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

Liam Fox Excerpts

Report stage
Tuesday 19th March 2024 Commons Chamber

There are no right answers to these dilemmas. Together, we will have to find ways of navigating them. Do we act alone or together? Should we be open or closed? Can we act in the short term, or do we need to think for the long term? Do we use carrots or sticks? Is this a broad canvas of action, or do we need a targeted approach? These are questions that are hard to answer, but unless we debate them in the House, we will not grow the skills and the experience to make good and wise decisions for the future. That is why we needed a debate on the CPTPP treaty under the CRaG process. Today’s debate is important, but it is second best.

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

It is always a pleasure to follow the right hon. Member for Birmingham, Hodge Hill (Liam Byrne).

I rise to echo the comments made so eloquently and clearly by my right hon. Friend the Member for Chingford and Woodford Green (Sir Iain Duncan Smith), and to add just a few comments of my own. I have always been in favour of the CPTPP, and, as I said from the Front Bench in 2019,

“It is absolutely essential, particularly given the rise of protectionism globally, that we commit ourselves to a rules-based system based on the WTO. Of course, we have abilities to augment that by other regional relationships, which is why we have had the public consultation and the debate in Parliament about the potential accession to the CPTPP”.—[Official Report, 6 June 2019; Vol. 661, c. 250.]

I have also always believed that the benefits of the CPTPP have been at least as much about geopolitics as about simple import and export numbers. As the Royal United Services Institute put it,

“Joining the CPTPP provides the UK with not just economic benefits, but the means to help define and defend a rules-based order in the face of China’s diplomatic and economic heft.”

At a time of tense relations between China and the United States, the United Kingdom has joined a trade agreement in which neither is present, although the United States was instrumental in its creation—a point to which I shall return later.

The March 2023 integrated review refresh describes the Indo-Pacific as

“critical to the UK’s economy, security and our interest in an open and stable international order. Developments there will have disproportionate influence on the global economy, supply chains”

—that was mentioned by the right hon. Member for Birmingham, Hodge Hill—

“strategic stability and norms of state behaviour.”

The CPTPP, in turn, is about a contribution to the stability of the global trade and investment system.

Within that debate, what do we perceive China’s security threat to the UK to be? In their reply to a report from the Intelligence and Security Committee, in a section entitled “The Strategic Context”, the Government stated:

“China almost certainly maintains the largest state intelligence apparatus in the world. The nature and scale of the Chinese Intelligence Services are—like many aspects of China’s government—hard to grasp for the outsider, due to the size of the bureaucracy, the blurring of lines of accountability between party and state officials, a partially decentralised system, and a lack of verifiable information.”

They also stated:

“The Chinese Intelligence Services target the UK and its overseas interests prolifically and aggressively. While they seek to obtain classified information, they are willing to utilise intelligence officers and agents to collect open source information indiscriminately—given the vast resources at their disposal…To compound the problem, it is not just the Chinese Intelligence Services: the Chinese Communist Party co-opts every state institution, company and citizen. This ‘whole-of-state’ approach means China can aggressively target the UK”

—and UK interests, wherever those interests are globally. Sadly, we have discovered that to our cost in many of our governmental institutions here.

The question, given all that, is this: could China actually be admitted to the CPTPP, and if it is theoretically possible, how likely is it? I think it instructive to look first at the experience of the World Trade Organisation, a brief that my right hon. Friend the Minister and I shared over several years of my extremely enjoyable time working with him at the Department for International Trade. When China acceded to the WTO in 2001, the west saw it as promising and promoting economic and political reform. It was a time of great optimism that the Chinese communist system could be pulled in a direction that would be advantageous to, and in the interests of, the west. However, Jiang Zemin, the Chinese leader at the time, claimed that the motive of the United States in all this was to

“westernise and divide socialist countries”.

Thus the WTO itself was heading for a stalemate in its direction of travel almost from the point at which China acceded to it.

This has added to other WTO problems—and I mention that because we need to look at the CPTPP within the wider trading framework. The WTO’s problems have been compounded by its adoption of the concept of unanimity, while its rules talk about consensus. If consensus and unanimity meant the same thing, there would not be two different words for it in the founding documents. This has meant that virtually any country in the WTO now exercises a right of veto, which has prevented us from moving forward in what we perceived to be a process of genuine liberalisation of global trade.

[Sir Iain Duncan Smith]

I apologise for interrupting my right hon. Friend’s excellent speech. The key was, we were told at the time, that the move would change China, and that persuaded the Government, but what we have found is that China is now changing the terms of the debate, because it has not changed at all—it has got worse. Is that not a very good reason why we need to debate these issues whenever we can?

[Sir Liam Fox]

My right hon. Friend is entirely right. As I observed at the time, President Clinton took the view that the treaty was the best hope that the west had of pulling China into a much more market-orientated, rules-based economy, where we could gain the benefits of a more liberal, global economy, but that is not how it turned out. We have had only one multilateral treaty since the WTO was created, the 2017 trade facilitation agreement.

There is a hierarchy of agreements that we can secure in terms of liberalisation. A multilateral agreement is the best, but given the effective veto that countries have, that is unlikely, and it is very unlikely to give us the benefits that we would like to see, especially the liberalisation of trade in services. The next best is a plurilateral agreement, the next best after that is a regional agreement, and then we are down to what some people would unkindly describe as the bargain basement of bilateral FTAs. All those are useful in creating a more liberal global trading environment. However, if China were to seek to join the CPTPP, it would need to commit itself to liberalisation in line with CPTPP requirements, which would require a reduced role for the Chinese state. If anyone who keeps an eye on current affairs thinks that the Chinese state is tending in the direction of a smaller influence, they are watching different news outlets from the ones that I am watching.

China could, of course, seek a bespoke agreement to join the CPTPP, but the UK has already set the precedent by joining on current terms. Even if China could join the CPTPP, could it be trusted to meet any of the conditions of accession? Although Chinese leaders have declared their willingness to meet the conditions, many countries are extremely sceptical, given China’s behaviour as a WTO member. China has a poor record when it comes to complying with WTO rules and observing the fundamental principles of non-discrimination, openness, reciprocity, fairness and transparency on which the WTO agreements are based. China’s subsidies over capacity, intellectual property theft and protectionist non-market policies exacerbate distortions in the global economy, and—even more worryingly—China’s use of trade as a tool of coercive diplomacy has raised concerns further, especially given its behaviour towards Australia and Japan. This is not the sort of partner we should be wishing to join us in the CPTPP, unless there are previously unimagined changes in behaviour.

Finally, a word, if I may, beyond this Chamber to our US colleagues: I believe that the decision to leave the CPTPP by the United States was a mistake. It removed from United States policymakers a tool in its strategic ability to shape events in the region. UK accession provides an opportunity for the United States to seek to join this new grouping and gain greater direct influence over China trade relations with the fastest growing economic zone in the world. These are all reasons why we must keep a very close eye on what happens with China and our new membership of the CPTPP. We have gained a great deal; we cannot afford to have it thrown away, by ourselves or by others.

[Mr Speaker]

We now come to a maiden speech; I call Damien Egan.