Transatlantic Trade and Investment Partnership (EUC Report)

Lord Lamont of Lerwick Excerpts

Tuesday 17th June 2014 Lords Chamber

[Lord Lamont of Lerwick (Con)]

My Lords, I speak only as a member of the committee and only in order to express solidarity and agreement with the committee’s report. It was a real pleasure to be a member of the committee. My noble friend Lord Tugendhat has thanked our clerk Julia Labeta—who very deservedly has been promoted—our policy analyst Roshani Palamakumbura and our policy adviser Edward Bolton. All of them did a wonderful job in drawing together the huge weight of evidence that we had and helping us to draw the conclusions from it. However, my noble friend Lord Tugendhat deserves special praise for his chairmanship of the committee. He was a very balanced chairman and had a remarkable ability to draw out the different threads of the argument and to guide the committee towards proper and appropriate conclusions.

Like my noble friend, I believe that TTIP has huge potential benefits, to the advantage of both the United States and Europe. However, they are potential benefits; whether they will ever actually be realised is perhaps more of question than has hitherto been admitted. The benefits of an agreement are, of course, mainly about trade but they also extend to investment. Professor Baldwin pointed out in his evidence to our committee that, whereas US-Asian trade is very much just about trade, trade between the United States and Europe is also very intertwined with investment. An increase in trade between the United States and Europe is likely to lead to much more transatlantic investment in both directions as well.

The figures that were produced on the overall benefit of TTIP to the two economies were massive. A number of members of the committee queried the precise figures; they are quite right to be sceptical about the precision of figures of this magnitude as they are produced, but the dramatic impact cannot really be doubted. We also heard enough from our witnesses to banish some of the wilder fears about TTIP. There is no reason to believe that we are going to see social and environmental regulation being gutted, and there will not be reductions in consumer protection or a race to the bottom.

The hope, as my noble friend Lord Tugendhat said, is that TTIP will become a template for the future. In recent years, there have been many more bilateral negotiations, as global negotiations have stalled. This is hardly surprising, as Robert Zoellick made quite clear when the negotiations with WTO ministerial representatives failed at Cancun and he said, “I cannot do business with these people here. I will go and find people with whom I can do business”. That has increasingly led to a lot of different bilateral agreements. It is hoped, as my noble friend Lord Tugendhat said, that this very big bilateral agreement—if you can call one with 28 Governments a bilateral agreement, although it is two organisations negotiating together—might give impetus to restarting the global negotiations.

It also emerged that one of the thoughts in the mind of the United States Government was that concluding a successful trade agreement between Europe and the United States might act as an incentive to bring China back to the table and play a more active role in global talks once again. This was a good thought, although I think that all members of the committee would agree that when we met the representatives of the People’s Republic of China’s trade representation in Brussels, they were aware of but highly resistant to this thinking in the American position.

The point was made very early on and very quickly in our discussions that many of the issues in TTIP will be about non-tariff barriers, because tariffs have come down so much. However, it is important not to forget that there are some areas in which there are still relatively high tariffs, such as automobiles, textiles and clothing, which are very important sectors indeed. Non-tariff barriers are much more difficult to negotiate and, because of that, the issue seems to be not whether regulations as such can be harmonised but whether one can agree a path or process, into the future, by which future regulations, as they evolve, are based on a co-operative dialogue and increasingly harmonised.

The noble Lord, Lord Mandelson, drew a distinction between brownfield harmonisation and greenfield harmonisation for the future. I must say that this seems to be quite difficult and one must not be overoptimistic about it. There is a certain institutional lethargy here. Co-operation between regulators internationally is quite limited because regulators see their role as regulating within the jurisdiction in which they operate. Their responsibilities are often embedded in constitutional and legal structures. Regulators are often reluctant or afraid to trust the judgments of regulators in other countries, leading to a reluctance to have mutual recognition or passporting mechanisms that allow people who are approved in one country to operate in another. Moreover, regulators are often under a legal obligation to demonstrate this or that to national Parliaments. Finally, of course, regulators are often established and have powers for very strong political reasons that are not easily moved.

This was abundantly clear in the financial sector. As my noble friend Lord Tugendhat has said, there was absolute resistance in the US about the financial sector and strong opposition from US agencies, which do not wish to indulge in a form of harmonisation in the future. They were not having it, as one person who gave evidence to the committee put it. The fear in the United States seems to be that too much co-operation and harmonisation could cause Dodd-Frank to unravel. Dodd-Frank is umbrella legislation, so a lot of the detailed work will come later on in what we would call secondary legislation. The Americans are particularly anxious to make that fit for purpose in their country and for their conditions, and not to see it interfered with from abroad. For that reason, as the report says, we were not really very clear on what the Government’s objectives in the financial sector are. One could see certain things to do with insurance and Lloyd’s, but beyond that it was almost as though someone in the Foreign Office or BIS had just said, “What are we good at in the UK? We’re good at financial services, so we’ll have those as one of the objectives of this negotiation”. But boy, it ain’t going to get anywhere, and I would be interested to hear from the Minister how the Government see this.

Another difficult area is that of public procurement. The EU says that it expects no less than a quarter of the gains that might be made by Europe through an agreement to come from the benefits of opening up procurement, but that has to be reciprocal. We have a rather asymmetrical negotiation with 28 sovereign Governments, each with a public procurement programme, against one sovereign Government on the side of the United States. Plainly, the negotiation ought to involve the individual states of the United States as well, but it has been estimated that only 10 of them stand to gain, with just four, I believe, having indicated that they are prepared to participate seriously in negotiations. It was argued by one of our witnesses that transparency might be a middle way. If there was a public duty of transparency, that would force the opening up of procurement markets. However, we heard evidence of a shocking nature from other witnesses that transparency comes well after jobs in the eyes of many US legislators.

Finance and procurement are difficult areas, but automobiles, food and drink are more promising. As I said earlier, there is scope to reduce tariffs, as there is scope for the non-tariff barriers. It was suggested to us by the automobile industry that some manufacturers might move to the low-cost states of the United States in order to export back to Europe. As the noble Baroness, Lady Quin, highlighted, a lot of gains can also be made from the alignment of regulations, even on quite trivial things such as the sort of light you have to have on a car or a heavy goods vehicle indicating when the brake is on. All these little things, when added up together, can produce very considerable savings for manufacturers. An agreement in this area could not just stimulate trade but have a profound effect on the location of investment.

It was unfortunate that we did not hear more about energy in our report. One would have liked to have learnt much more about the possible future of exports of gas from the United States. Of course, what is happening in the energy markets in the United States could itself dwarf the impact of TTIP, because a lot of people will be attracted to trade and investment in the United States because of the lower costs, including the lower cost of energy.

TTIP is a very ambitious concept. It would be nice to say that it is an idea whose time has come. I hope it has. One day it certainly will happen but the difficulty is in making it happen in the near future. The important thing going forward is to advance the points that are most practical—to grab the low-hanging fruit—and then try to establish a path for future regulatory co-operation. As the noble Lord, Lord Mandelson, said, most trade negotiations are a snapshot and the trick is to turn the snapshot into a movie for the future.