Transatlantic Trade and Investment Partnership

Lord Clarke of Nottingham Excerpts

Tuesday 25th February 2014 Commons Chamber

[The Minister without Portfolio (Mr Kenneth Clarke)]

I too congratulate the right hon. Member for Wentworth and Dearne (John Healey) and his colleagues in the all-party group on securing the debate on this important subject. I welcome the fact that the vast majority of Members have spoken out in favour of the prospects of a trade agreement between the EU and the US, which we believe will be of great benefit to this country. I hope that the debate might serve the purpose of publicising the virtues of trade agreements between the EU and the US, as several hon. Members have said. I can assure Members that it is not for want of trying. I am afraid that the media in this country probably find the virtual consensus that exists between the main spokesmen in this debate one of the things that makes it less newsworthy. However, an agreement could be of enormous importance to the future of our economy.

The economies of most of the western democracies need a considerable boost at the moment and few things could give a greater boost on both sides of the Atlantic than a comprehensive deal that leads to a stimulus of trade in both directions. The values have been underlined. The case has been made. The figures on the potential value are speculative but there is no doubt there will be a stimulus to growth on both sides of the Atlantic, as the history of trading relationships shows. We should not forget that.

People keep going on about the fact that the agreement should be for ordinary people and not just giant corporations. What we are expecting to flow from that will be good for employment, particularly in modern, competitive sectors of our economy. It will also be good for consumers in increasing choice and keeping down prices and costs. As my hon. Friend the Member for Cities of London and Westminster (Mark Field) said, the last several decades show that the benefits of open trade are of great advantage.

[Several hon. Members]

rose—

[Mr Clarke]

I will give way shortly. I will merely say that the fact that we have this near consensus in British politics helps to give the UK a leading role in the negotiations. It is one of those areas where, despite our, at times, slightly tricky relationships with the EU, the UK is acknowledged to be the member state most in favour of open trading relationships. It is known that the UK’s position is not dependent on the position of one political party but extends way across the political threshold. My role, at the request of my right hon. Friend the Prime Minister, is to ensure that British interests and influence are brought to bear both in Washington and Brussels as the agreement goes ahead. It will be of huge value to achieve this, but let no one be too complacent about the prospects of getting a comprehensive agreement. It will not be easy, but I believe that the prospects are better at the moment than they have been at any time during my political career.

[Ian Paisley]

I fully agree with the way in which the Minister has approached this debate and the TTIP, but will he give us an assurance that he will ensure that the rights and interests of farmers and consumers are the top priority for the Government?

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[Mr Clarke]

I will certainly try to address all those concerns. That is the key reservation that is being expressed. A lot of Members say that they are in favour of a TTIP but are extremely worried that it will affect our ability to set standards, and it is important that we address those fears. I genuinely believe that they are unfounded, but it is feared that people are getting conspiratorial and somehow plotting to reduce farming, food safety, health and environmental standards on both sides of the Atlantic. The fact is that the British Government are convinced that a trade deal is not the place to raise or lower standards for the consumer, for the environment, for health and safety, for employment or for farming and food safety. Those are matters for the legislative authorities on both sides of the Atlantic to decide for themselves. On neither side of the Atlantic is anyone proposing to undermine those standards.

The hon. Member for Brighton, Pavilion (Caroline Lucas) drew our attention to the matter of financial services in the United States. When I go to the US, I find myself having to reassure people that we are not trying to reduce their standards in relation to Dodd-Frank. When I meet people in the Democrat party who are close to the labour unions, I have to reassure them that our labour market standards on this side of the Atlantic are as good as, if not dramatically better than, those in the United States, even if our pay rates are not so high. The issues are not the same between us as they are between, for example, the United States and some of the Pacific rim countries. On neither side of the Atlantic is there any weakness in the lobbying from NGOs and others on all these issues. The negotiators on both sides of the Atlantic and the Governments of the European Union—certainly the British Government—have no intention of allowing our own right to legislate in the appropriate spheres to be compromised. Nor are we choosing this particular instrument to enter into a conspiracy to get round or lower the standards that we in this House and the people of this country wish to see applied.

[Mr Brian H. Donohoe (Central Ayrshire) (Lab)]

Our delegation that was sent to the States saw at first hand the discussions on the time scale. As I see it, that is the main hurdle that we face in relation to any agreement. Has the Minister any up-to-date information on the likely time scale for the introduction of such a treaty?

[Mr Clarke]

The hon. Gentleman follows these matters closely, and he knows that, on both sides of the Atlantic, we broadly agree that we need to keep up the momentum and make progress. If we do not achieve this deal by the end of 2015 or early 2016, we will not get there at all because the politics will take over. That is the history of trade deals. We would all have preferred an arrangement like the Doha round, under the auspices of the World Trade Organisation, but since that has gone we have tried to move towards this kind of agreement. The pace will vary. We have made remarkable progress so far, and we are about to go into our fourth round. Some of the first offers have already been exchanged.

How quickly this goes will depend on events. The half-term elections in the United States might slow things down, for example. Also, the US is engaged in negotiations on the Pacific partnership, which is associated with our agreement and slightly ahead of it. In any event, we have to secure agreement within the present administrative term in the United States, and before the politics in any part of Europe start to go sour because a lobby group suddenly decides that vested interests can be protected by opposing the deal. We have every intention of pressing on and making progress as rapidly as possible.

[Mr Robert Buckland (South Swindon) (Con)]

In our negotiations with the US Government, is it not important that we should emphasise the distinction between the TTIP and deals such as the trans-Pacific partnership, on the basis that the risk of a sophisticated, regulated market such as the EU dumping inferior goods on the US is minimal, and that the fears that have accompanied other free trade deals need not exist in the TTIP?

[Mr Clarke]

I can assure my hon. Friend that I make that point, although we are not hostile to the Pacific partnership. It is perfectly reasonable for the American Administration to wish to conclude such an ambitious deal. However, people appreciate that the issues being discussed in Congress and among the American public are quite different from ours, and I think that that makes it easier for us to make progress. On the question of fast-track authority, which would determine when we eventually conclude, my hon. Friend has mentioned worries about the trans-Pacific partnership that are causing doubts in the United States. I think that we are waiting in the queue behind that agreement in that regard.

[Mr Buckland]

Is there not a danger that members of Congress who are hostile to the fast-track authority proposals could somehow bring the TTIP into the mix and withhold FTA for our deal, as opposed to the trans-Pacific partnership?

[Mr Clarke]

The answer to that is yes, there is a danger. I can assure my hon. Friend that we will do our best to minimise it, as will the commission in Washington. It would be most unfortunate if that were to happen.

That brings me to the question of transparency. No one is hostile to the idea of being transparent. The EU is a union of 28 nation states and Governments, all of whom have their own Parliament, and the desire to share information among Parliaments and the public is considerable. There is a dilemma, however, in that there is a conflict between that arrangement and the negotiating positions. There is no doubt that our American friends negotiate very hard indeed. They are pretty hard-nosed people when it comes to negotiating the detail, and we cannot send our negotiators into the chamber with all their bottom lines, their ambitions and the mandates they have received from their member states revealed. We need to get that balance right, but the instinct of Commissioner de Gucht and Commissioner Barnier—and certainly of the British Government—is to be as forthcoming as possible, so long as we are not simply feeding information to lobbies that want to try to put a spoke in the wheels. I entirely understand that getting public support—and, eventually, the smooth ratification of this deal—will depend on whether we have been sufficiently transparent with all the lobbies.

[Katy Clark (North Ayrshire and Arran) (Lab)]

Will the Minister give way?

[Mr Clarke]

Let me make some progress; otherwise, I will not be able to complete my speech in the appropriate time.

The question of investor-state dispute settlements—ISDS is the acronym—has given rise to fears that the proposed deal is a plot between multinational companies that are seeking to destroy our long-established standards in labour laws, environmental laws and so on. I really do not believe that that is the case. On the other hand, the concerns are being taken seriously. I realise that we have to have substance to my assertion that we are not raising or lowering standards on either side of the Atlantic and we are not usurping the role of legislatures, which is why the Commission has said that it is going to consult. I understand some of the fears that have been expressed, but I do think that people have got the wrong end of the stick and the fears are wholly exaggerated.

[Katy Clark]

rose—

[Mr Clarke]

Let me make my point and go through the argument, and then I will give way. First, let us remember that trade deals do benefit consumers, which is why consumer groups such as Which? are in favour of this trade deal. It is protectionist providers that resist such deals. Quality, choice and the price for consumers are improved where there is a good trade deal, and those with the best products and services tend to win out in trade deals. The ISDS clause is not a novelty; it is not some new threat that has emerged. Such clauses have been put into most trade deals for years and years. I have heard the familiar examples of odd claims that have been made in actions around the world, but these clauses have not had the effect that has been described.

Apparently, there are 3,400 of these clauses inserted in trade deals globally. The EU and its members have 1,400 ISDS clauses in various trade deals, and the UK has 94 ISDS clauses in our existing bilateral treaties. We have twice been challenged under ISDS for standards alleged to break our treaty obligations, but so far no British Government have ever lost a case under ISDS. What we have done is successfully brought claims against other countries; we have had slightly more success there, because the point of an ISDS is to underline the value of the total agreement by making sure that no individual investor or business can be disadvantaged by a Government or union of Governments breaking the obligations they have entered into.

The case was cited of Slovenia—somebody, perhaps the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards), said Slovakia—and my understanding is that it was lost when, as a result of local lobbying, that country went back on the deal it had just done to open up its health insurance market. That cannot be done, but no ISDS takes away the right to legislate from a Parliament; an ISDS gives rise only to a quicker and cheaper means of resolving disputes if there is some suggestion that a Government are breaking the agreement. Some say, “No European Union Government or the USA would ever do that”, but one of the big ambitions of those on this side of the Atlantic is to open up the public procurement market in the US. In some states of the US it is open, but in others it is not; some states do not measure up to WTO standards at all. Far be it from me to express the faintest doubts about the approach of politicians in some smaller US states or some EU states, but public procurement sometimes takes on a pork barrel element when the contracts are being placed, as opposed to when the tenders are being issued.

I think there could be some advantage, some reassurance and some pressure against people cheating in public procurement contracts if it is known that there is an ISDS clause. Of course it is quicker and cheaper, and it is arbitration and not litigation, but again the argument of those against ISDS is, “Why don’t you just go to law? There is a perfectly good legal system in the European countries and in the US.” I can say only that the US does have a perfectly good legal system, but it is expensive and it can be extremely long, as one sails through either the state courts or the federal courts trying to resolve a dispute. People have said that the advantages in all this agreement are as much in the area of regulatory coherence —with far more regulatory coherence stopping unnecessary convergence in our recognition of regulatory standards—than they are in tariffs, but small and medium-sized countries are not going to go into these markets if they are taking on the risk of having to go in for expensive litigation against American authorities that are plainly not complying with their terms of the treaty. Similarly, there are states in the EU where American investors would be most reluctant to sail in if they were relying entirely on the fact that they can take to the legal process in some southern European countries to challenge the bona fides of local officials over whether they were complying with the agreement. I will go no further, but the British have always put these clauses in our trade deals and the US normally puts them in its trade deals; 3,400 of them are in place and they have made a reality of free trade where it would otherwise not have happened.

[Julian Smith]

I welcome the fact that my right hon. and learned Friend is standing up for small and micro-businesses, which will really benefit from this ISDS vehicle. Is he, like me, surprised that the Labour party, while claiming to be pro-enterprise, is so against this measure?

[Mr Clarke]

Obviously, I understand the doubts being expressed, because some extremely respectable lobbies and non-governmental organisations—some consumer groups, some aid lobbies and some sections of the trade union movement—are raising all these fears. I genuinely think that they are mistaken and that their arguments, if they are too successful, will not benefit employees, consumers or anybody else, which is why I am trying to rebut them. Those who have spoken—I do not think anyone would be offended if I described them as somewhat of the left of the broad political spectrum, which does not mean that they are unacceptably or extremely left—are getting the wrong end of the stick. The ordinary man and woman have a great deal to benefit from this TTIP. To make it less effective by excluding an ISDS would not help.

[Katy Clark]

Will the right hon. and learned Gentleman therefore give us an assurance that nothing in this trade agreement would undermine the democratic ability of this House and other parts of Government in these islands to take decisions on the commissioning and organisation of public services—whether those services are in the private or the public sector?

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[Mr Clarke]

I realise that a broader issue underpins those fears, which is the extent to which there is scope for private sector involvement in our national health service, and that is part of a much bigger argument that I have taken part in for 30 years. I was not aware that a distinction was drawn between British, French and German private sector participation and American participation in our national health service. I can assure the hon. Lady that nothing in the agreement would open up access to the national health service beyond what is already permitted, and what was permitted under the previous Government. Overseas suppliers are already able to offer hospital services and health-related professional services through a commercial presence here. The important thing for anyone who engages in the provision of professional health services and health care companies in this country is that they have to comply with UK standards and regulations in just the same way as British health care providers, and, as I say, those standards will remain under the sovereignty of this country.

[Mr John Spellar (Warley) (Lab)]

The right hon. and learned Gentleman was asked a question regarding the involvement of micro-businesses, but the note from the Library states that the average cost of an arbitration case is $4 million per party, about 82% of which is legal fees. The panel members can claim a daily fee of $3,000 a day plus expenses, and billing rates for arbitration lawyers run up to $1,000 an hour. Only major corporations will therefore be able to participate in this. I am not detracting from the main thrust of his argument, but this really is for major companies, is it not?

[Mr Clarke]

I am not encouraging small companies to start engaging in arbitration in major commercial disputes. That is an average. It depends on the complexity of the issues. I think the right hon. Gentleman would agree that full-scale commercial litigation—probably on either side of the Atlantic—is more expensive. This is a quicker arbitration process to substitute for the enormous costs that would be involved in challenging a public body, on either side of the Atlantic, on a commercial dispute about a breach of treaty obligation.

[Mr Cash]

Before my right hon. and learned Friend concludes, will he elucidate on the point he made earlier?

[Mr Clarke]

Which point I made earlier?

[Madam Deputy Speaker (Mrs Eleanor Laing)]

Order. Is the Minister giving way?

[Mr Clarke]

indicated assent.

[Mr Cash]

It was with respect to the question of transparency and the fast-track arrangements. As my right hon. and learned Friend knows, President Obama, in his State of the Union address, called for fast-track arrangements. The next day, the Democratic leader in the Senate turned down the idea. Indeed, Nancy Pelosi, the minority Democratic Leader in the House of Representatives, turned it down only last week. Was my right hon. and learned Friend being a little sanguine in his assessment of the position, and does he have any up-to-date information to give us today?

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[Mr Clarke]

I said only that the timing of fast track authority would have an effect on the timing of any agreement. I follow these matters closely. Obviously, they are utterly beyond our control. This is a political issue in Congress. There is more support in both Houses of Congress for a trade agreement with the EU than I can remember in my political career, but people have reservations and of course many people in Congress would rather see all the details before they approve it than give too early authority. The problem is that no one will ever settle a negotiation with a US Administration on the basis that Congress might be able to suggest detailed amendments to it afterwards as a condition of approval. It would be improper for me to start offering opinions about how it is going to go with the United States, but the timing of fast-track authority is a little uncertain. The doubts are more provoked by the Pacific partnership agreement than the TTIP. As my hon. Friend the Member for South Swindon (Mr Buckland) said a few moments ago, the two are slightly linked when it comes to American debate.

[Mr Donohoe]

Will the Minister give way?

[Mr Clarke]

This will definitely be the last intervention I will take.

[Mr Donohoe]

On the basis of discussions on this matter with Senators from the United States, it seems that they are concerned, as we should be, about the growth in the Chinese marketplace.

[Mr Clarke]

Well, they are, but that is, as several people have said, part of the significance of this potential EU-US deal. It covers 47% of the world’s GDP and about 30% of world trade. If we can get a proper comprehensive agreement, we will set standards that will guide future trade agreements that will inevitably involve China. The Prime Minister recently began to talk about the prospect of moving on to the big challenge of deciding how China should be accommodated in these arrangements, which are now, I am glad to say, spreading throughout the world. If we can tackle this one, we will be in a better position to contemplate how to deal with China.

The negotiations are making good progress. It gives some cause for optimism at a time when it is foolish to be naively optimistic about how rapidly we are going to recover from the worst financial crisis in modern times and how rapidly the western European countries, including the United Kingdom, will return confidently to secure normal growth in better balanced economies that are able to compete in the modern world. This agreement is going in the right direction. Needless to say, I agree with my hon. Friend the Member for North Dorset (Mr Walter) that it particularly underlines the value to this country of its being a full member of the EU. It is an illusion to believe that we would sit at these tables if we suddenly decided to leave the EU. It is a complete delusion for any Scotsman to believe that Scotland would continue to play any significant role in this kind of problem if it suddenly decided to revive the mediaeval kingdom and start leaving the United Kingdom. We live in a world where politics has never been more intimate and we live in a globalised economy where our aim must be to have a United Kingdom economy that is modern and competitive —as ever, opening possibilities for us. A confident United Kingdom will play a leading part in influencing the EU’s progress towards a comprehensive deal which there is a good chance—no more than that—will be achieved within the next year or two. The fact that it has been so widely welcomed in this House will help us give added impetus and improve British influence in the process on both sides of the Atlantic.

[Several hon. Members]

rose—

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[Zac Goldsmith]

I thank the hon. Gentleman for that intervention.

There are so many differences between the US and the EU, and not only in the quality of standards, but in the approach to developing them. I cannot imagine a situation in which harmonising standards and regulations would work in the interests of the consumer. I have given the example of GM food labelling, but there are many others. A number of countries around the world, and indeed the EU as a whole, have chosen not to allow the import from the US of beef from cows fed a diet that includes the hormone ractopamine, because of the fairly grave health concerns. I suspect that most British consumers would support that position. Would that be challenged? Well, there is already plenty of talk among agribusiness in the United States that it should be.

Most worryingly, US agribusiness is strongly opposed to EU attempts to limit endocrine disruptors. The links between the use of such chemicals and the alarming increase in precocious puberty among young girls are not disputed. Will those standards that we have set across Europe be adhered to and maintained? That remains to be seen, but we know that plenty of lobby groups in the United States have their sights set on reducing those standards.

It is easy to imagine that regulatory convergence will mean chasing the lowest common denominator. It is worth noting that, according to a whole raft of freedom of information requests conducted by the Corporate Europe Observatory in the context of the TTIP, the Commission has met civil society groups just eight times over the course of those discussions, whereas it has met corporate lobby groups—I do not know how they are defined and am only repeating what has been reported—119 times.

I suspect that most Members across the House would agree that removing or simplifying unnecessary regulations, removing barriers to entry, particularly for small firms, and encouraging free trade are all laudable aims, but they need not happen at the expense of democracy. My concern is that the proposed ISDS mechanisms, which we have already heard a great deal about, will undermine democracy. Under those mechanisms, companies wishing to challenge a national regulation could effectively bypass the usual process and go straight to an investment tribunal. Often hugely important outcomes therefore rest on the shoulders of just three arbitrators—one is chosen by the company, another by the state and the third is a compromise of the two. It is hard to understand how this country would want or need such a system.

My right hon. and learned Friend the Minister was asked recently—

[Mr Kenneth Clarke]

rose—

[Zac Goldsmith]

He is about to intervene, but I am going to quote him anyway, because he might be about to repeat this. When asked why that would be useful for this country, and indeed for Europe, he stated:

“Investor protection is designed to support businesses investing in countries where the rule of law is unpredictable, to say the least.”

There have been so many requests to this Government and to the European Commission for examples of countries in the EU that are beyond the pale along the lines of the description he offered, but not one country has so far been listed, so why do we need this process? Why do we need these tribunals for countries where the rule of law is adhered to more or less across the board?

[Mr Clarke]

As I understand it, an investor who has access to this process would not be able to start arguing in favour of reducing standards in any regulation that has been passed by the legislature. Regulating will remain the responsibility of the authorities that already regulate. The only claim that can be made through the ISDS is that the state has gone back on its treaty obligation. Therefore, unless in the course of negotiations some agreement has been entered into to change regulatory standards on either side of the Atlantic, there is no way our existing rules on food standards or anything else could be challenged by some American company that suddenly decides that now that we have signed a TTIP it has the right to try to change the rules. What we are trying to get rid of is unnecessary regulation and the duplication by regulators on either side of the Atlantic of processes designed to reach the same public objective. That is the kind of thing that can be eliminated, to the huge advantage of companies on both sides of the Atlantic.

[Zac Goldsmith]

I very much appreciate my right hon. and learned Friend’s intervention. At this stage it is very hard to know how things will pan out. Much will depend on the terms of reference, but there are plenty of examples from around the world—as he pointed out, this is not a new concept—of companies using similar provisions in other trade agreements in order to undermine domestic legislation.

The North American Free Trade Agreement is a good example. According to a succession of polls in the past year, just 15% of US citizens want to remain in NAFTA. It has become one of the most unpopular free trade agreements of all; it makes the Euroscepticism that my right hon. and learned Friend talked about earlier look like a joke. A striking example in relation to NAFTA concerns Canada being sued via one of these dispute mechanisms by Ethyl Corporation—he is probably familiar with the case—for banning the chemical MMT, which Canada considers to be a highly dangerous toxin. Canada had to settle; it paid millions of dollars in compensation and eventually had to reverse its ban. Incidentally, the ban still stands in the United States, which makes the decision even more perverse. There are many more examples, and I was going to rattle off hundreds, but time is short and Members will be pleased to know that I will not.

As this treaty unfolds, it is essential that we remain mindful of who it is designed to serve. A guard needs to be erected against the voracious lobbying by big businesses that have a direct interest in undermining a number of the standards that I cited and have been cited by other Members. I personally do not trust the Commission to balance those competing interests, for all kinds of reasons, some of which I have hinted at in my short speech. I strongly believe that it falls to legislators like us to apply scrutiny throughout this process, and I very much hope that we do.