Comprehensive Economic Partnership (EUC Report)

Lord Darroch of Kew Excerpts

Thursday 26th November 2020 Grand Committee

[Lord Darroch of Kew (CB) (Maiden Speech) [V]]

My Lords, I am delighted and honoured to join your Lordships’ House. In my 42 years as a British diplomat, I sometimes sat in the official Box in this House on the deeply questionable basis that I could offer useful advice to the Minister at the Dispatch Box. Later in my career, especially in my last two overseas postings, as ambassador to the European Union and to the United States, I had the honour of giving evidence to committees of this House. I remember in particular two features that stood out whenever I gave evidence: the matchless courtesy with which proceedings were conducted and the forensic accuracy and pertinence of the questions posed. So it is a relief that I am now on the other side of the table.

I start with some words of sincere thanks to the staff of the House for the help that they have given me over the past few months. They have been models of professionalism, not least the IT expert who spent more than an hour on the telephone to me—though to him it must have seemed much longer—helping me with the theoretically simple task of setting up my email account.

There is a particular reason for my choice of this debate for my maiden speech. Tokyo was my first overseas posting, and I was there for four and a half years in the early 1980s, so there is a certain symmetry in UK- Japan relations being the focus of my first intervention in the House.

I was in the political section of the embassy but, at that time, there was absolutely no question about the central task of the embassy: it was about the economic and trade relationship, opening up the Japanese market and encouraging Japanese investment in the UK. If anyone ever thought that diplomats were interested only in political and national security work and not in trade or inward investment, they should have seen the British embassy in Tokyo in the early 1980s.

While it was nothing to do with me, labouring away in the political section, my colleagues in Tokyo succeeded —it took a while—in opening up the Japanese market. Tariffs and quotas were reduced or eliminated, and the first big Japanese investments—notably the Nissan factory up in Sunderland—were enticed to the UK, all of which paved the way for a substantial boost to the commercial and investment links between the two countries and the thriving bilateral relationship that we see today. A lot of officials, diplomats and Ministers have played a part in this progression, but I like to think that the seeds were planted by my economic and commercial colleagues in those now distant early 1980s days, back in the Tokyo embassy.

That brings me to this new UK-Japan Comprehensive Economic Partnership Agreement. I start by congratulating the International Agreements Sub-Committee on its report on the agreement, which is an excellent piece of analysis, and the summary of conclusions and recommendations is a model of its kind. I am tempted to say that I agree with every one of them and leave it at that, but, having got the Floor, I would like to offer briefly three reflections.

The first is to highlight one of the central themes of the committee report: the overselling of the gains of this agreement. This is not to discount or diminish the work of our negotiators. I spent many hours negotiating around the EU table and know that negotiations are always a hard slog. But to quote the committee’s report, the Government are

“presenting as a new gain the retention of EU negotiated provisions.”

There are some modest advances, such as faster reductions in tariffs on, for example, leather goods, some more liberal rules-of-origin provisions, and some improved financial services provisions. However, there are also some deficiencies in comparison with the EU agreement—in particular, the arrangements for continued access for UK companies and some tariff-rate quotas are suboptimal and introduce uncertainty. There is further uncertainty about whether UK exporters will actually gain the additional 60 or so geographical indicators that are promised, and around how the provisions of this agreement on application to Northern Ireland will work in practice.

With so little good news around in these coronavirus days, I can understand the temptation to talk up successes. I repeat that it is good to have this agreement, but overselling always brings consequences down the track.

Secondly, the committee’s report highlights the important succession to the Trans-Pacific Partnership Agreement. I strongly agree. This is the part of the world enjoying the strongest economic growth, and it is coping with the pandemic better than Europe or the United States. The stronger our trade relations with the region, the better for the UK in the medium term.

My third point is a wider one. As the report notes at paragraph 105, the Government have estimated that the agreement with Japan will increase GDP by 0.07% a year, though they have not offered a figure for what benefits the agreement brings over and above those that were enjoyed by the UK as a member of the EU-Japan agreement. I note that in another part of the post-Brexit forest, the Government have estimated that a free trade deal with the US would boost the UK economy by 0.16% over the next 15 years. I point out the contrast between these figures and the impact on the UK economy of no-deal Brexit. A recent study by the London School of Economics estimated that no-deal Brexit would have a long-term impact on the UK of 8% of GDP—that is not too far from the Government’s own forecast, back in 2018, of 7.6% of GDP.

The point is obvious: these trade deals with the likes of Japan and the US can have a positive but modest impact on our future economic growth, but they are dwarfed by the implications—positive or negative—of the current negotiations with the European Union. Nothing is more important than a successful outcome to that process. This is, I recognise, hardly an original or controversial point, but the clock is ticking, it is the 11th hour, and the risks are growing.