Trade (Australia and New Zealand) Bill

Lord Hannan of Kingsclere Excerpts

2nd reading
Monday 9th January 2023 Lords Chamber

[Lord Hannan of Kingsclere (Con)]

My Lords, I refer to my declaration in the register of interests as president of the Institute for Free Trade and an adviser to the UK Board of Trade. I had not been aware prior to this debate that we were also expected to make familial or genetic declarations of interest, but for the record I have a large family in New Zealand, a lot of whom are Labour voters. We are about as distant as we could be geographically, but about as close as we could be in every other respect. Actually, some of them have moved to Australia, as many Kiwis have done, where they can very easily work under the terms of the ANZCERTA deal between the countries. I hope that we will work towards the long-term goal of going deeper than we have with these treaties and try lateralising ANZCERTA. We share extraordinary closeness and interoperability economically.

It is also a huge pleasure to welcome the maiden speech of my noble friend Lord Swire, whose wit, effervescence and largeness of spirit will delight our debates and elevate our counsels.

I am asked on occasion whether I have any regrets about Brexit. My chief regret is very easily stated: it is that it was followed by an unpleasant culture war through which prism we still judge almost everything. It is extraordinary that six and a half years after the debate, questions such as this are still being approached fundamentally by where people stood on the original referendum. I am not talking about people who are against trade in general. I am not talking about the Trumpsters or the Corbynites or those such as the noble Baroness, Lady Bennett of Manor Castle, who has always been very clear that she does not much like free trade. She wants self-sufficient communities, and she sees the exchange of goods as a contingent necessity and a necessary evil—fine. She has been completely consistent in that position in all the interventions she has made in your Lordships’ Chamber.

I would, however, address those who see themselves as generally supporting the liberal order and the free exchange of goods and services. I put this general question to them: would you judge the Bill in the same way if it were a trade deal between the EU and Australia and New Zealand? Would you still be talking about getting swamped by cheap food and so on, or would you be celebrating its provisions?

When my right honourable friend Liam Fox was at the Department for International Trade, he did a series of opinion polls and focus groups and found a fascinating switch in opinion—a polar switch if you like. The kinds of people who had previously been the most in favour—the most open and liberal—in their attitude to commerce had now begun to associate global Britain with people and arguments that they did not like, and were therefore falling back into these protectionist and mercantilist arguments about standing up for our producers. Happily, the opposite was also true: a certain type of UKIP voter who, 10 years ago, would have been grumbling about whether the French should be able to own our energy companies had become much more in favour of international trade.

Let me address the people who are in favour of trade in general; let us leave aside the people who think it is a bad idea. Is there anything in the Bill that you would seriously object to were it not for this ongoing culture war? I will not rehearse in full all its advantages; we have already heard them from my noble friend the Minister, who really knows his onions, as well as his Australian iron ore, his New Zealand lamb and his trade and tariff quotas—rarely has someone been so fitted to the ministerial office by their interests and enthusiasms. The fact that we have the removal of 100% of tariffs is, of course, a very good thing and has attracted more comment than almost everything else, but I would say it is virtually the least important aspect of the Bill.

We are not in the 19th century, when we were mainly interested in foodstuffs and manufactured goods. We could look at the provisions of these treaties on mobility, which the noble Lord, Lord Liddle, was generous enough to acknowledge as a major positive: the ability of people who speak the same languages and have similar qualifications from, often, the same educational institutions to work without hindrance in each other’s economies. We could look at the provisions on services; we always think of financial services, but there is also shipping, architecture, and the audio-visual sector. We could look at the rules on cross-border data, on investment and, indeed, on procurement; it is extraordinary that the British companies will effectively be treated as if they were Australian or New Zealand companies for large measures of procurement in those countries. This is an extraordinarily successful negotiation. Yes, of course it could go further, and we will all find one or two aspects with which to disagree, but there is no world in which we are worse off after the Bill than before it.

I would like to address some of the criticism that we have heard in this Chamber and outside its walls. Something that we heard from a number of noble Lords was the mercantilist objection. People have said that this is an asymmetric Bill; that we are lowering tariffs faster on this side than on the other side. Good—that is the advantage of trade; it means that you can buy stuff cheaper. I am amazed by how many people think of themselves as free marketeers but, in the post-EU context, struggle or affect to struggle with this point.

I think of the number of times I have been asked, “We are letting in all this Australian beef—what are we getting in return?” The answer is that we are getting the beef: high-quality, nutritious and excellent beef. If you do not want it, do not buy it; that is the basis of how a market system works. The idea that you judge a country by its trade surpluses—that exports are the only thing that matter—was debunked by Adam Smith, but it continues to come back as a zombie argument in every generation.

I have big trade deficits with all the pubs around me in the Hampshire-Berkshire borders—with the Watership Down, Bel and the Dragon, and the White Hart in Overton. Sometimes they engage in dumping; they will say, “Have a free glass of wine if you have a meal on a Monday,” or whatever. Who gets the better end of that deal? There is nothing wrong with getting cheaper imports; that is what drives the economy. It means that people spend less money on the basics so they have more resources to spend on everything else; that is what drives growth.

That brings us, rather neatly, on to the farming or NFU objection. The NFU is in this curious position now where it opposes trade deals with everyone except the European Union. It does not phrase it like that, but that is the practical position it has taken. It does it by deliberately conflating what is allowed in other countries for domestic purposes, and trade deals. We have had a bit of that in the Chamber today: “Australia permits x or y and we do not like it”. Yes, but that does not affect our own standards of what is permissible and may be sold here. No country has ever tried to insist on exporting its own production standards, as opposed to its own food standards. The EU has never done so and, by the way, if we did so—if we consistently said we would not import food unless the production standards were identical—we would not have a free trade agreement with the European Union because we diverge in a number of areas from the EU. No one has ever done that, and it is mischievous to suggest that somehow, that could be done in this case. We are talking about countries with high welfare standards, countries very similar to our own.

I ought to address the hill farms question because it is important. The people who are stewards of our upland areas perform a service for the rest of us that goes well beyond food production. They are looking after a common resource: a beautiful countryside. It is a difficult thing to monetise. We drive past it and it looks very nice. It is what economists would call an externality. If we regard that as an important service, then we should reward them directly for doing so, and that has nothing to do with the levels of tariffs on New Zealand lamb. In some cases, these hill farmers will be getting more than 50%—significantly more in one or two cases—of their income from the Government in direct grants. There is an argument for being more generous, but their income will not be affected by the levels of tariffs we have on Australia and New Zealand. Indeed, when it comes to beef, the beef currently being imported from Ireland and France will instead be imported from the Commonwealth. It will have almost no impact on our domestic producers.

On food miles, the point was made by the noble Baroness, Lady Bennett, and others that we should not be trading with distant places, other things being equal, and we should try to do everything as locally as possible. We live in an age where geographical proximity has never mattered less. When the European Union was founded, there was an argument for regional blocs, but advances in refrigeration, the internet and cheap air travel have completely revolutionised the situation. There have been studies of the environmental impact of importing New Zealand lamb. Astonishingly, it turns out that New Zealand lamb eaten in London has a smaller carbon footprint than Welsh lamb eaten in London.

That may seem counterintuitive, but think about it. First, the overwhelming preponderance of carbon production is in the food production phase—on the farm. The things that make the Kiwi farmers efficient, the economies of scale and so on, tend also to mean they use less fertiliser, less heating and so on. By being cheap, they also make themselves more environmentally friendly. The very same thing that noble Lords were complaining about—the imbalance—tends to make things cheaper. In terms of transport, if we think about the size of one of those tankers, the tiny proportion of it take up by one lamb chop, and the efficient route it takes it straight from port to port and then to distribution, that is a very different thing from driving a small number of bits of frozen meat from a remote hill farm. So, even in the transport phase, often, there is no difference. I wonder how much of the argument about food miles is results driven or based on resentment of the fact that we are in this situation at all.

Finally, on the point raised by the noble Baroness, Lady Young of Old Scone—whether trade deals should be about the environment and democratisation—we all share her concern about those things. Who does not want a cleaner environment and the spread of democracy? But we should be careful of a category error: these are not things to be squeezed into a trade deal as a coda. The more important they are, the more they should be dealt with in their own right with an international treaty. In fact, if I have a criticism of these two deals and of the DfIT’s approach so far, it is that it has been too ready to get into areas that have nothing to do with the removal of trade barriers and to have chapters on indigenous rights in New Zealand, or whatever. That is a perfectly valid and important issue but it does not belong in a trade agreement.

Let us not lose sight of what we stand to gain. Your Lordships’ Chamber is, in a sense, our national institutional memory and it is our duty to recall the things that worked and that raised this country to success. Few things are more clearly in that category than free commerce and free exchange. We invented in theory with the writings of Adam Smith and David Ricardo; we then invented in practice as the first country to remove tariffs, from the 1840s. We did so unilaterally because we understood that the biggest advantage in trade was allowing prices to fall, so that our people were better off and would have more wherewithal to drive economic growth. Let us be worthy of the deeds of our ancestors. Let us pass on their success to our descendants.