Comprehensive and Progressive Trans-Pacific Partnership (IAC Report)

Lord Kerr of Kinlochard Excerpts

Tuesday 19th March 2024 Lords Chamber

[Lord Kerr of Kinlochard (CB)]

It is a great pleasure to follow the noble Lord, Lord Marland. I shall be slightly less concise, but I bear the earlier discussion in mind.

On my tombstone will be the words: “He was an inaugural member of the International Agreements Committee”. No more need be said: it is the peak of my career. I was lucky enough to be on that sub-committee of the EU Committee which preceded and then became it, under the inventive chairmanship of the noble and learned Lord, Lord Goldsmith, and then the skilful Socratic reasoning of the noble Baroness, Lady Hayter. From the word go, I thought it was a good idea that we should accede to what I am going to call the Pacific partnership treaty—because I do not believe that any sane human being can say “CPTPP”.

Our work in the IAC on the treaty was helped hugely by the constructive approach taken by successive Ministers: the noble Lord, Lord Grimstone, who is not in his place today, now a poacher, then a gamekeeper; and the noble Lord, Lord Johnson, who was extremely forthcoming to the committee. I am glad that the committee has produced such a positive report. It is much more supportive than we were able to be about some of the Government’s bilateral trade agreements earlier on.

It is easier to be supportive because the Government did not oversell the deal, and they did tend to oversell some of the previous simple rollover deals. Back then, of course, we had a Trade Secretary and a Prime Minister who were determined to declare total victories—black-and-white, total triumphs. The Trade Secretary pronounced it a “disgrace” that we sell so little cheese to countries where cheese is not eaten, and the Prime Minister proudly proclaimed that his trade treaty with the European Union contained “no non-tariff barriers”. I cannot recall any trade treaty that does contain non- tariff barriers. Most good trade treaties remove or limit them; his ignored them and so legitimised them and introduced them, as the noble Lord, Lord Purvis, has explained.

In the case of the Pacific partnership, on the other hand, I recall no photo ops, no soundbites. We were spared the obvious soundbites about the merits of selling Bovril to Borneo, and the economic benefits were not exaggerated. The OBR says they are perhaps rather less than the Government had previously suggested, but the Government were putting the figure at under 0.1% of GDP, and the various upside possibilities that the noble Lord, Lord Lansley, mentioned had been taken into account in their calculations.

The deal was not oversold; it was sold on the potential of the partnership to develop. That was quite right, and I believe the partnership will develop. The digital economy deal between Chile, New Zealand and Singapore is a harbinger and a signpost. I hope that is the way it will develop, and I commend the call on the Government, in paragraph 118 of the IAC’s report,

“to set out and publish its priorities”

for this year’s quinquennial review of the partnership.

The Canadians, who are leading on the review, want to see a deepening of the deal, particularly in the area of digital trade. I hope we will row in behind them and help them on that. I also attach importance to the various recommendations to make British business better aware of the new opportunities the partnership opens and how to access them. The task force is a good idea; the roadshow is a good idea; the website clearly needs reform. Other than for command economies, trade treaties only enable: the greater part of their job is making sure that the opportunities for actual and potential exporters are used, and our Government need to do better. Explaining the partnership’s complex rules of origin has hardly begun.

With the indulgence of the House, I would like to offer one more general point—a coda to my time on the IAC, drawing on my experience of it. It serves the House well within the confines imposed on it by the CRaG Act, but I very much hope that the next Government, of whatever political complexion, will be readier than this one have been to look again at these constraints. When CRaG was passed, no one foresaw Brexit. Trade agreements back then were negotiated for us by the European Commission’s experts, most of them British, and overseen by the Council in Brussels and the European Parliament in Strasbourg. It was all very transparent. So the EU Committee, when I served on it, looking at trade agreements, was far better informed back then, pre-Brexit, than the IAC is now.

Brexit meant that Whitehall took back control but Westminster was shut out. Although my past was in Whitehall, I believe that the reduction in Westminster’s scrutiny is actually bad for Whitehall and for the country. Let me explain.

The principal reason why the EU drives harder trade bargains than we do—the contrast between our deal with Australia and its was striking—is that it is holding the keys to a larger market so it can extract greater concessions for handing over the keys. The EU is also more practised, but we may be getting better. It sounds as if we have been more resolute with the Canadians and Mexicans, whose agricultural exporters pricked up their ears at seeing how the Australians and New Zealanders had taken us to the cleaners. Wiser counsels have prevailed on India; I was concerned by the Johnson press for an agreement—any agreement—soon.

However, I believe that the Commission’s hand on trade negotiations is greatly strengthened by the effective scrutiny of its work that the Council in Brussels and the Parliament in Strasbourg hold. American negotiators can and do point to their separation of powers, and congressional oversight and veto rights. When American negotiators reject a proposed concession or a trade-off, they can and do say, “Sorry, Congress wouldn’t wear it. It wouldn’t fly on the Hill”. EU negotiators can and frequently do play the same card. Ours cannot because the world knows that, in London, parliamentary oversight is pro forma and perfunctory. Trade policy in London is a black box and Parliament is put in the picture about treaties only once it is too late to change them.

It is different in Ottawa, Canberra and Wellington, so our weakness is not a function of a parliamentary system; in other parliamentary systems there is far closer scrutiny than we are allowed here. When the IAC tried to find out what was happening in the negotiation with New Zealand, our principal source was the New Zealand Government’s website, which gave a very full account of each negotiating round. In London, the Minister—the noble Lord, Lord Grimstone—was allowed to send us a regular letter saying that there had been a round, a chapter had been opened, a chapter had been closed and there would be another round. He was allowed to give agendas and dates, but not information on substance, issues or trade-offs. There was nothing remotely useful, although it was all available on the New Zealand government website and so available to the committee. This is all a great pity, because greater transparency elsewhere means greater public understanding elsewhere. It means that exporters elsewhere are better prepared for new opportunities when they arise as a consequence of trade deals.

Reform of the CRaG Act, allowing for a real parliamentary role in approving mandates, following negotiations and ratifying trade treaties, would produce better outcomes for the United Kingdom. It is not a zero-sum game, with Westminster’s gain meaning Whitehall’s loss. It honestly is not; it would be a win-win. The IAC does its best for House and country, but I am quite sure that it would be better for everyone if the Government could be more grown-up and trust the country to be more grown-up about trade. We still need a clear trade strategy to be agreed and published. Here I disagree with the noble Lord, Lord Lansley. Grown-up countries do this: the Americans do it, the EU does it, France and Germany do it. Most countries publish their trade strategy, promulgate it, defend it and act on it. We should do so too. Real parliamentary association with the negotiating process would be in everybody’s interest.

Since I have disagreed with him on one point, I end by saying that I disagree with the noble Lord, Lord Lansley, on another. I am afraid I cannot share his optimism about the possibility that a Trump Administration would look again at participation in the Pacific partnership treaty. I am afraid that that ship has definitively sailed.

--- Later in debate ---

[Lord Johnson of Lainston (Con)]

I thank the noble Baroness. The checking is a matter for the Food Standards Agency. We have made a number of assertions. It believes that this FTA will not result in additional risk for it. I do not wish to be contentious. I always listen very closely to the noble Baroness’s comment about free trade. We do not share the same views on its benefits. I listened to her very carefully and I noticed that at no point did she mention the principle of the consumer. I am particularly focused on making sure that the consumer benefits from these free trade deals—that they see prices come down and the range of products broaden.

A number of noble Lords, including the noble Lord, Lord Fox, and the noble Baroness, Lady Bennett, mentioned the concept of proximity being at the core of trade. For many goods, it is right and in fact efficient to have a proximous concept of trade. I think of the idea of swapping beef herds, in terms of practicality—although I think we sell better beef than the Australians, and certainly more specialist types—so there is a market in that sense. However, if we look at investment, which is an important element of the CPTPP, our two biggest investment partners in terms of growth and current value are the United States and now India. They are clearly not the most proximous countries to the UK, so it is important to understand that, in modern trade, in services, the digital provision of services and financial investment, the world truly is our oyster.

Speaking of investment: the ISDS concern is raised continually. As Investment Minister, I believe that strong investment protections for investors into the UK are at the core of our offering. If, at any point, investors felt that their investment rights would be derogated, it would be much harder for all of us—and whoever stands in my place as Investment Minister—to get the vital money that we need for our infrastructure into this country. These ISDS provisions are enormously beneficial for us. I feel totally safe in offering them to other countries. I do not believe that there is any derogation of our ability to manage our economy, our ambitions for net zero, how we treat our workforce or any other measure. Investing in these CPTPP countries protects our businesses, particularly in countries such as Malaysia where we now have these protections.

That brings me briefly to the services point—

[Lord Kerr of Kinlochard (CB)]

I entirely agree with the Minister about ISDS. Will he confirm that ISDS will be in any trade deal we sign with India?

[Lord Johnson of Lainston (Con)]

This is not in my notes. I cannot confirm what will be in our trade deal with India. I stress the importance of protecting our investor base when we invest internationally. It is right that the services principle has been raised. One of the most effective elements of the CPTPP treaty revolves around our agricultural access, where there is a high degree of compatibility between what we produce and what these markets want, as there is with goods. Noble Lords have raised this on a number of occasions. The noble Lord, Lord McNicol, raised the point about the Society of Motor Manufacturers and Traders, which particularly welcomes the relationship with Malaysia, where there is a different tariff approach. The rules of origin will simplify a lot of activity when we come to work with these countries. We do a lot of manufacturing trade with countries such as Japan, Malaysia, Vietnam and other CPTPP countries.

Services are the future. Some 80% of our economy and its growth are structured around services. The services chapters in the CPTPP can go further. This is a living agreement. We will build on the chapters, particularly on digital, that allow us to expand our services access. There are important basic building blocks around professional qualification recognition and plans to develop this effectively, to promote collaboration between professional qualification providers. It promotes collaboration between regulators. It allows for more effective business mobility, which is important. Someone who is posted to Canada on a work contract can take their spouse. There is first-time access and security for business mobility in countries such as Malaysia and Brunei, as well as other opportunities, such as transportation in Chile, and a number of other key points relating to digital provision and preventing data localisation. These all sound quite technical but are very important in firing the starting gun on further discussions.

A number of Peers, including the noble Lords, Lord Purvis, Lord Kerr and Lord Anderson, and the noble Baroness, Lady Hayter, have mentioned that these further discussions are encapsulated around a general review. This is a useful mechanism for us to participate in before we become a full member, as we are doing. This conversation will certainly include how to build on the services offering that is in the CPTPP. We welcome it. Our teams will be fully dedicated to it.

The noble Lords, Lord Kerr and Lord Marland, looked at the secretariat which will help us in these negotiations. I ask noble Lords to forgive me if I have missed any who also made this point. We have 14 full- time personnel who are part of the negotiating team and who now make up the CPTPP unit within the Department for Business and Trade. As I understand it, they are permanent and will not be moved to negotiate another deal. They will stay, I hope, to focus on making sure that we have a close relationship with the CPTPP countries. If a permanent secretariat is developed in the coming years, they would feed into that.

We want this organisation to grow, have deep roots and be strong for the future. I do not know what the plans are relating to the secretariat, but these are always live conversations, and of course we will feed in where appropriate. Once we become a full member, we will be able to put our platform forward with more vigour.

A question which is oft raised is how the department promotes the CPTPP to small businesses. I am very pleased that there is an SME chapter in the CPTPP; it is important, because it helps all economies focus on how they can help small and medium-sized enterprises to make the most of the CPTPP. This is at the core of all the economies that are participating in the treaty.

I am aware of the difficulty in promoting quite a complex treaty principle—there are rules of origin and comparable treaties, as we have treaties with many of these countries already, so it is not necessarily clear sometimes which treaty you should use, and you have to pick which of the two. We have done a great deal of work to ensure that our online access is powerful enough to enable people to make these decisions. We have a unit which specialises in promoting our free trade agenda and the treaties that we have signed up to. It has run a number of workshops. We need to work with the Chambers of Commerce to make sure that we get the message out.

I am totally aware of the need to ensure that this is a success, and I welcome the challenge. Crucially, the department sees it as part of its conceptual and fundamental mission. This Government want to be proud of their post-Brexit vision of Britain. Therefore, it is up to us to ensure that we deliver, by making the necessary noise to get as many businesses involved, both in exporting and in taking advantage of this treaty.

I hope I have covered the majority of the points raised. I am always comfortable coming back to noble Lords and the committee. Again, I congratulate the committee, and the noble and learned Lord, Lord Goldsmith, and the noble Baroness, Lady Hayter, for the work they do and the high degree of collaboration that they have with me.

On the question of our trade policy, people hunt for a matrix or template of what tomorrow holds. Looking back on our accession to the CPTPP, I am reminded that it has been likened to the next-door neighbour’s cat with a cough—I cannot remember quite what the quote was from the noble Lord, Lord Purvis. But I think this is a lion that will roar. Think of the rather extraordinary counterintuitive decision to say that we are going to pivot—that we had a relationship with the European Union and are now going to look for bigger and better relationships around the rest of the world. That is exactly the sort of economic decision that a good businessperson would take. Unquestionably, there is no derogation in the need to have the highest-quality trading relationship with our European neighbours, but where is the future? That is the point.

If you asked any of the next generation coming through—some of them are in this Chamber today—they would say that we should look to Asia and the growing populations. My noble friend Lady Lawlor rightly pointed to the astonishing levels of growth coming from those economies. In this country, for a politician, Cabinet Minister or Prime Minister—the leadership in this great nation of ours—to decide to go for the Pacific in this way and join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership is an astounding jump of the mind that I am sure previous senior mandarins of the Foreign and Commonwealth Office must be aghast at—such out-of-the-box thinking.

I am enormously proud to have been party to bringing this legislation through this House and promoting it with all noble Lords in this place. If I can repeat them, the countries are Australia, Brunei, Canada, Chile, Peru, Singapore, New Zealand, Vietnam, Japan, Malaysia and Mexico. We are proud to join that phenomenal cohort. I am excited about the future and very positive about the opportunities that this trade treaty will bring. In my view, it will far outstrip the predictions made by everyone in this House, and even the Government themselves. I am grateful for this opportunity to discuss it.