UK-Japan Comprehensive Economic Partnership Agreement

Liam Fox Excerpts

Wednesday 25th November 2020 Commons Chamber

[Dr Liam Fox (North Somerset) (Con)]

I want to begin by congratulating my right hon. Friend the Secretary of State and her incredible team of Ministers, our fabulous negotiating team, our Japan team at DIT and our team in Tokyo, led by ambassador Paul Madden, who have all contributed enormously to the success of this negotiation. I want briefly to explain why I think this deal is important in the global trade environment, what it says about Japan’s outlook and the UK’s outlook and why it matters for CPTPP.

All trade liberalisation matters, particularly at the present time. Even before the covid pandemic, global trade was shrinking—partly for cyclical reasons, 10 years post the financial crisis; partly because of trade tensions, not least between China and the United States; and partly because of rising protectionism, not least in the G20. The G20 represent 90% of global GDP and 80% of global trade. At the end of the financial crisis, only 0.7% of G20 imports were covered by restrictive measures. In the first quarter of 2020, that had mushroomed to 10.3%—a huge barrier for developing countries to have to overcome to be able to sell their goods into developed markets.

We have also had a failure of liberalisation at the WTO—25 years and all we have seen is the trade facilitation agreement, no further liberalisation—and we have seen far too few multilateral agreements. In fact, we have seen none apart from TFA; we are now moving to plurilateral, regional and then bilateral FTAs. That is why any liberalisation should be welcomed in this House.

Japan is a country with a GDP of $4.97 trillion. It has a global GDP share of 4.13%—not an inconsiderable market—with a GDP per capita of over $39,000. Japan is increasingly assertive and confident on the global stage. When TPP was looking as though it might collapse when President Trump pulled the United States out, Prime Minister Abe stepped up and led its recovery. I am sure that everyone in the House would like to wish him good health in his retirement.

We have seen increased co-operation in security between the UK and Japan, with the first joint exercise by UK troops in Japan only last year. We have a strong investment relationship with Japan. A self-confident, assertive Japan is good for our bilateral relations, good for regional security and good for global prosperity. My right hon. Friend said right at the outset what she thought that meant for the UK’s outlook. Clearly, having an independent trade policy is one of the positive consequences of Brexit. This agreement itself says a lot about the UK’s outlook. It brings improvements to mobility provisions for business travellers and it is has clear pluses in terms of data and digital, indicating the UK’s forward-leaning position on this most important element in the global economy and our understanding of the importance of e-commerce, not only as a key enabler of development but as an empowerment tool—not least for women in the global economy, particularly in the least developing economies.

The agreement also helps us to escape from the trap of the EU’s data localisation. The four countries—Germany, France, Slovenia and Austria—that held the rest of the EU to ransom are out of step with the rest of the global economy. They had a medieval view of data localisation, and not only have we escaped it by being out of the European Union, but we have managed to go forward in this agreement. Of course, the real gain that we would get with Japan would be global services liberalisation, because a multilateral agreement, or even an open plurilateral agreement, would give us far greater access to what we really need.

Finally, let me say something about CPTPP. This is a regional grouping of increasing importance. As my right hon. Friend said, it represents an increasing share of global GDP. With the UK, it would be bigger in GDP share than the EU; with the United States, its share would be over 40%. Here is a great opportunity: if we can persuade the new United States Administration to take America back into TPP alongside the UK, it will also have net benefits for our trading relationship with the United States.

Eleven fast-growing countries: a single set of rules of origin, allowing content from all CPTPP countries to be cumulated—but above all else, its advantage lies in the strategic environment. If we want to deal with the problems of China in global trade, in terms of intellectual property theft and transparency, we are going to do it not by hitting it with tariffs repeatedly, but by creating a parallel structure with a widened CPTPP that shows what can be achieved by genuine free trade and adherence to global rules. That is the real prize for us.

[Alyn Smith (Stirling) (SNP)]

Last time we discussed this text, I said that I would reserve my enthusiasm until we saw more of the detail. I am rather glad I did, because while it would be churlish of me not to give the Secretary of State her moment—this is an achievement, and I welcome it—it is really small beer. Any rational person recognises that in any course of action there are upsides and downsides, costs and benefits, and any course of action will have consequences. I am struck, to mangle Thomas Hardy, that this is a treaty in which no Brexiter would see anything to dislike, but no objective person anything to admire when set against the disadvantages of this course of action.

In EU stuff, in trade and in life, if we do not look at things in the round—if we do not look at the full picture—we will make poor conclusions. As we heard earlier, the consequences of giving up the benefits of the EU-Japan trade deal, to be replaced by this deal, have not been properly analysed. By the UK Government’s figures, such as they are on this, the deal will add 0.07% percent to UK GDP. That is not a small amount of money and I welcome it, but we need to look in the round at what we are losing.

I am struck, as always, by the capacity of Government Members to be giddy with excitement over the Brexit process and the potential hypothetical upsides, which, in a spirit of intellectual honesty, I accept may exist. I am proudly pro-European. A cornerstone of the SNP’s economic plans for Scotland is membership of the single market. We believe we were adequately well represented by the EU on the world stage. PGIs were mentioned earlier and there is an interesting point to be asked, and perhaps answered, about what protections the UK Government sought within the EU’s negotiation and at what point the UK disengaged from that process to foster its own deal, but that is a different argument. I accept that we have left the European Union and we need to properly analyse the costs and benefits of where we are now.

There may be some advantages to this deal. There may be some things that fit better. I have my doubts and I am not convinced that it was worth the change, but the SNP is pro-trade. As I say, we believe that the risk to our existing trade patterns is not set off properly by the benefits of this deal. Japan accounts for 1.8% of the UK’s exports of goods; the EU accounts for 46% of them. So to get the hypothetical potential upsides of the Japan deal, the UK jeopardises the real-world existing benefits of the EU single market membership and access right now. To ignore that strikes me as flatly absurd.

[Dr Fox]

I am delighted to hear that the SNP is pro-trade. Will the hon. Gentleman tell us what assessment has been made of the cost of trade to Scotland of the SNP and Scotland withdrawing from the UK single market?

[Alyn Smith]

We will tell the right hon. Gentleman that when we are bringing forward the independence prospectus. We regret that the UK has left the European Union. We regret the consequences to all our businesses, traders and exporters of the increased complexity and uncertainty that leaving the EU single market means. Our proposition on independence will be rejoining the EU market, and that has consequences for our trade flows, of course, but a proper analysis of how much Scottish trade goes through England, rather than to England, is an interesting statistic in itself. In the same way as Ireland, pre-EU membership, was very heavily dependent on the UK market, Scotland’s trade flows will change also.

There are consequences, which I do not dismiss and deny, but let us talk about this deal right now as opposed to our plans for the future. This deal right now is not worth the candle, is not worth the effort and is in no way better than what we are giving up to get it. A real-world example, where the Secretary of State and I have a degree of common ground, is cheese. She has mentioned cheese a number of times. I note that it was a particularly nice touch to give a jar of British Stilton to Japan’s Minister Motegi to celebrate this deal. I wonder: did the Secretary of State check whether he is lactose intolerant? There was an interesting statistic—I see that there are doctors in the House— from The Lancet in October 2017 that 73% of the Japanese population are lactose intolerant. Perhaps we should consider what the opportunities for our exports of cheese actually are in the real world, as opposed to Panglossian excitement about what they might be, hypothetically.

In conclusion, we welcome this treaty—just. We think it is better than the alternatives, but like any responsible Government, we are concerned about the real-world consequences and real-world costs to all our exporters right now of jeopardising our closest trading relationships with the EU, and, as we have heard, of the failure to roll over trade agreements with the wider world. It was best put by Mike Hawes, the chief executive of the Society of Motor Manufacturers and Traders, who said:

“We hope the deal can be ratified swiftly but, for both sides to benefit fully, we still need to urgently complete an ambitious and tariff-free UK-EU deal—and time is rapidly running out.”

I counsel Government Members to save their hubris until the bigger questions are answered.