Australia Free Trade Agreement

Lord Liddle Excerpts

Monday 11th July 2022 Lords Chamber

[Lord Liddle (Lab)]

My Lords, first, I pay tribute to the noble Lord, Lord Grimstone, who was a very good Minister. He always attempted to answer our questions and treat Members of Parliament with seriousness. He approached his job as a Minister with a level of seriousness that some members of the Cabinet would have done well to follow. Secondly, I pay tribute to my noble friend Lady Hayter for producing this very good, balanced report. It is a bit kinder to the agreement than instinctively I am, but it is an important job of scrutiny well done. The only tragedy about parliamentary scrutiny is that we do not have in the British Parliament what exists in the European Parliament: a trade committee that follows and comments on the negotiations by the Commission at every stage. It is not much use having scrutiny only when the whole thing is over, so I hope we will press that point about future scrutiny and continue to press it.

My general view of this is that, as we are outside the EU, we have the ability to conclude our own trade agreements. This is what we should do, as it is in the national interest, but in this agreement—this is the central point I want to make—we are heading for a post-Brexit political economy that I am not particularly enthused about. That is a political economy based not on a European model of high standards underpinning our society, but a model based on Britain becoming Singapore-on-Thames and being part of a deregulated Pacific community, which could have consequences for the British people.

That is my worry about this agreement, but let us first examine its practical content. I am an instinctive free trader, like most of us in the Chamber, I suspect. I have always thought that consumers do well out of cheap goods, and therefore free trade and competition is a good thing. However, when I worked in the Cabinet of my noble friend Lord Mandelson when he was Trade Commissioner, I learned a few things about how others approached trade negotiations. Certainly, in Brussels, I remember asking senior officials questions about this, and they said, “Roger, what you’ve got to do is work out your offensive interests in any trade negotiation. Then you have to work out what you will defend to the last that the other side will want”. I think Britain has interpreted its offensive interests, in a simple way, as being strongly in services liberalisation. I think that is correct; that is where our great competitive strengths are. The question is whether, in order to pursue modest gains in services liberalisation, we are prepared to make large sacrifices—the common external tariff that we used to have with the EU, which to a large extent we have taken on ourselves—and whether we are prepared cut our tariffs. Of course, that policy pursued to its logical conclusion will be pretty ruinous for British agriculture and for large sections of our manufacturing that will have very little protection. Thinking about Britain, as opposed to London and Singapore-on-Thames, we have to ask whether this pursuit of services liberalisation, above everything else, will fit with the levelling-up objectives of our much-lamented Prime Minister.

I tried to find out what academics think about this agreement. There is a UK Trade Policy Observatory at the University of Sussex, and its conclusion based on its modelling is that the deal will boost Australian exports to us six times more than any benefit the other way, to the UK. That is a considered, academic view, and I will give you the numbers. It estimates that

“the UK may see an increase in exports of 0.35%, while Australia’s exports are simulated to increase by 2.2% once the free trade agreement is in force.”

That is why the forecast gain to our GDP of 0.07% is so small. The practical benefits are not that huge, and we ought to bear that in mind.

We have given a lot away, it seems, for not that much in return on services. But it is a modest step and therefore one should not be too critical, I suppose. There are some aspects of it that I really like: it is great that the working visas are to be expanded for people aged under 35, whereas previously they were only for those under 30, and from two to three years. That gives young people a tremendous opportunity to work in another country. I only wish that the TCA with the European Union had a similar agreement. If it had, a lot of the problems that we presently witness in the creative sector, with young people who are touring around Europe and all that, would just disappear. This model of the liberalisation of visas for young people, enabling them to work to pay for their stay in another country, is one that we should try to extend more generally.

Coming on to my reservations, I think the Government see—I should like to know whether the noble Viscount, Lord Younger, agrees with this—the main benefit of this agreement as unlocking the door to our membership of the CPTPP, the Pacific Rim trade agreement. This is the wrong post-Brexit political economy for Britain. It is true that it plays to our economic strengths, which are in services, and that Asia is an area with tremendous potential for growth. But within this economic area, there is very little concern for standards and the predominant view favours deregulation. This is particularly true of environmental standards and, on that point, the deal with Australia is absolutely shocking.

At present we are looking, along with the European Union—this is one area where there is alignment—at whether we should impose a carbon border adjustment mechanism on countries that do not stick to their climate change commitments. This deal with Australia has absolutely nothing to say about that question, yet this is a pretty fundamental point for the future. Our ability to use our economic strength, in Europe and Britain, to force other countries to take their obligations seriously will be important in tackling the climate crisis in future, and I worry that this trans-Pacific thing is an obstacle to that.

I also worry, as a Labour man, about labour standards, about whether trade unions are recognised and about whether there are minimum wages. What standards are there, and are people working in safe and reasonable conditions? If we keep alignment on these questions with Europe, as we were promised by this Government in all the Brexit negotiations, there will be at least some minimum standards. But are those minimum standards to be included in this Pacific agreement? I do not know, and I have doubts.

This seems to fit in with the tilt to the Pacific included in the recent defence review. With the war in Ukraine, however, do we really think that our central security interests are in the Pacific? Is that what people such as my friend the noble Lord, Lord Robathan, over there really think? Surely, our central security interests remain in Europe.

[Lord Robathan (Con)]

Actually, I agree with the noble Lord, and thank him for asking, but I do not think it is an either/or; I do not think it is binary. The issue with the Pacific is huge, as is the issue with Europe.

[Lord Liddle (Lab)]

I agree with that as well, but there is also a contradiction about this focus on the Pacific: the reason it is an economically dynamic area is because of the dynamism of China—it is China that drives the Pacific area. If with one hand we are saying we want economically to be a beneficiary of this but with the other hand saying we think there is a major security threat here, I do not know quite where we are going to end up. I just raise that as a question, but it seems to me to be an important one.

I have doubts—I am not saying I rule it out—about whether this Pacific tilt is wise. I worry that any trade agreement we make that does not meet European standards raises issues about trade with the single market in Europe, which is still by far the most central part of our economic interests.