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

Liam Byrne Excerpts

2nd reading
Monday 29th January 2024 Commons Chamber

[Kemi Badenoch]

My right hon. Friend is correct. We would not have been able to sign this agreement had we not left the European Union, but we are now able to enjoy the benefits of this free trade agreement as well as the one that we have with the European Union.

[Liam Byrne (Birmingham, Hodge Hill) (Lab)]

Many of the figures that are sometimes cited about the future size and scope of the Indo-Pacific market include the size and growth of China. Has the Secretary of State reflected further on the evidence that she gave to the Select Committee last week, and can she tell the House whether, if China decides to try to join the CPTPP and meets the technical standards, the UK will block that or welcome it?

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[Kemi Badenoch]

I agree with that statement. I would just like to highlight the significant contribution that our trade envoys, including my hon. Friends the Members for Wyre Forest (Mark Garnier), and for Gloucester (Richard Graham), are making to our debate on trade. They are getting out there, bringing business to the United Kingdom, selling all that is great about our country, and making a valuable contribution to trade policy in the UK, and I want to take this opportunity to thank them for all the work they are doing, travelling around the world and banging the drum for British trade.

[Liam Byrne]

Before the Secretary of State moves off the subject of cars, I want to make an intervention about our trade with Canada, which involves more than £745 million-worth of exports. We currently benefit from tariff-free trade because of the extended accumulation of origin rules. That tariff break will end at the end of March, and because talks have broken down, we face a situation where our car exports are about to be hit by tariffs. Can she tell the House a bit more about how she plans to avoid a tariff war hitting UK car exports at the end of March?

[Kemi Badenoch]

This is a good opportunity for me to state explicitly that the talks have not broken down. We are having multiple discussions with Canada on cheese, in which we have not come to an agreement. However, the quota that we have under CPTPP with Canada is 16.5 kilotonnes, which is more than the 2 kilotonnes we are selling to Canada at the moment, so we are not particularly concerned about that, although it is disappointing. We have an ongoing rules of origin discussion, and we have an FTA discussion, which I have paused, for reasons that the right hon. Gentleman will know—

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[Liam Byrne]

indicated dissent.

[Kemi Badenoch]

Well, he should know them, because I believe I referred to them in the Select Committee; I hope he was listening. The point I am making to the Chair of the Select Committee is that trade is dynamic. On some issues that we are negotiating and discussing with our partners, we have differences of opinion; and others are going swimmingly. This is not a reason for us to cast aspersions on our trade relationships with the countries in question.

Joining this partnership will deliver for our manufacturers, but crucially it will also deliver for our globally renowned services sector. The UK is already the world’s second largest exporter of services, behind only the US, and services exports are at record levels. CPTPP, with its modern and ambitious rules on services and digital trade, plays to the UK’s strengths, given that almost 80% of our economy is services-based. It will reduce market access barriers, such as data localisation requirements; British businesses will not have to set up costly servers or data centres in each member country, and that will save them significant time, money and other resources. This agreement will help flagship British businesses such as Standard Chartered and BT to gain smoother access to markets in Singapore, Vietnam and Malaysia, strengthening our trade with those nations for years to come.

We also have a ratchet mechanism for the first time with Malaysia, Chile, Mexico, Peru, Singapore, Brunei and Vietnam, meaning that if those countries relax rules for a particular service, restrictions cannot then be reintroduced in future. That is another clear example of how this agreement will unlock smoother, simpler trade. The director general of the Institute of Export and International Trade, Marco Forgione, has rightly said:

“This is all good news for UK businesses, giving them greater access to one of the fastest growing regions in the world”.

The issue is not just the benefits that joining this partnership will bring over the short term. This is a growing agreement, designed to expand and bring in more markets and more opportunities for UK businesses in the long run. As the first acceding country, we will be ideally placed to take advantage of that future growth.

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[Gareth Thomas]

One set of figures the Secretary of State’s Department definitely did not put together were those that the Office for Budget Responsibility produced. It now expects only a 0.04% increase in our economic growth, after a decade, from joining CPTPP. As we already have free trade agreements in place with nine of the other 11 CPTPP members, formally joining CPTPP feels rather thin compensation for Ministers’ many other failures on trade.

[Liam Byrne]

In the light of the news that the figures that have been tabled by the Department are not accurate—I can barely believe it—would my hon. Friend, like me, have expected there to be a new impact assessment alongside the Bill, with the latest departmental assessments set out clearly therein?

[Gareth Thomas]

It would have been an excellent idea if the Secretary of State had published those. Perhaps she might be willing to publish them at the same time as giving us a statement about what exactly is going on in the negotiations with Canada. We will have to use the review of CPTPP in 2026 to try to increase more markedly the benefits of membership for British jobs, British consumers and growth.

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[Liam Byrne (Birmingham, Hodge Hill) (Lab)]

I suppose I should start by declaring an interest, because nearly 10 years ago I wrote a book called “Turning to Face the East: How Britain can prosper in the Asian century”, which was an encouragement for exactly this kind of initiative. I am a supporter of CPTPP and I am grateful to the Secretary of State, who is no longer in her place, for joining us at the Business and Trade Committee last week, along with others, to provide evidence on the treaty. The Committee hopes, if its members are amenable, to publish a report on CPTPP over the next couple of weeks, and certainly before Committee stage of this Bill, to try to maximise opportunities to build cross-party consensus on something very important to all our futures.

I want briefly to say a word about size, a word about standards, and a word about settlement of investor disputes, but it behoves us all in this House to recognise the point we start from: trade and export growth is not where it needs to be, or where Members on both sides of the House want it to be. We know the old joke: not all fairytales start with “Once upon a time”; some of them begin with “When I am elected”. Looking back at the Conservative manifesto for the last election, we might be tempted to label it a bit of a fairy story, because it said very clearly that the goal was to set out free trade agreements covering about 80% of British trade, and we are nowhere near that. We are in fact much closer to 60%.

The Secretary of State put most of the onus for that on a change of Administration in America, but the truth is that apart from the cut-and-paste, roll-over trade deals that we have had since leaving the European Union, we have only signed three new free trade deals. I am glad to hear that what would have been the fourth new one, which we hoped to sign with Canada, is not dead, but it certainly appeared to be running into trouble last week. I am sad that the Secretary of State did not come to the House to make a statement about that news today. That would have been appropriate. However, I am grateful that she has made some reassuring noises about it in this debate.

When the Select Committee put the point about the lack of FTAs to the Secretary of State last week, she said that she had “pivoted away” from FTAs. That is not necessarily a good thing, because she went on to say that she, like many economists, thought that FTAs do promote trade. The bottom line is that our export performance is way off target. The Government have set an export target of about £1 trillion by 2030, which interestingly has not been adjusted up for inflation as arguably it should have been, but the Institute of Directors last year said that we need export growth to be getting on for about 3.5%. As the shadow Minister, my hon. Friend the Member for Harrow West (Gareth Thomas), said, we are nowhere near achieving that performance. We have an export growth forecast of roughly 0.1%, 0.2%, or 0.3%.

The Secretary of State very kindly agreed not to have a public argument with the Office for Budget Responsibility last week, and I think we were all grateful for that, but she said there were different models—not alternative facts, but alternative models—in her Department. I have written to her today to ask for the publication of those models so that the Select Committee can scrutinise them before the Bill goes into Committee. Scale is important because our trade performance is off track. Generally speaking, economies that trade more, grow faster, and we want our economy to grow faster, because we all share an interest in raising the living standards of our constituents. That is why my the first point, about the scale of CPTPP in the future, is so important.

The Secretary of State has stacked up a lot of her argument on our needing to go in future to where the growth is. She said that if we cannot do trade deals where the growth is today—for example, with our partners in America—we should go to where the growth will be tomorrow. That is a reasonable argument, and Asia-Pacific countries accounted for over 70% of global GDP growth in the decade up to 2023. However, China accounted for about one third of global GDP growth. That is why I pushed the Secretary of State again, as I did last week, to at least show us how we will have a conversation about how this country will make a rational decision with partners on whether to agree to ratify China, if it met the technical standards. We have similar questions to resolve on Taiwan, but in his public pronouncements, President Xi has made it very clear that he is ambitious for China to meet the technical standards. The question is therefore whether, if China met the technical standards, we would stand in the way of ratification, or whether other important geopolitical considerations would inspire us to block it.

Looking beyond China to the CPTPP’s future more generally, given that we have set such store by this treaty, what is our vision for its future? Where is the road map? The Department published a document a year or two ago on the strategic benefits, but the Secretary of State resiled from all the numbers in that report last week. I do not think that is a good way to make public policy, but let me put it this way: our debate about trade policy and strategy ahead of the election would be much stronger if we had good figures on the table about the options and choices confronting our country. We will certainly do our bit in the Business and Trade Committee to supply those figures, but it would be fantastic if the Secretary of State could commit to doing something similar.

The question that follows on from size is about standards. There were controversial topics that we took evidence on last week, and we will capture what we learned in the report that we publish. There were questions about environmental and climate impacts; there are general provisions about those in the treaty, but they are not enforceable and there is not much mention of net zero. If we think about the treaty as something that is fairly marginal for trade today—it represents about a 0.09% GDP uplift over nine years—but is geopolitically important, we need to think about how it becomes a load-bearing structure for more of our ambitions in the world, such as the race to net zero. Maybe when the Minister is winding up he could say a bit more about how we can freight this treaty with some of our other national interests.

The point about food production standards has already come up. No changes to UK standards are entailed in the treaty, but there were concerns about sanitary and phytosanitary rules, based on the precautionary principle. The evidence we heard said that they could be challenged. It is a legally murky area and, on balance, the challenges seem unlikely to succeed, but that is none the less something to explore in the Bill Committee. It could well be that that Committee wants to ensure that further safeguards are written into the Bill over the course of its passage.

There will be an increase in imports of agrifood goods produced to lower standards than UK standards. That is true when it comes to pesticides, genetically modified organisms and animal welfare, but not to antimicrobials. On pesticides, the Trade and Agriculture Commission found some basis for weaker standards; on GMOs it found some basis for concern. On environmental laws and policies, palm oil imports are obviously controversial, particularly when it comes to deforestation in Malaysia, but the TAC found that the concerns were, if not non-present—there are concerns to be had—then perhaps slightly overstated.

The final point is about investor-state dispute settlements. Again, the treaty extends the application of ISDS to Canada, Japan and Brunei. One way in which that has become such a big issue is that organisations such as the Canadian teachers’ pension funds are some of the biggest investors in the world, with significant investments in the UK water industry. There have been 1,300 or 1,500 of those cases around the world. The evidence we heard suggested that the UK was likely to be able to successfully defend such cases. One consideration about which we should hear a little more is whether the presence of those clauses in the Bill creates a chilling effect on the way in which we regulate our markets here. If we wanted to regulate the water industry differently in future, would we not bring forward those regulations because of fear about what would happen and how we might be challenged?

The gains from the treaty, as drafted, are modest. They generally come from the fact that we have a new FTA, as part of the treaty, with Malaysia and Brunei. That is good for whisky, for cars and for chocolate, such as that made in Bournville. A single set of rules of origin and a single cumulation zone are good things. Access to some of the agrifood quotas, such as Canadian dairy, is a good thing. Some of the progress made in the digital chapter, about which the Secretary of State did not talk much, could be quite useful and can be built on more generally.

We have to conclude that the trade benefits as of now are no substitute for ironing out the difficulties that bedevil trade between the UK and our close neighbour, the EU. Across the House, we should collectively ensure that we are doing what we can to advance the prospect of a UK-US trade deal. These are modest trade benefits but an important geostrategic step forward.

It is good to have this Second Reading debate, which I welcome. Like the hon. Member for Totnes (Anthony Mangnall), I very much hope that the Government will make time for us to have a debate under the CRaG principles about whether the treaty as a whole goes forward. We would welcome the opportunity to have an amendable motion on that, as the other place did recently on the Safety of Rwanda (Asylum and Immigration) Bill. The Public Administration and Constitutional Affairs Committee has published an excellent report today about how we can better consider treaties. In this new world, Parliament as a whole must get a lot better at studying these kinds of trade agreements and ensuring that they dovetail with other aspects of our economic and national security. I look forward to the debate in the Bill Committee, which I hope will benefit from the report that our Select Committee will supply.

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[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.