Future Free Trade Agreements Debate
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Liam Fox
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Future Free Trade Agreements
Liam Fox Excerpts(5 years, 9 months ago)
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The Secretary of State for International Trade and President of the Board of Trade (Dr Liam Fox)
I beg to move,
That this House has considered potential future free trade agreements: Australia, New Zealand, US and a comprehensive and progressive agreement for Trans-Pacific Partnership.
It is a pleasure to open the debate on Britain’s potential future free trade agreements as an independent trading nation outside the European Union. The Government have consulted widely on the topic and heard a huge range of views, including from the Select Committee on International Trade, businesses, civil society groups, parliamentarians and the wider public. Today is the opportunity for the Government to hear further from Members of this House what their ambitions are for the first agreements we negotiate as an independent trading nation.
Although the Government’s firm intention is secure an ambitious partnership with the European Union, if we are to deliver on the referendum result instruction given to us by the British people, we must remember that there is a world beyond Europe and there will be a time beyond Brexit. Now, for the first time in over 40 years, the United Kingdom will have the opportunity to step out into the world and forge relationships across the globe by negotiating, signing and ratifying new free trade agreements.
Free trade agreements should not be seen in isolation from the wider economic, strategic and security partnerships that we will need to thrive as a truly global Britain; nor should we ignore the enormous potential of multilateral agreements, which can have even greater liberalising effect than bilateral FTAs. Our ability to influence such agreements will be a major benefit of taking up our independent seat at the World Trade Organisation on leaving the European Union.
Nick Thomas-Symonds (Torfaen) (Lab)
Numerous constituents have contacted me, very concerned about the future of our national health service. If we are to have all these trade deals around the world, can the Secretary of State guarantee that we will never open up our healthcare market to private firms that would deeply damage our NHS?
Dr Fox
I have read a number of representations from a number of organisations, particularly in relation to investor-state dispute settlements on matters such as healthcare, but let me say first that the ISDS system does not and cannot force the privatisation of any public services, and under current UK and EU agreements, claims can be made only in respect of established investments; they cannot be made in relation to an alleged failure to open up public services to a potential investor.
In the comprehensive and economic trade agreement, which has been ratified by this House, there is a clear reservation on healthcare services, which the Government have said we want to use as the template for the future. For the sake of clarity, I will read out the provision. Under the heading “Cross-Border Trade in Services”, it states:
“The United Kingdom reserves the right to adopt or maintain any measure requiring the establishment of suppliers and restricting the cross-border supply of health-related professional services by service suppliers not physically present in the territory of the UK, including medical and dental services as well as services by psychologists; midwives services; services by nurses, physiotherapists and paramedical personnel; the retail sales of pharmaceuticals and of medical and orthopaedic goods, and other services supplied by pharmacists.”
We have made it very clear that there will be nothing in future agreements that will stop the Government being able to regulate our public services, including the national health service. That is set out in statute; it is there for all those who take an interest to read. There is no point having the same old arguments that were raised by the Transatlantic Trade and Investment Partnership, because we have already made that specific proposal; it sits there in CETA, which was ratified by this House, although its provisions, including NHS regulation and services, labour law and environmental services, were not supported by the Opposition. Perhaps the hon. Gentleman would like to explain why.
John Spellar (Warley) (Lab)
I thank the Secretary of State for that clarification. He has made it abundantly clear that the privatisation threat to our health services lies not with trade deals from which we can be fully protected but from his own Government’s privatisation agenda, which is still ongoing.
Dr Fox
While I clearly reject the latter part of what the right hon. Gentleman has said, the rest of it is very important. Trade agreements make it very clear that it is up to the elected Government of the United Kingdom to determine what they do with public services. The matter is therefore decided by the British electorate and not by any forces outside the United Kingdom. I am grateful to the right hon. Gentleman for making that point.
Several hon. Members rose—
Dr Fox
I will make some progress. I will give way again shortly.
New opportunities are clearly available to the United Kingdom, and seeking them will demand some of the agility that is required to respond to the potentially seismic shifts that are taking place in the world economy. The United Kingdom will have to be ready to compete for emerging sources of growth. While our established partners—such as the European Union—will continue to be vital, the locus of economic power is none the less shifting rapidly. It is estimated that 90% of global economic growth in the next five years will occur outside the EU. A centre of gravity that rested in North America in 1990 will have shifted to China and the far east by 2050, and we are already seeing the effects of some of that in the global economy. Those changes in economic development, global trade patterns and population growth in emerging and developing economies will fundamentally alter the opportunities that developed economies will have in the years to come.
Overall, the global population is projected to rise from 7 billion in 2010 to 9.8 billion by 2050, with the increase stemming mainly from Asia and Africa. The world is becoming increasingly well educated, wealthier and more urbanised. It is expected that by 2030, 60% of the world’s population—5 billion people—will be middle-class. In 2009, the figure was only 1.8 billion. In the intervening time, middle-class spending will more than double to $6.38 trillion. The rise of the middle class in Asia means that there is an enormous potential demand for the high-quality products and services in which the UK specialises. By 2030, China alone will have 220 cities with a population of more than 1 million, while the whole of Europe will have only 35.
David Linden (Glasgow East) (SNP)
The Secretary of State is right to refer to the emerging middle class in growing economies—India is one example—but can he give me a cast-iron guarantee that when he is negotiating these trade agreements, human rights and issues such as freedom of religion and belief will be at the forefront of his mind? I am concerned about the possibility that, as we go around negotiating these wonderful free trade agreements, we will start to ignore human rights, particularly in the case of India.
Dr Fox
The importance that the UK ascribes to human rights is extremely well documented in the range of Departments that are involved. The Government do not intend to seek any watering down of concepts of human rights, although it is very reasonable for us to have different provisions in countries such as Canada and the United States, whose legal remedies and legal systems are similar to ours, from those that we would have in some other countries. We will want to be flexible on that, and it is one of the issues that I want to see built into real-time parliamentary scrutiny of our trade agreements so that the House can determine whether the values represented by the United Kingdom are reflected in those agreements.
Stephen Timms (East Ham) (Lab)
Does the Secretary of State expect the beneficial arrangements that the European Union has made with developing countries to be maintained in the deals that his Department will negotiate?
Dr Fox
I am grateful to the right hon. Gentleman, who takes an interest in these issues, for his intervention. Not only would I like to see those maintained, but I would like to see us use our greater freedom to enhance them. For example, I would like to see a greater convergence of our trade and our development policies; I would like to see us use outward direct investment to help some of the poorest countries develop the ability to add value to their primary commodities; and I would like then for us to be able to use our freedoms in tariff policy to be able to reduce those tariffs on those value-added goods. It cannot be right that countries that produce coffee or fish are penalised for roasting their coffee beans or canning their fish when they try to sell them into our markets. By bringing those two elements together, we would be able to bring enormous benefit and enable people to trade their way to prosperity, rather than being as dependent on our aid policies as they are today. I am grateful to colleagues on both sides of the House who have come forward to us with proposals on that, because I think that we could find a strong bipartisan consensus in this country to be able to do some of that work.
Jim Shannon (Strangford) (DUP)
We have already shown that we are very capable of getting contracts, for instance, as the Secretary of State knows and as I saw from direct involvement, with China in terms of the agri-food sector in Northern Ireland. We have a £200 million contract over four years, which is an example of what we can do. Does the Secretary of State feel that the personal, family and business contacts we have with Australia, New Zealand and the USA will inevitably lead to further trade deals that will benefit us all in the UK, and does he share the confidence that I and many others in this House have that the trade deals we will get will benefit all in the United Kingdom of Great Britain and Northern Ireland?
Dr Fox
The hon. Gentleman makes several interesting points, and of course not all of the improved openings will come from former bilateral free trade agreements. The case he makes about opening up the dairy sector in China, which as he correctly suggests is worth about a quarter of a billion pounds to the Northern Ireland economy, came from our bilateral engagement with the Chinese Government and looking at their own regulations, so it was produced by a unilateral change by China, rather than a bilateral agreement. In many ways, it will be the opening up of sectors rather than bilateral agreements that will see the UK be able to increase access. The hon. Gentleman also makes a very good point about some of those other countries, because we have strong bilateral and personal links that I hope in the case of the United States, for example, will enable us to be involved at a state as well as a federal level in improving British trading access into those markets.
Vicky Ford (Chelmsford) (Con)
On scrutiny and transparency, can my right hon. Friend confirm that the legal protections for our NHS that were built into the EU-Canada deal will be replicated in any future UK trade agreement and that, if there was ever a dispute with investors, it would be resolved in a transparent and open manner and not behind closed doors?
Dr Fox
The UK as well as the EU have been at the forefront of improving the investor-state dispute settlement system and its transparency; in particular we supported the UNCITRAL—United Nations Commission on International Trade Law—rules on transparency that became effective in 2014. We have always seen this as being a necessary part of agreements, but we do absolutely agree that transparency is one of the ways to give greater public confidence in the system itself.
It is predicted that the share of global GDP of the seven largest emerging economies—Brazil, China, India, Indonesia, Mexico, Russia and Turkey—could increase from around 35% to nearly 50% by 2050, which would mean that they would overtake the G7, although of course even with more mature economies the International Monetary Fund has predicted that the United States will grow over 50% faster than the euro area this year, at 2.5%. This historic shift in global economic and demographic power will reshape the opportunities of international trade in the years to come, perhaps faster than many expect.
We cannot wish away this change and nor should we. Providing the employment and economic growth the UK needs means navigating this shift successfully. Happily, the United Kingdom is well placed to take advantage of these new opportunities. British businesses are superbly positioned to capitalise on this new environment, as both established and growing economies drive demand in precisely those sectors in which the UK excels. Anyone who has travelled widely will have seen how impressed global businesses and consumers are by the high quality of British goods and the professionalism of British services.
Geraint Davies (Swansea West) (Lab/Co-op)
But surely Team EU collectively, with Britain in it, would have much more negotiating leverage against those very large emerging markets. An extreme example would be China. We are dwarfed by China but, as the EU, we can negotiate the best deal. The EU is negotiating deals with Singapore, Japan and others. Surely the Secretary of State must agree that we would get a better deal as part of the EU than isolated as a dwarf outside it.
Dr Fox
I really find it quite insulting that the United Kingdom, the fifth biggest economy in the world, should be described as a dwarf by the hon. Gentleman. We are one of the most successful global economies. It is also worth pointing out that the European Union does not have a trade agreement with China or with the United States because it was too difficult to get an agreement with the 28 nations in those negotiations. He is right to suggest that economies of scale have a role in trade agreements, but so also does the ability to conclude those agreements and to ratify them. That has shown itself to be easier when dealing with single nations, which is why Australia has a trade agreement with China but the European Union does not.
Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)
The Secretary of State has given us a good rundown of eastern growth metrics. This is why the EU is making the free trade deals with Japan and Korea that we are worried we are going to fall out of. The percentage that I would like him to give us is the gain to gross domestic product for the UK in any deals. We know that the UK will probably gain about 0.2% of GDP with a United States deal, as opposed to the 6% to 8% that it is going to lose from the European Union. That is only about one thirtieth or one fortieth of the gain. If the right hon. Gentleman is talking percentages, will he give us the percentages in context? He says that there will be a loss from Europe and gains with the United States of America and other places, but sadly those gains will be dwarfed by the losses.
Dr Fox
But that is a false prospectus, because we want a full and comprehensive trading agreement with the European Union that maintains that trade for the United Kingdom plus the extended opportunities that will come with increased access to those markets that are growing faster. It is possible to do both. It is possible to maintain our trade with the European Union and to improve our trade with the rest of the world. In fact, Britain will have to do that if we want to generate the sort of income that we require for the provision of our public services. Work done by the Institute of Economic Affairs suggests that in 2017 the big increase in UK exports of about £60 billion fed back into the Exchequer at a level of something like £15 billion to £20 billion. That is an example of how, when we come to balance our budget, it is not simply a choice between raising taxes and cutting spending; it is also about earning more money as a country.
Angus Brendan MacNeil
Is the right hon. Gentleman seriously saying that the Treasury’s suggestion that getting out of the European Union and the single market will hit the UK economy by 6% to 8% is not actually the truth? That is what is going to happen; he knows that we will take a GDP hit from that. He also knows that a deal with the USA, which accounts for a quarter of the world’s GDP, will give us only a 0.2% gain. He will need to make about 30 or 40 USA-style deals to make up for that loss. Given that the USA accounts for a quarter of the planet, he is going to have to trade with seven or eight planets to make up the loss resulting from his Government’s policy on Europe.
Dr Fox
I know that the hon. Gentleman feels very strongly about this. He did not like the result of the referendum and he does not like the decision to leave the European Union, but we are leaving the European Union and we need to ensure that we have sufficient access to the European market, but in a way that does not tie our hands in relation to increased access to other global markets. He makes assumptions on growth in other markets that I do not accept. Nor is this purely about access to goods markets; it is also about the growing access to services markets. In the global trading environment, we have simply not seen the sort of liberalisation in services that we have seen in goods since the establishment of the World Trade Organisation. There is huge potential to unlock the economic benefits to the United Kingdom in seeking global liberalisation in services trading, which is not factored into any of the equations that the hon. Gentleman has mentioned.
Stewart Hosie (Dundee East) (SNP)
My hon. Friend the Member for Na h-Eileanan an Iar (Angus Brendan MacNeil), the Chair of the International Trade Committee, has got to the nub of this. The National Institute of Economic and Social Research said 18 months or so ago that we would lose around 20% of total UK trade even with an FTA with the EU. However, FTAs with the main English-speaking economies and with all the BRICS countries would only see trade rise by 2% or 3% respectively, which goes nowhere close to filling the gap. The point that my hon. Friend is making in GDP terms and the one that I am making in trade terms is at the heart of this. Liberalisation or not, there is no way that we can fill the gap left by what we are about to lose.
Dr Fox
As I said, the Government’s ambition is to have a full and comprehensive agreement with the EU, as set out in the Prime Minister’s model. Of course, if the Opposition parties want to avoid what they regard as the terrible scenario of no deal, they can vote for the Prime Minister’s deal. In arithmetic terms—if the hon. Gentleman looks at where Britain’s exports are going—just over a decade ago some 56% of our exports were going to the EU, whereas today that is down to about 44%. Why? It is not simply because the EU has grown more slowly, which it has, but because the economy of the rest of the world is growing faster. Clearly, that is where the markets are going to be for a United Kingdom that has an outward, global vision.
Several hon. Members rose—
Dr Fox
I will make some progress.
Standards have been widely debated in relation to future trade agreements, and I am sure that they will be raised throughout today’s debate. The Government have been clear that more trade does not and cannot come at the expense of the deterioration of our world-class regulations and standards, whether they relate to the recognised quality and safety of our products, our labour laws or our environmental protections. Our current approach both protects our own citizens from substandard goods and services and provides the quality assurance that foreign buyers want, which underpins our export success. I remind the House that Britain’s exports are currently at an all-time high.
The United Kingdom has proud and long-standing domestic commitments to protect the environment, to fight against climate change and to uphold high labour standards. We have clear commitments to sustainable development and the protection and advancement of human rights, as mentioned by the hon. Member for Glasgow East (David Linden), who is no longer in his place. We have a proud and long-standing tradition of promoting those values throughout the world, and the Government remain determined to meet our international commitments in that regard. That will not change as we leave the European Union.
To further that agenda, we will also be exploring how those values should be reflected in the design and provisions of future trade and investment agreements. We are absolutely clear in our policy that any future deals must ensure high food safety, animal welfare standards and environmental protections and maintain our excellent labour standards. The Government are committed to ensuring that this House and people across the country will have the opportunity to scrutinise such commitments in any future free trade agreements—a subject on which I will elaborate later.
Helen Goodman (Bishop Auckland) (Lab)
Taking the Secretary of State back to Honda’s decision earlier this week, the company said that one of its reasons for disinvesting from the UK was the new EU-Japan free trade agreement. Britain was fully involved in the negotiating of that agreement, so did the Secretary of State’s officials get the EU to take account of the FTA’s impact on inward investment into this country, because it has turned out to be disastrous?
Dr Fox
That was one of many reasons, with the main reason being changes in the international car market and, for example, the move towards electric vehicles and away from diesel engines. However, the hon. Lady’s argument seems strange coming from the Labour party, because Labour wants to remain in a customs union with the EU, which would keep the EU-Japan agreement in place and prevent us from making changes to it in the future. If it is such a bad agreement, why is it Labour policy to lock us into a customs union with that agreement in place?
Helen Goodman
We would like to stay in the customs union because we export a lot to Europe. That is the simple answer to the Secretary of State. However, the question that I am trying to put to him is about what he, his officials and his Ministers did to prevent an agreement that has been damaging to the British economy. Will he undertake to ensure that future free trade agreements will not involve the same model, because that would have a similar negative impact?
Dr Fox
The liberalisation of global trade is to everyone’s advantage. The hon. Lady says it is a terrible agreement, but her party’s Front-Bench policy is to keep Britain in the customs union, which would mean the agreement is there in perpetuity. Not only that, but we would have no ability to alter it in future, nor would we have the ability to resist any changes made to it, whether or not we think they are to Britain’s advantage. The Labour party cannot have it both ways: it either wants the freedom to create trade agreements or it wants them to be dictated by the European Union. It must be one or the other.
Stephen Timms
The hon. Member for Chelmsford (Vicky Ford) asked the Secretary of State for an assurance that the wording he read out from the agreement with Canada will be included in these future trade deals, too. Can he give the House that assurance?
Dr Fox
I have done so in previous debates of this nature, in which I said that we regard the public provisions in CETA as being the template we would like to see for future trade agreements. We think it is a good agreement, which is why we find it difficult to fathom why the Labour party did not vote for it in the House of Commons.
The world is crying out for the goods and services in which Britain excels, and it will do so even more in future. We have long been a proud and open trading nation. Trade totals some 61% of our GDP, and it is the foundation of an economy that delivers high-quality, high-paid jobs, that delivers better and more affordable products and that creates the conditions for competitive, world-leading businesses to innovate, prosper and grow across all parts of the UK.
Our openness to free trade, founded on a rules-based multilateral trading system with the World Trade Organisation at its centre, is at the heart of our prosperity. The Government have a clear position that multilateral agreements remain the gold standard of international trade agreements and are the ideal means of pursuing prosperity for the UK and globally across all 164 WTO members. However, this does not mean that bilateral or regional agreements cannot be useful complements to the multilateral system as an adjunct to wider liberalisation. That is why we are also pursuing a range of free trade agreements at both a regional and a bilateral level. Through these free trade agreements, the United Kingdom can work with our partners to establish modern, enduring and impactful trading rules that work for British businesses and for people and communities across our country.
One of the most important trade agreements we are considering is, of course, with the United States, which is our largest single-nation trading partner, with £184 billion- worth in the last year accounting for around a fifth of our exports, and is the single biggest source of inward investment into the United Kingdom. The UK and the US have a deep, long-standing relationship with a strong and enduring bond. We have a shared heritage and shared values, and of course we have deep co-operation across a wide variety of security and defence matters.
We have already taken concrete steps towards this potential trade agreement, including the signing of a mutual recognition agreement last week that confirms both Governments’ commitment to maintaining all relevant aspects of the current EU-US MRA when it ceases to apply to the UK. This will help to facilitate goods trade between the two nations and will guarantee that UK and US exporters can continue to ensure goods are compliant with technical regulations before they depart their home country. Total UK trade in the sectors covered by the deal is worth up to £12.8 billion, with the UK exports covered worth an estimated £8.9 billion.
Similar agreements have been signed in recent weeks with Australia and New Zealand. These agreements ensure continuity and safeguard revenues for British businesses and consumers, and they mark a further crucial step in securing and furthering our vital trading relationships. An ambitious free trade agreement between the US and the UK would further cement our existing strong bilateral partnership and further the interests of our highly compatible economies. It will make it easier for UK and US businesses to trade with each other and identify where we can collaborate to promote open markets around the world.
Chi Onwurah (Newcastle upon Tyne Central) (Lab)
I have been listening carefully to the Secretary of State, and his argument seems to be that, on our own, we will be nimbler and more able to negotiate good trade deals, but he must know that size matters. As a market of 500 million, there is 10 times the opportunity for profit in the European Union than in the United Kingdom. Why should we get a better trade deal with the United States, for example, given the smallness of our market and of the opportunity for profitability compared with the European Union? If we are not going to get a better deal, why are we doing it?
Dr Fox
I hate to point it out, but the EU does not have a trade agreement with the US. Let me give the hon. Lady one example of why it has been unable to have one—data localisation. Although 24 out of the 28 members wanted to move forward with data movement with the US, four countries—France, Germany, Austria and Slovenia—blocked it. That meant that although most of the EU wanted that agreement, it was unable to get it. We would not be restricted in the same way. She is right to say that the bigger the market, the bigger the offer, but that has to be balanced against our ability to be flexible, and how liberal and open we would want to be in that trading environment. We are the fifth biggest economy in the world, and I find it ridiculous that we are being told that we are some sort of economic minnow, when, as the fifth biggest market in the world, most countries want to have access to us. Being smaller economies than the EU has not prevented countries such as Canada and Australia from having trade agreements with much bigger economies, because those trade agreements will be completed and signed only if they provide mutual benefits—otherwise, what would be the point in negotiating them? So I counsel this House against the despair of saying, “We cannot do it on our own.” As the fifth biggest economy on the planet, we are more than able to negotiate strong agreements with other political and economic groupings around the world.
Several hon. Members rose—
Dr Fox
I will make a little progress, because I know other Members wish to speak.
When we leave the European Union, an ambitious UK-US free trade agreement will be a key priority for the Department for International Trade, and we have already been laying the groundwork. The US-UK trade and investment working group has now met five times, with conversations focused on what both sides can do towards ensuring certainty and continuity for business on both sides of the Atlantic, and on identifying opportunities to facilitate bilateral trade and investment, consistent with the UK’s obligations as an EU member. Both the Prime Minister and President Trump have made clear their shared commitment to these bilateral discussions, and they restated that in their most recent meeting in July 2018. As US Ambassador Woody Johnson has said:
“Britain is the perfect trading partner for the United States.”
We very much welcome the letter of intent sent to Congress from the United States trade representative stating that the Administration intend to open a negotiation with the UK once we leave the EU. The President’s statement in the Rose Garden last week, pointing to a very substantial potential increase in UK-US trade, makes it clear that we already have a special trade relationship and that there is real ambition on both sides of the Atlantic to embrace this after we leave the EU.
Matt Western (Warwick and Leamington) (Lab)
Let me come back to a point about UK-US trade. The Secretary of State will be well aware that so many US corporations have favoured UK membership of the EU because it has given them a bridging point in access to the EU. The US Chamber of Commerce in Europe, for example, has long favoured our staying in Europe. Does he not agree with that?
Dr Fox
A lot of US corporations that I speak to are very relaxed about what our relationship with the EU will be, not least when I explain to them the constitutional implications of Britain being in the EU. I say to my American colleagues, “How would you like to have a court that has authority over the Supreme Court but that sits in Ottawa or Mexico City and over which you have no control?” They then soon understand the constitutional reasons why many of us voted to leave the EU.
Vicky Ford
My constituents are very concerned about animal welfare standards. Will the Secretary of State confirm that a future trade agreement with the US would not expose British farmers, who have our high animal welfare standards, to products from the US that may have been produced to a lower animal welfare standard?
Dr Fox
I have already said that we give high priority to those standards, including animal welfare standards. That has been an essential part of what the Government have set out. I know that it would be advantageous for the Opposition if that were not the Government’s position, and they would like it not to be our position so that they could attack it, but we want to maintain our high standards of consumer products, our high environmental standards, our high standard of labour law protection and our high animal welfare standards as part of our approach to global trade. I am not sure that I could be clearer but, no matter how often the Government restate their position, there are those who do not want it to be our position and who want to interpret it in a completely different way.
The Asia Pacific region will be a key engine of global growth in the 21st century. That means that the comprehensive and progressive agreement for trans-Pacific partnership, or CPTPP, is a key interest for the United Kingdom as we leave the European Union. It is an extraordinarily global free trade agreement, spanning 11 countries on four continents: Japan, Vietnam, Singapore, Malaysia, Brunei, Australia, New Zealand, Canada, Mexico, Chile and Peru. Those 11 countries are collectively home to around 500 million people, constituting some 13% of global GDP and more than £95 billion-worth of current UK trade. If the UK were to accede to it, we would be the second-largest economic member within the agreement, which would then cover a sixth, or 17%, of global GDP—nearly equal to the EU minus the UK.
There has been a positive response across CPTPP members to the Prime Minister’s announcement of the UK’s interest in potential accession. In particular, it has been welcomed by both the Japanese and Australian Prime Ministers.
John Spellar
I thank the Secretary of State for mentioning the welcome developments with regard to the partnership. I hope, though, that accession would not be at the expense of trying to move towards a free trade agreement with our great friends and allies in Australia.
Dr Fox
The right hon. Gentleman, as ever, anticipates my very next point. In addition to considering access to that comprehensive international trade agreement, we are at the same time moving forward with ambitious bilateral discussions for future free trade agreements with two of our closest friends and allies: Australia and New Zealand. Both countries are important strategic partners with which the United Kingdom has a deep shared heritage, built on the foundations of democratic values, security, language, our common legal system, culture and, of course, sport—although not all with equal success. It is because of our shared values and our firm belief in free and open trade that we want to strike cutting-edge free trade agreements with Australia and New Zealand, seeking to go further than CPTPP—indeed, further than any FTA ever before—in areas of shared ambition such as services and digital.
Many UK businesses already view Australia and New Zealand as an attractive base for their regional operations, and their proximity to Asia makes them excellent partners for UK firms in a region that stands to deliver nearly two thirds of global growth to 2030. Unlike the EU, Australia and New Zealand have trade agreements with the world’s second largest economy, China.
Mary Glindon (North Tyneside) (Lab)
The Australian Trade Minister has said that other countries in the Asia Pacific region would be considered before us for membership of the trans-Pacific partnership, because we are not in that region. How does the Secretary of State feel about that? Does it dint his confidence at all about any agreements we could reach?
Dr Fox
No. The countries in the CPTPP have been quite clear that they want to finish the ratification process for the 11 countries that are already in the partnership before they consider potential new entrant countries. They have yet to decide whether they want to consider individual countries or to group countries in a timetable for accession. We have simply made it clear that we have an ambition to join the partnership. We have a long way to go in determining what that would look like in respect of both timescale and content.
I am delighted to report that both Australia and New Zealand have shown strong political will to negotiate such agreements. Australia is the 13th largest global economy and has been a flourishing nation in recent times, with an excellent record on GDP growth, and trade already worth some £15 billion per year.
The UK is the second largest investor in Australia while Britain is the second largest destination for Australian overseas investment. Our countries established the UK-Australia trade working group in September 2016 and since that time it has met regularly to lay the foundations for future FTA negotiations in addition to discussing wider trade issues of shared interest. I believe that we can look forward to those discussions with confidence.
Similarly, New Zealand and the United Kingdom enjoy extremely close economic ties. The UK is New Zealand’s largest export market in the European Union. New Zealand exports more goods to the UK than to Germany, France and Italy combined. We are also the largest EU investor in New Zealand. The UK and New Zealand are both ranked in the top 10 countries for ease of doing business and we already boast a strong trade relationship, with UK-New Zealand trade worth around £2.8 billion.
The UK-New Zealand trade policy dialogue has been working since September 2016 to determine how we further strengthen our trade and investment relationship and to prepare the groundwork for the launch of bilateral FTA negotiations. An FTA with New Zealand would be an opportunity to set an ambitious precedent for future agreements and to build our relationship with a key ally in multilateral forums. It will give us the opportunity to pioneer modern and enduring trade rules, to update the global rulebook and to identify where we can collaborate to promote free, fair, rules-based trade in markets around the world.
Free trade agreements also give the United Kingdom the opportunity to design new modern trading rules that play to our unique strengths. To ensure that any future FTA works for the whole of the UK, the Government have sought views from a broad range of stakeholders from all parts of the UK. The Government’s proposal, published last year, set out our approach to pursuing new trade agreements collaboratively by engaging the widest range of stakeholder groups. We are committed to an inclusive and transparent trade policy that benefits the whole of the UK.
We are also creating a new strategic trade advisory group, which will advise Department of International Trade Ministers and trade negotiators on trade policy as we move forward. The group will be co-chaired by the Minister for Trade Policy and we are now finalising the selection process for membership. I will shortly write to the successful candidates, with an announcement to follow. This group is composed of core members, representing a diverse range of interests and expertise, drawn from different groups—from business and the trade unions to consumers and non-governmental organisations among others—but all with an interest in our future trade policy and its impact on the full spectrum of issues facing the UK, from the workplace to consumer choice and the environment. The membership of this group, with its balance of interests and representation from across the UK, is designed to allow the Government to harness advice, insight and evidence from a cross section of experienced voices already actively involved in trade-related issues.
Deidre Brock (Edinburgh North and Leith) (SNP)
I thank the Secretary of State for giving way. Let me go back to the issues around Australia—as an Australian this area is of particular interest to me. The Japan-Australia economic partnership agreement took seven years from start to finish to establish. How long does the Secretary of State estimate it will take to establish a similar agreement with Australia?
Dr Fox
At the other end of the scale, the Australia-US trade agreement was an extremely short one to negotiate. So where there are compatible economies, it is possible to do that. I spoke to my Australian counterpart yesterday, and we hope that, given the openness of our economies and their compatibility in terms of shape, we will be able to conclude an agreement as soon as possible. There is no way, in advance of a negotiation, to say how long it will take. At the beginning of this process, our Australian colleagues are likely to be involved in a general election, which may mean that it will be slightly later when we can get into the process, but I hope to be able to conduct bipartisan negotiations with them to ensure that we can make progress as quickly as possible, which is in our mutual interest.
On 20 July 2018, we launched four online public consultations, providing the public with an opportunity to give their views on potential future trade agreements with the US, Australia and New Zealand and on accession to the CPTPP. All four consultations were open for 14 weeks—two weeks longer than the EU’s trade agreement consultations—and collectively attracted more than 600,000 responses, making it one of the largest consultation exercises ever run by the UK Government.
Alongside the consultations, we ran 12 events across the different regions and nations of the UK to seek their views on how prospective trade agreements could support prosperity and growth. The evidence provided in the responses to those consultations will inform the Government’s overall approach to our future trading relationship with these countries, including our approach to negotiating any trade agreements. Decisions made as a result of the consultations will be published before potential negotiations start.
This is the first time that the United Kingdom has consulted on potential future trade agreements independently. The volume of responses across all four consultations, run simultaneously, means that it is only right that we take time to consider the responses and the views of this House in detail. While there are many other markets that the UK will look to for new agreements, our shared values and our strength of trade with the US, Australia and New Zealand make them the right places on which to focus our initial attention, alongside our interest in potentially negotiating accession to the CPTPP.
Let me turn to future scrutiny of our free trade agreements—a topic that has received much discussion in both Houses, including through the inquiry co-ordinated by the International Trade Committee and the published response.
Angus Brendan MacNeil
Let me provide a little extra scrutiny. The Secretary of State has talked a lot about trade policy and trade agreements, but these are very different from trade; trade is a different thing. I am thinking about my constituency, where there are guys who travel to the European continent on a weekly rotation basis with lorries containing live shellfish. Now, if we have trade agreements with New Zealand, it is not so easy to drive there on a weekly rotation with a lorry of live shellfish. These guys would also face snarl-ups and there would not be the openness that there currently is to access the French, Spanish, Italian and German markets. How will the interface between trade, trade policies and trade agreements actually work in practice for lorry drivers of shellfish? That is what these people need to know.
Dr Fox
The mechanics of the market become immaterial if there is no market to sell into. We are looking to ensure that UK producers have increased market access so they can trade more, sell more of their products and make more profit, which enables us to employ more people. That is what the whole concept of free trade is about. The hon. Gentleman is quite right that the mechanics at borders need to be ensured—not only in the United Kingdom, but in many of the other countries that we are selling into. That is what the trade facilitation agreement that we signed last year was all about. There has to be an improvement in global trading mechanics, including through using new technologies.
The Government are committed to the established principle that Parliament must be able to scrutinise trade agreements at the beginning, throughout and at the end of negotiations. We must have a mechanism that balances real and meaningful scrutiny with the need to maintain the greatest possible security for sensitive negotiating positions and potentially market-sensitive data. I am grateful to Members on both sides of the House for their encouragement and the private conversations that we have been able to have on this issue. The Government are considering how best to balance these elements and I will bring forward further proposals very shortly, not least because we need this for the Trade Bill to make progress on Report in the other place. We will of course take account of views expressed on the subject in this debate.
As we leave the European Union, the United Kingdom will have the opportunity to negotiate, sign and ratify free trade agreements during the implementation period. Working with like-minded partners such as Australia and New Zealand in bilateral agreements and adding our weight to the CPTPP—a modern and ambitious agreement— alongside an agreement with the largest and one of the most innovative countries in the world, the United States, will allow the United Kingdom to take advantage of the opportunities that leaving the European Union affords. This will allow us both to break down barriers that exist with our established partners, and to adapt to the momentous changes taking place in global trading patterns and the growth of the global economy.
Across the world, new markets are emerging that will provide golden opportunities for British goods and services, and it is right that the Government seek out like-minded partners to build the relationships and trading environments that will best maximise those opportunities for the benefit of the United Kingdom and the wider world.
Barry Gardiner
The hon. Gentleman makes two distinct points. Of course, he is right to talk about the impact of Brexit on the automotive sector in the UK. All Members in this House should be concerned about that. The point that my hon. Friend the Member for Bishop Auckland quite rightly made was that Honda said, as the Secretary of State mentioned, that there was no imputation that this decision was made as a result of Brexit, but there was a clear indication that it was as a result of Japan now being able to import tariff-free to Europe—including the UK, but the whole 28 member states. At the point when this Government should have been making representations during the negotiations on that agreement, they were not doing so.
Dr Fox
The Labour party’s position is that it would be inside the customs union, where it would inherit the very agreements it says it does not like—it did not vote for CETA and it does not like the Japan economic partnership agreement. It would not only be bound by those agreements but would have no say in any future policy because it would be applied by the EU through the customs union.
Barry Gardiner
It is always the way with the Secretary of State: when he sees that a valid point has been made and that he is vulnerable to it, he tries to go on the attack. It does not work. It is a pathetic response when he knows and should, with some humility, accept that the proper impact assessments were never made.
Barry Gardiner
I do not know whether my hon. Friend was in the Chamber just prior to the debate starting, but I raised a point of order with Mr Speaker—obviously, you were not here, Madam Deputy Speaker— to say that the fourth written statement due to be laid before the House today had not been made available prior to this debate. I thought that was a great shame. Mr Speaker expressed his view that, of course, these things sometimes happen inadvertently. If it was advertent, he deprecated it. But of course, there is a pattern here, and my hon. Friend is right to point to that pattern. I share her hope that we will not find next week that there are further documents that either would have been vital for today’s debate or are being produced at exactly the wrong point for Parliament to have the maximum opportunity to scrutinise what the Government are doing.
The British Ceramic Confederation letter continues:
“Some members thought if we are importing, say, a raw material, that was not manufactured or quarried in the UK a liberalisation might be acceptable. Our members are clear this should be an exception rather than a general rule and comprehensive consultation would be needed.”
Of course, the chief executive rightly also points out that most other sectors have not had the same level of discussion with officials that ceramics has had, and so are largely unprepared for the potential impact of a unilateral snap move to zero most favoured nation tariff rates. There has been no comprehensive formal consultation, no comprehensive impact assessment and no prolonged transition proposed. Such a significant decision would have far-reaching consequences for the UK economy and would demand full parliamentary scrutiny.
Consultation, impact assessments and parliamentary scrutiny—those are all the things their lordships are still waiting for before returning the Trade Bill to this House, and all the things this debate ought to have been about, rather than putative future agreements whose working groups have been mired in secrecy and which the Secretary of State sees as his vanity project of restoring the Anglosphere.
The letter continues:
“In a no deal Brexit, already highly damaging and disruptive for our sector, the shock of zero tariffs would be devastating, affecting businesses, jobs and communities across the country as well as affecting UK manufacturing more generally.”
Of course, it is not just the ceramics industry that is horrified by the Secretary of State’s proposals. The Manufacturing Trade Remedies Alliance, which is made up of eight national trade associations, as well as three trade unions, only yesterday put out an equally strong press release damning the folly of a wholesale reduction to zero tariffs, saying that
“the move could ruin the home market for many sectors. Increased imports would flood the market, jeopardising tens of thousands of jobs and fundamentally changing the British economy.”
Ian Cranshaw, head of international trade at the Chemical Industries Association, said:
“The idea of a new tariff regime is something which should be subject to proper consultation. With less than 40 days to Brexit, British manufacturers already dealing with Brexit uncertainties are now having to assess how their business might be impacted by an increase in non-EU competition should the government remove MFN tariffs on key chemical products.”
Finally, Jude Brimble, GMB national secretary, said:
“Zero tariffs in the event of a no-deal Brexit is a short-sighted move. While it may lower prices in the short term, it will ultimately put thousands of British manufacturing jobs at risk.”
Barry Gardiner
In a moment. Jude Brimble continued:
“Manufacturers are often based in the heart of their communities and supporting many more indirect and supply chain jobs.
Zero tariffs could destroy the proud history of making and manufacturing”
in this country.
Is this really what the Secretary of State intends? I will happily give way to him now if he will rise to confirm that he has abandoned that folly.
Barry Gardiner
I have two points. First, of course I will vote for a deal, but I will not vote for the Secretary of State’s bad deal. That is why we have put forward our own proposals for a good deal that would protect manufacturing in this country. Secondly, he says that new tariffs will be necessary only if there is no deal. Why then have he and his departmental officials been talking to industry about his proposals for zero tariffs? I will very happily give way if he will come back to the Dispatch Box and explain that. [Interruption.]
Dr Fox
The hon. Lady has asked for my reassurance. As I mentioned earlier, article 23.4 of the comprehensive economic and trade agreement states:
“The Parties recognise that it is inappropriate to encourage trade or investment by weakening or reducing the levels of protection afforded in their labour law and standards.”
The protections for which the hon. Lady has specifically asked are included in a document that has already been ratified by the United Kingdom Parliament. My question is this: why did the Labour party not vote for it?
Liz Twist
I thank the Secretary of State for his comments, and for pointing me to that document. I am sure that my constituents will be glad to hear what he has said, but they will also want me to ensure that the issue continues to be at the heart of our discussions and interventions.
That concern about people and labour standards brings me to my third point. Just before Christmas, I was pleased to be able to lead a debate on Traidcraft and the future of fair trade. One of the issues raised was also raised today by my right hon. Friend the Member for East Ham (Stephen Timms): trading status with less developed and developing countries. We were seeking assurances that those countries would continue to have access; I noted the Secretary of State’s earlier comments on that matter but would welcome further assurances, perhaps by the Minister in summing up this debate. It is important for trading and the economic development of those countries, but there is also an important gender equality element in dealing with those countries to ensure they continue to have that focus.
Finally, people wanted me to raise the issue of scrutiny. There is real concern that trade deals will be signed off behind closed doors. Again, I note that the Secretary of State touched on that, but we need to be very clear that there is the best possible scrutiny of the trade deals being done; Parliament must be able to take a full part in that, and it must be transparent. My constituents must be able to see that that is happening. It is very important that that happens.
These are not the detailed points that many other Members have raised, but they are the issues that most concern my constituents, and they must be addressed in the discussions. Again, I ask the Minister to address clearly the concerns of my constituents.
Bill Esterson (Sefton Central) (Lab)
Thank you very much, Madam Deputy Speaker. It certainly has been a very thorough debate, and I certainly do not intend to go into the Minister’s allocation of time and will be well within my half of what is remaining; I can certainly confirm that.
At the start of the debate, my hon. Friend the Member for Brent North (Barry Gardiner) raised a point of order. He said that a written ministerial statement on trade continuity under a no-deal scenario was due to be published today—it was listed as No. 4 on the Order Paper—but that it was not available by the start of our deliberations. It had still not been published on the internet by 2.30 pm, but happily the Vote Office very kindly delivered a copy to me at about 2.10 pm, which was some time after the Front-Bench speeches to which you have just referred, Madam Deputy Speaker. The document is entirely relevant to our deliberations. It refers to mutual recognition agreements with the United States, Australia and New Zealand, and much more besides that is relevant to the debate. I shall take the time to refer to it during my remarks. It is a shame that it was not here earlier, as it would have enabled other Members to have the relevant information.
Distance is important. The value of our trading relationship with Ireland is higher than the value of UK trade with Italy or Spain, even though Ireland’s economy is much smaller than that of either Italy or Spain. Members should not just take my word for it; that is the view of the Office for National Statistics. If the Government have their way, we will abandon the deal that we have on our doorstep for a deal—or a series of deals—on the other side of the planet. Trade by teleport is not a reality, however. I am glad that the Secretary of State has acknowledged the fact that we are on the other side of the world from the Pacific. It is also a fact that he is proposing that we become a nation that is reliant on carbon-pumping trade deals, which is somewhat at odds with the claim in his opening speech that he is going to uphold our climate change obligations.
Bill Esterson
What an absurd intervention—but we have come to expect nothing less from the Secretary of State. Of course we should have trade around the world, but we should not be prioritising trade on the far side of the world over trade on our own doorstep. He knows that only too well. That has been the theme of this debate.
The Secretary of State quoted the interpretive instrument in CETA. As the hon. Member for Dundee East (Stewart Hosie) mentioned, the Canadians have the highest use of investor-state dispute settlement arrangements anywhere in the world, so they have form when it comes to the use of such systems. The problem is that the instrument does not alter, let alone override, the text of CETA. Article 31 of the Vienna convention states that treaties
“shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose.”
However, if there is
“any conflict or confusion between CETA’s plain wording and the instrument, it is CETA’s text that prevails…The critical point is that while the parties retain the right to regulate, they must do so in conformity with their CETA obligations and commitments.”
Those are the words of the Canadian Centre for Policy Alternatives. The interpretive instrument that the Secretary of State referred to does not overrule the main CETA documents. Those of our constituents who have written to us with their concerns about the threat of the privatisation of the national health service as a result of the negotiation of deals—the subjects of which have been covered in this debate—are right to be concerned, given the contents of the CETA document and the legal opinions on it. They are right to raise those concerns, as was my hon. Friend the Member for Blaydon (Liz Twist) earlier.
Turning to the opportunities to scrutinise the negotiation of these deals, I wonder whether the Minister could pick up on the thread of the debate about whether this is our one and only opportunity to do that or whether there will be further chances for Members of Parliament to debate and challenge the mandate for negotiation and then to scrutinise any proposals put forward during the negotiations. What is going to replace the current arrangements through the Council of Ministers, the international trade committee of the European Parliament, the European Parliament itself, and our own European Scrutiny Committee? I note that the written ministerial statement refers to
“full parliamentary scrutiny processes to ratify some UK-third country agreements”,
so what are those processes? Do they represent full scrutiny, or are they the Henry VIII powers that the Secretary of State advocated in the Trade Bill, which mean an absence of any meaningful scrutiny of measures, especially given the inability to influence their contents? The same point applies to the new agreements referred to in this debate.
Businesses that want certainty had to change from WTO arrangements with Japan, to which the statement refers, to EU-Japan agreement arrangements at the start of this year. Presumably, they will now have to change back to us trading with Japan through the WTO, which again is mentioned in the statement, and then, once agreed, to UK-Japan bilateral agreement arrangements. That is far from a demonstration of certainty for business, but that is what the written statement appears to confirm, which prompts the question of why there was a delay in the appearance of the missing information.
Bill Esterson
Was he? That is very kind of him.
In 2017, a number of Australian academics warned of the danger that
“Australia’s interests get caught up in the possibly unrealistic worldview of the Brexiteers and thus Australia becomes collateral damage of…British politics.”
Why might they say that with this Secretary of State in charge?
In the real world, my constituents who put their goods on a ship at the port of Liverpool today do not know whether the ship will be able to dock in Tokyo on 30 March and what arrangements will be in place. They want the Government to show that they understand diplomacy, and they want them to avoid causing offence in delicate trade negotiations.
This week, in Swindon, we have seen what is happening in the real world: real workers’ jobs going—3,500 of them—and real communities affected. We are party to a trade agreement with Japan through our membership of the European Union, and the deal has not prevented the disinvestment of Japanese companies such as Honda and Nissan.
“The idea that Brexit uncertainty is irrelevant to this is fanciful. How are Honda supposed to calculate the costs and benefits of staying in the UK in the overall global context against such lack of clarity on the future terms of trade?”
Those are not my words but the words of Sir David Warren, the former UK ambassador to Japan.
Dr Fox
I would have thought that the management of Honda are closer to this issue, and they say it is a result of changes in the international car industry and specifically not a result of Brexit. Why does the hon. Gentleman want to make it so when the company itself says it is not true?
Bill Esterson
As my hon. Friend the Member for Brent North was just saying to me, Honda’s management are far too well-mannered to say these things in public, but a former ambassador will tell it as it is, and I would have thought the Secretary of State wanted to take the advice of somebody with Sir David Warren’s experience.
Bill Esterson
The leave campaign pushed the point rather hard about Turkey’s accession to the EU.
My hon. Friend the Member for Bishop Auckland (Helen Goodman)—this is the bigger point about the Secretary of State’s involvement—spoke about the failure to ensure, when the EU-Japan deal was negotiated, that there was support for the foreign direct investment and its critical place in our car industry, whether at Honda or Nissan. The Secretary of State’s answer is that he will not change his approach in the future trade deals he negotiates once we have left the EU. That is a pretty grim predictor of what is going to happen under this Secretary of State and his colleagues in their support—or rather lack of it—for our industry, our manufacturing industry and our car industry in particular.
Bill Esterson
We have come to an interesting point, with Labour Members citing Margaret Thatcher and the fact that she founded the single market of the European Union to demonstrate just how wrong the current Government, who claim her inheritance, are in their international trade policy.
I have taken a number of interventions and I am very cognisant of your strictures for me to keep things to a minimum, Madam Deputy Speaker. As I was saying, the alternative is to deliver certainty. That alternative can come with a new customs union and a deal with the single market on regulations, standards and common institutions that protects our trade with the EU and with our partners around the world. The difficulties in renegotiating the deals with our partners have been laid bare in recent weeks by the failure of the International Trade Secretary to make progress on more than a handful of such deals, quite apart from the uncertainty over our future trading relationship with the EU. He wants to align with lower standards from the US.
Bill Esterson
Well, the Secretary of State has been saying that for years. The Chair of the International Trade Committee spoke earlier, and the Committee’s report set out the consequences of a deal with the US: it will inevitably lead to a conflict, with the potential for lower standards, impacting our ability to do a trade deal with the EU. That point should be listened to and the Minister should respond to it in his summing up.
We have had an excellent debate and I sincerely hope that the Minister will respond to the challenges set to him about where we have reached. In particular, I hope he will address whether adequate protection is in place for our agriculture, car industry and other manufacturing sectors and whether there will be further opportunity to scrutinise international trade agreements and their preparation with the US, Australia, New Zealand and the Pacific rim. I thank my colleagues for their contributions to the debate. I look forward to scrutinising the Government in the coming months on these points, but the fact that only five roll-over deals have been completed so far does not bode well under this Secretary of State and his ministerial team. [Interruption.]