a seat at the negotiating table of any deals. If we are outside the EU, we will not have that, but, equally, we will not have the benefit of being part of a 500 million-strong consumer market that would enable us to negotiate better deals. I am sure that the hon. Gentleman appreciates that being in a new customs union with the EU, as the leader of my party set out in a speech he gave in Coventry a little while ago, would mean that we would be co-decision makers with the EU in that relationship—a customs union not such as the one we currently have with the EU, but one much more like Mercosur, where each of the countries has equal sway.

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

It is a pleasure to follow the hon. Member for Yeovil (Mr Fysh), who made a number of interesting points about the uncertainties we face. In particular, we have Brexit day in March and then a transition period, and our status within this very welcome EU-Japan deal is very uncertain.

The first key point I want to make is that we should relish the fact, as the right hon. Member for Chelsea and Fulham (Greg Hands) essentially did, that we have been part of the EU and have had the strength of the EU to enable us to negotiate a good deal. The real fear is that, after Brexit, we will be a stand-alone country facing big opportunities but also big challenges—whether with Japan, China or Trump’s United States. That is something I very much regret.

It is good to see that we do not have an investor court system in the Japan deal. That underlines the point that such a system is simply unnecessary for trading between two mature economies in democracies with established judiciaries, because there is already protection for investors. That is the case for Canada, and also for trade with the United States, in which investors are protected. The problem with investor court systems is that they put the investor first, above the environment or the public interest. There is an endless list of examples, but—[Interruption.] The Under-Secretary of State is chuntering from the Front Bench. By way of example, let us take George Osborne’s sugar tax. When such a tax was introduced in Mexico, such a system was used to sue Mexico for the profits lost by protecting people from diabetes, so these things do happen.

[Kevin Hollinrake]

The hon. Gentleman is citing the Cargill case, in which Mexico was actually fined by the World Trade Organisation for inappropriately applying tariffs that were contrary to a free trade agreement. In that case, it was ruled against not just under the investor-state dispute settlement process, but in the WTO itself.

[Geraint Davies]

The WTO did get involved, but the essential point—[Interruption.] No, let us get this clear. The essential point of these arbitration courts is that investors invest, and if Governments change the rules and doing so changes their future profits, investors can sue for compensation, as was the case with the sugar tax. That would be the case if there was a plastics tax, for example, or if there was a diesel tax, and so on. That is why people are very worried, and the Government must not trade off the environment, the public interest and wider considerations of public law. Thankfully, there has been concern about this in Europe, which is why such an unnecessary system has not been applied in the Japan deal.

On Japan, 40% of its inward investment into Europe is to Britain. Why? Is it because the Japanese love British people? We do speak English, which is their second language, but it is basically because we are a platform, through the customs union and the single market, into the biggest market in the world. These are the facts. If we are not in the single market and the customs union, which we will not be after the transition period—if we go ahead with the barmy negotiation that is being suggested—that foreign direct investment will go to mainland Europe, and we may just be left on our own.

This is the situation we face. In particular, as has been said, President Trump basically has an America first policy. He does not recognise anything except a zero-sum game. We have had a conversation about imports and exports.

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[Kevin Hollinrake (Thirsk and Malton) (Con)]

I welcome my hon. Friend the Minister for Trade Policy to his place and thank his predecessor for all the fine work he did in this area and his great knowledge.

I am very much in favour of this agreement, which is a clearer position than that of the shadow Secretary of State, who has refused all opportunities to say whether he would or would not execute the agreement. He also apparently wants to leave future negotiations in such deals with the EU and seems to think that we will be co-decision makers on that basis. Has he had conversations with the EU about that? Would it agree to such a thing? It seems very unlikely.

The Secretary of State has clearly pointed out the benefits of free trade agreements, as Ricardo did 200 years ago. He has talked about the increase in overall consumption and the bilateral agreements between the two trading nations. He is right. One hundred years ago, 90% of the population of this planet was in extreme poverty. Today it is only 10%. One hundred years ago, only 20% of people got a basic education. Today it is 80%. That demonstrates clearly that free trade is not a zero-sum game. So we should welcome this agreement, which will enable us to set aside these tariffs. That will have a significant impact on trade—an increase in trade of £10 billion to £15 billion per annum.

One thing Ricardo probably could not have foreseen is the way nations have regulated their own economies and the differences between those regulations. Part of the difficulty with these agreements is the harmonisation of regulations—the non-tariff barriers. This is not just about free trade: it has to be fair trade so we operate on a fair and level playing field. That is particularly necessary for our small and medium-sized businesses.

In this place, we rightly bring forward new legislation—whether workplace regulation, environmental regulations, product standards or animal welfare legislation— because we want to see high standards in products and in terms of how we operate business in this country. Clearly, multinationals have different opportunities from small businesses. They can game the system in many ways—not all of them do—and put their manufacturing facilities in areas with the lowest common denominator. That is certainly a feature of President Trump’s renegotiation of NAFTA. He is trying to ensure that Mexico has a minimum wage, in order to disincentivise car manufacturers from placing their manufacturing facilities in the areas of lowest cost.

In conclusion: free trade, yes, but it absolutely has to be fair trade. In all these agreements, we have to consider small businesses—