CPTPP (International Agreements Committee Report)

Lord Hannay of Chiswick Excerpts

Tuesday 1st February 2022 Grand Committee

[Lord Hannay of Chiswick (CB)]

My Lords, the case for the UK joining the CPTPP seems an entirely convincing one. That of course is one of the findings of the report that we are debating today, which was so excellently introduced by the noble Baroness, Lady Hayter. The case for joining would be all the more convincing if it was not overlaid by hyperbole which overlooks the fact that we are already in a free trade relationship with seven—soon to be nine—of the CPTPP’s 11 member states; and that the crude figures of our trade with all these countries, both imports and exports, provide no measure of the benefits that the UK could expect from joining the group.

I add, referring to my noble friend Lord Bilimoria’s quotation from the Foreign Secretary, when she was Secretary of State for International Trade, that a trade agreement of a bilateral kind such as accession to the CPTPP cannot be free of limitations on our sovereignty; every trade agreement is a limitation on our sovereignty, as I am sure the noble Lord knows. Also, there is the hard fact is that the CPTPP is neither the first nor the second of our principal markets. They are the EU and the US, and with neither of them are our trade relations in particularly promising shape.

I will focus my remarks on the implications for our accession to the CPTPP of the applications to join that group by China and Taiwan, which were referred to in paragraphs 33 and 34 of the report, and by several speakers in this debate; and on the consequences of our joining the CPTPP for Northern Ireland. Neither issue was properly addressed in the Government’s negotiating objectives. I hope that the Minister will be able to cast some light on both when he replies to the debate.

The applications by China and Taiwan are clearly relevant to our application, although they are quite separate from it. Their relevance is that if either or both is successful—as it is hoped ours will be—our trade relations with those two countries will in future be regulated by the terms of the CPTPP and not, as now, by our shared WTO status. Put clearly, we would be in a free trade area relationship with China—surely a major development indeed. The right reverend Prelate has referred to some of the problems that would arise in that situation.

It is clear too that the sequencing of the handling of these three bids for CPTPP membership, over which we have virtually no control, could present some really tricky challenges. The least likely eventuality, I suggest, is that either China or Taiwan, or both, join ahead of us, in which case they would have a say over our terms of accession. I do not honestly think that very likely. Slightly but not much more likely is that two or three of us join simultaneously, in which case we will have no say over the terms under which the others join, nor they over ours. Most likely, we will join first, in which case we will, presumably, have an equal say with other CPTPP members over the terms of accession of both China and Taiwan.

If I have those three alternatives right—I would be grateful if the Minister could say whether I do—it is easy to see that each of them bristles with choices of a considerable geopolitical significance that will have to be made further down the road. I am not stepping into the mistake of asking him to tell me what the position of the British Government will be in any of those three cases, merely whether I have correctly adduced the three possibilities.

With the implications for Northern Ireland of UK CPTPP membership, referred to in paragraph 37 of the report, we are on rather more familiar ground, alas, although experience in other contexts has shown that there are great complexities and difficult choices to be made there too, of which the negotiating objectives give no hint. While it is clear that the EU has no say over whether we join the CPTPP, will we ensure that the Commission is properly briefed during the negotiations to join the CPTPP, with a view to avoiding unpleasant surprises as far as possible in implementing the provisions of our CPTPP membership in Northern Ireland, which, for trade in goods, as the Minister knows very well, is part of the EU’s single market? Can he say whether such a precautionary approach of briefing the Commission will be undertaken or is in hand?

I will leave most of the other, more detailed aspects of our CPTPP accession negotiations referred to in the report to others more knowledgeable than I. But since several noble Lords have touched on patents and intellectual property, I hope the Minister can give a clear assurance that the UK will accept no CPTPP provisions that could be incompatible with or prejudicial of our continuing membership of the European Patent Convention and its European Patent Office.

I conclude with a comment on assertions being made that all this will be wrapped up within the current year. Given the complexities and sensitivity of many of the issues at stake, and the rather cumbersome nature of a negotiation that will require unanimity of all concerned at every stage, I seriously doubt whether that estimate is realistic. Setting it out now, however much it fits a desire to achieve it, will come back to bite the Government in the ankle when it is not achieved.

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[The Minister of State, Department for Business, Energy and Industrial Strategy and Department for International Trade (Lord Grimstone of Boscobel) (Con)]

My Lords, I thank the noble Baroness, Lady Hayter, for tabling today’s Motion, and congratulate her on the 10th report of the International Agreements Committee regarding our planned accession to the CPTPP. As always, it is a highly detailed piece of work, and I have ensured that my department has considered each of its recommendations in detail, as we will the valuable points raised in today’s debate. Also importantly, I shall make sure that our negotiators are fully aware of the points raised today. I thank those who have contributed to today’s excellent debate and will endeavour to respond to the points which have been raised. If I miss some points out, as I surely will, I will of course write to noble Lords.

I welcome my noble friend Lord Udny-Lister as a new member of the IAC. I have no doubt that his experience and wisdom will greatly inform our debates on these matters going forward.

Membership of the CPTPP is central to the Government’s trade strategy and key to ensuring future prosperity at home and influence in the Indo-Pacific. As we have heard today, the CPTPP represents one of the largest trading blocs in the world, covering a population of over 510 million. It includes some of the world’s largest and fastest-growing economies, including Japan, Malaysia and Vietnam. As my noble friend Lord Lansley and the noble Lord, Lord Bilimoria, put it so clearly, the wider Indo-Pacific region is the world’s growth engine, home to half of the global population and 40% of the world’s GDP. We truly believe that accession to the CPTPP will allow the UK to engage more deeply with this part of the world, both through trade and on wider foreign policy issues.

It is pleasing that there is already considerable demand for UK goods and services in the region. UK trade with CPTPP members between 2016 and 2019 increased by an average of 8% annually, and by 2019 the overall value of UK exports to the bloc was a remarkable £110 billion. Trade with the region is already supporting jobs and prosperity at home and projecting UK influence overseas. Membership of CPTPP will consolidate this. As we level up the country, every region and nation of the UK stands to gain from UK accession to CPTPP. The West Midlands and Scotland are set to enjoy the greatest relative gains, through long-run increases to output of £177 million and £163 million respectively, as a direct result of CPTPP membership. Key industries such as food and drink, services and digital trade are particularly likely to benefit. I welcome the reference by the noble Baroness, Lady Hayter, to the food and drink council. No starting date is yet confirmed for that council, but we hope that it will be in action as soon as possible.

CPTPP membership offers something fundamentally different to our bilateral agreements with existing members, which have often been referred to in today’s debate. The agreement’s advanced provisions on services, investment and digital trade will deliver new benefits for British businesses, and its rules of origin provisions will allow companies to cumulate originating content from an £8.4 trillion free trade area, allowing more resilient supply chains to develop. I agree with the noble Lord, Lord Purvis, that the resilience of supply chains is so important and, frankly, something we have not paid enough attention to in the past. The CPTPP further offers increased opportunities for collaboration across vital areas such as climate change, sustainability and women’s economic empowerment.

Expansion to other like-minded market economies is a key purpose of the CPTPP—we hear this directly from its members. The UK is at the front of that queue. It is right that the UK does not offer a running commentary on any other applicants while we are still negotiating the terms of our membership. However, I will return to that point later, particularly the question of China and Taiwan. Looking beyond that, if just Thailand and South Korea joined the agreement, it would treble the long-run economic benefit from £1.8 billion to £5.5 billion.

The CPTPP will bring us together with a group of economies promoting free trade and high standards in a region where, frankly, the contest between rules-based trade and unfair practices is particularly intense. It would send a powerful signal that the UK, as an independent trading nation, will continue to champion free and fair trade, fight protectionism and remove barriers to trade at every opportunity.

In answer to the noble Lord, Lord Bilimoria, I am afraid I cannot give a timetable for completion of these or other negotiations which are currently under way—other than to say, unhelpfully, as soon as possible, consistent with reaching a successful outcome.

I will now address some of the concerns raised by the IAC’s report and your Lordships in this debate. The noble Lord, Lord Hannay of Chiswick, asked whether we will consult the EU on our negotiations. I am afraid we will not—

[Lord Hannay of Chiswick (CB)]

The noble Lord is very kind to have replied to my point, but he happens to have replied to the wrong one. I never suggested we should consult the EU; I suggested we should brief it.

[Lord Grimstone of Boscobel (Con)]

I apologise to the noble Lord. I should have said “brief”—I misnoted it as “consult”. However, I can equally confirm to him that we will not brief the EU on our negotiations. However, I can also confirm that our top priority is to protect the Good Friday agreement and the gains from the peace process, and to preserve Northern Ireland’s place in the UK. When we negotiate, the Government are negotiating on behalf of the whole UK, representing the interests of all the UK’s nations, including Northern Ireland.

I will say more on China, Taiwan and other economies seeking to accede to the CPTPP. As I have explained, as a non-member, the UK is not commenting—it would be inappropriate to do so—on the specifics of other economies’ interest in the agreement. The noble Lord, Lord Hannay—I hope I do not misquote him again—set out three theoretical scenarios. I will not give him my views on these in detail other than to confirm that we are the only country in negotiations with the CPTPP at the moment. It may also help the noble Lord if I note that there must be a full consensus between existing members to admit any new applicant. Once we are party to the agreement, the UK will have the same rights as other parties in respect of future applicants, which amounts to an effective veto. I hope noble Lords will understand that it is not appropriate for me to comment further at this stage on what are hypothetical situations.

CPTPP members and the UK rightly share the intention to be part of an agreement that embodies high standards in areas such as intellectual property, investment, procurement, rules on state-owned enterprises and data flows. Any applicant will have to satisfy CPTPP members that it can and will meet these standards. My noble friend Lord Gold and I share a common interest in financial services, and I welcome his comments on that topic. CPTPP has a dedicated chapter on financial services, which we believe will open up new opportunities for British businesses. The provisions in that chapter include matters such as non-discrimination obligations and liberalising cross-border flows of financial information. There is also an annexe on professional services that encourages mutual recognition of professional qualifications, which I think will be very helpful to us going forward.

It is a very good thing that more and more economies want to sign up in due course to the high standards of CPTPP, with Ecuador being the latest country to indicate an interest in doing that and submitting an application shortly before Christmas.

The right reverend Prelate the Bishop of St Albans certainly gave us food for thought in his speech. Of course, I have heard both his and other noble Lords’ concerns about potential impacts on UK food standards through the agreement. Let me be crystal clear: there are no provisions in this trade agreement that will force the UK to lower food standards in any area. I can give the noble Baroness, Lady Chapman, complete reassurance on that matter. I am pleased to be able to put that firmly on the record.

The Government’s strong position is that there is no inconsistency between the approach set out in the agreement and our existing domestic regulatory system. In other words, nothing in the agreement will change or lower the standards of food that we let into our country. The Trade and Agriculture Commission will no doubt be carefully studying that and will report to the House in due course on that matter.

Our wider environmental, product, labour and animal welfare standards will be protected too. CPTPP explicitly affords members the right to regulate for their own desired levels of domestic protection and thus will not undermine the UK’s objectives—on net zero, for example —in any way.

The noble Lord, Lord Oates, spoke eloquently about climate change. CPTPP retains the rights of members to regulate for their own levels of environmental protection and contains commitments to protect the environment. The system robustly protects the right of members to achieve their own ambitious net-zero goals. Of course, other CPTPP members, such as New Zealand, are also world leaders alongside us on climate action.

On the NHS and in answer to the noble Baroness, Lady Chapman, I do not think we could be clearer: protecting the NHS is a fundamental principle of our trade policy. During our negotiations to accede to CPTPP, the NHS and the price it pays for its medicines will not be on the table. The sustainability of the NHS is an absolute priority for the Government. We could not agree to any proposals that would put NHS finances at risk or reduce clinician and patient choice. This includes—and I say this categorically—making changes to our intellectual property regime that would lead to increased medicine costs for the NHS. I hope that reassures my noble friend Lord Lansley.

The Government have been listening closely to feedback from your Lordships and the wider business community about the importance of the European Patent Convention to the UK services and creative sectors, including today from my noble friend Lord Astor of Hever. I can once again confirm that accession negotiations will be consistent with the UK’s existing international obligations, including the European Patent Convention.

Regarding scrutiny, we remain committed to transparency. I wrote to the noble Baroness, Lady Hayter, about this yesterday evening in response to correspondence that the noble Baroness and I have been having. I can reassure the noble Baroness and other members of her committee that we will ensure that parliamentarians, businesses and the public have access to the information they need on our trade negotiations. The same transparency and scrutiny commitments we put in place for bilateral FTAs with Australia and New Zealand will apply to CPTPP.

The noble Baronesses, Lady Hayter and Lady Chapman, emphasised the importance of engagement with the DAs. I assure noble Lords that our approach to engaging DAs on trade policy is very comprehensive. We have engagement structures at all levels to make sure the DAs’ voices are heard. These include a quarterly ministerial forum for trade, regular bilateral ministerial meetings and the six-weekly senior officials’ group. The chief negotiators have regular calls running parallel to each negotiation round to keep the DAs fully informed of what is going on. Additionally, there are our six-weekly chapter-specific policy round tables and weekly working level engagement.

Your Lordships enquired about the potential for us to seek changes to the CPTPP text. I think that noble Lords recognise that this is an accession process, not a new negotiation, so it is not feasible to be seeking significant changes to the agreement. In this context, our negotiation objective is to be a part of a high-standard agreement, not to change it radically.

We are aware that other CPTPP parties have used side benefits to clarify certain specific policies. Let me reassure the noble Baroness, Lady Hayter, that this may be an option that is appropriate to explore in some cases. However, I hope noble Lords understand that the precise nature of that solution will be determined by negotiations. Offering a running commentary or setting out our intentions for side letters in public will undermine our negotiators’ leverage to secure any such solutions. It would be undermining the very thing we would seek to achieve through the side letters. I hope that the noble Lord, Lord Purvis, will accept that that is why I cannot be any more helpful in this regard. I can confirm that all such letters will be published before the CRaG process and thus will be open to the same full scrutiny as the agreement itself.

I will turn to a couple of other themes raised in the report. Regarding the sequencing of further applications, we have been repeatedly assured—this comes back to a point I made earlier—that our accession will be dealt with first, and interest from China or any other economy will not slow us down. In answer to my noble friend Lord Lansley’s question about ISDS, the extent of its coverage will be subject to negotiation during the agreement, but I am clear that we have nothing to fear from its use going forward.

On the expected economic benefits for the UK, our modelling does show—