CPTPP (International Agreements Committee Report)

Lord Gold Excerpts

Tuesday 1st February 2022 Grand Committee

[Lord Gold (Con)]

My Lords, first I join those noble Lords who support the Government’s plan to seek entry into the CPTPP. As the Government state, it will

“put the UK at the heart of a dynamic group of countries”

as global economic growth centres on the Pacific region. The Government claim that accession could see 99.9% of UK exports being eligible for tariff-free trade with its members and will “facilitate services trade.”

While I welcome the boost that joining the CPTPP is predicted to give to our export market, in this speech I want to focus on services, especially financial and professional, which the Government claim will be boosted by our accession. DIT figures show that from 2014 to 2016 financial services provided the largest exports from the UK to CPTPP members, primarily to Japan, accounting for 28% of service exports to member countries. So we already have a strong foothold, which we should be well placed to strengthen.

I am sure that I do not have to remind my noble friend the Minister, formerly chairman of Barclays Bank, how important the City of London and financial services are to the wealth of this country. I do not wish to open up old wounds, but the risk that Brexit posed to the financial services industry—not answered by the 2020 EU-UK trade and co-operation agreement, in my view—remains real, even though our worst fears prior to Brexit thankfully do not appear yet to have materialised and hopefully will not. Just as the Government contemplate in their Brexit freedom Bill how we might take steps to benefit from Brexit, hopefully boosting the strength of the City of London and financial services, I trust that in negotiating our proposed entry into the CPTPP, the Government will ensure that this sector is not left behind, as the opportunities are great.

Of course, in joining we would be acceding to a treaty already approved by 11 member countries, so our scope for change is somewhat limited. In their response to the IAC’s report on UK accession, the Government stated that in 2020 UK service suppliers exported £25.1 billion worth of services to member countries and that our joining will provide

“benefit from modern rules which ensure non-discriminatory treatment and increase security, protection and transparency.”

It is the case that treaty members must abide by non-discriminatory obligations so must not treat financial institutions or investments from another member country less favourably than similar domestic investors. If we join, we benefit from that. Treaty members are also barred from imposing restrictions or conditions on suppliers from another member, such as limits on the number of subsidiaries or nationality requirements for senior management. However, the Government do not provide a specific negotiating objective for UK financial services.

In its evidence to the IAC, the Law Society stated that the aims of UK legal professionals are

“unlikely to be realised via CPTPP”.

The London Market Group, which represents the insurance industry, told the committee that

“there is nothing specific that we will get from this agreement”.

The evidence the IAC received was, as the noble Baroness, Lady Hayter, said, universally supportive of membership and anticipated potential economic benefits for the future, but not for now.

So how are we to maximise our gain from joining CPTPP? One way is through the negotiation of side letters, a subject already raised by the chair of the IAC, the noble Baroness, Lady Hayter, and my noble friend Lord Lansley. Leaving aside issues of legal enforcement and whether each member country must agree the side letter in order to be bound by it, unless we enter into bilateral agreements with each member—we have already entered into a number of agreements, with, I think, seven of the member countries—side letters seem to be the only way, pre-entry, to improve the terms of the treaty. It is imperative therefore that the Government take every step they can to negotiate side letters or bilateral treaties that assist our services sector. Accordingly, will the Minister confirm that every attempt will be made in the forthcoming negotiations to agree with each member country side letters or bilateral agreements that boost our ability to compete and enhance our financial services and professional skills in the CPTPP world? Can he also give us now an idea of what we will specifically be seeking in our negotiations? I realise that he will not want to say anything that might prejudice the negotiations, but I am not asking him to tell us what we might give up in our discussions, only what our starting position might be.

Assuming that our application to join is successful, we then have a great opportunity to influence the way in which the financial services industry can operate. TheCityUK noted in its evidence to the IAC:

“Most barriers to trade in FRPS”—


or financial and related professional services—

“are regulatory and require regulatory co-operation to resolve them.”

Being a member of this “club” enables us to work with other members to liberalise regulation which is holding us back.

An example is the recognition of professional qualifications, the failure of which, at present, prevents professional services firms fully operating and expanding in member countries. In their negotiating objectives, the Government state that “further liberalisation” could be achieved through the recognition of professional qualifications, but the agreement does not provide for this. Each country member is to

“encourage its relevant bodies to establish dialogues with the relevant bodies of other Parties, with a view to recognising professional qualifications, and facilitating licensing or registration procedures”.

In closing, I ask the Minister to confirm that on our joining the CPTPP every possible step will be taken to liberalise regulations that hold us back and to further the recognition of professional qualifications.