Comprehensive Economic Partnership (EUC Report)

Lord Purvis of Tweed Excerpts

Thursday 26th November 2020 Grand Committee

[Lord Purvis of Tweed (LD)]

My Lords, as is the case in many of these trade debates, it is a continuing pleasure to follow the noble Baroness, Lady McIntosh, and I agree with much of what she said. I am sorry to see the Minister’s discomfort with his eye and I admire his resilience during this debate. I wish him a speedy recovery. I also commend the able way in which the noble and learned Lord, Lord Goldsmith, introduced the committee’s report. I commend all the members of the committee who have contributed to the debate today, including my noble friends Lord Oates and Lord Foster. I also agree with the noble Baroness, Lady Henig, that not only is this a thorough report, it is a very readable one. On many aspects, for those of us who are not steeped in the language of negotiation, readable reports on the consequences of trade agreements are of the utmost importance. I also welcome the maiden speech of the noble Lord, Lord Darroch. I serve on the international relations Select Committee. When we visited Washington, he hosted us for a great visit to the embassy and gave us valuable insights into American politics then under the Trump Administration. To our great benefit, everything that he says now will be on the record, and we will value his ongoing contributions.

In Committee on the Trade Bill, I think that the Minister felt that sometimes I was being rather churlish and a bit dour in some of my remarks. He challenged me to welcome signed trade agreements, and I do so; I welcome this agreement. However, not to disappoint him, I regret that we will be starting next year with fewer free trade agreements than we had prior to leaving the EU. I regret that businesses are facing more costs, more complicated red tape, more bureaucratic government processes and export procedures that are still confusing. I did reflect that page 9 of the scoping document for the UK-Japan agreement states:

“We will ensure that processes are predictable at, and away from, the border.”


Unfortunately, at the beginning of 2021, we will have anything but that.

This is a rollover agreement with some elements of addition which have been debated. I have said on a number of occasions during the passage of the Trade Bill and before it that my party has as one of its founding principles free, fair and open trade. We have been a champion of that for over a century. But we also believe in proper parliamentary scrutiny and accountability. For us to judge the benefits of agreements such as this, the scrutiny as set out in the report of the committee is both welcome and necessary. We will require ever deeper analysis to be able to come to a balanced view of the relative benefits to the UK, as the noble Lord, Lord Liddle, and others have indicated, compared with our trading competitors.

However friendly our trading competitors are, they are still competitors to the UK economy. It is my view that the scrutiny processes need to be enhanced, and we will debate that on the Trade Bill over the coming weeks. The reality for trade agreements, which I have learned during my time in this House, is that a Government who need the agreement the most will concede the most. Fundamentally, therefore, we have two questions today: is this deal good for Britain and is it a negotiated deal that provides comparative advantage for the UK as compared with Japan? We have had a lot of references to the Government selling this, but I think that we often operate a John Lewis trade policy—never knowingly undersold. There has certainly been no shortage of hyperbole. The Daily Express, in response to the announcement by Liz Truss of the signature for this deal, shouted

“Brexit Britain makes history as staggering £15 billion Japan trade deal secured.”


If grandiosity was an exportable commodity, our economic woes would be over, and I think that most Daily Express readers would be staggered to learn that, of that £15 billion, only £2.6 billion is to the benefit of the UK and the remainder is to the benefit of Japan. Therefore, parliamentary oversight and the ability for us to approve the mandates and then the agreements signed is vital. It should not be lost on Members of the Grand Committee that while we do not have a say on the setting of the mandate, and nor do we have a say on the final deal, the Japanese Diet will be voting for ratification on an up and down vote.

It is fair to compare the objectives set by the Government with what has then been realised. The Government published their strategic approach document in May 2020, which said that we would see a growth in exports of 21.3% over 15 years, but the final impact assessment states that we will see an increase of 17.2%, falling short of their ambition by nearly 25%, as the committee has alerted us. Can the Minister explain why we have fallen so short?

I want to look a little more closely at the comparative benefit, notwithstanding the remarks of the noble Lord, Lord Lansley, who knows that I hold him in high regard on these issues. The Government’s impact assessment for the UK on the EU-Japan agreement was published in May 2018. It stated that

“The economic assessment is carried out against a baseline”


where the EU-Japan EPA has not been implemented. This was the same for the scoping assessment for the UK-Japan agreement published in May 2020 and the same for the impact assessment published by the Government in October, so the same baseline makes for interesting reading. The Government’s impact assessment for the UK component of the EU-Japan agreement said:

“Compared to a baseline in which the EPA is not in force, we estimate that the beneficial impact of the EPA on UK GDP could range from between £2.1 billion to £3.0 billion per annum in the long run.”


The impact assessment of this agreement suggests that it is just £1.5 billion. The impact assessment for the EU went on to say:

“We estimate that because of the EPA, UK bilateral exports to Japan could increase in the range of £3.3 billion to £5.6 billion.”


The reality set out in the assessment in October this year is £2.6 billion. So even in the estimates of the UK impact on the EU agreement, we fall short. Let us remember that this uses the same baseline as if there had been no agreement in the first place.

Let us look at the sectors. My noble friend Lord Shipley referred to the motor industry in the north, which is absolutely vital to the area. The impact assessment of the EU agreement for the UK would see an increase for the motor vehicle industry of £1 billion, while the impact assessment for this shows no change. The UK is not at any comparative benefit from where we were with the European agreement. I accept that it can sometimes be difficult to compare baseline data when looking at the different circumstances—that is fair—but we are looking at comparisons between 2018, 2019 and 2020 from the same Government. Therefore, if there are differences, the Minister should say in his response that it is difficult to draw direct parallels, and it is incumbent on the Government to give us tracking data showing why the baseline indications are different.

I have a great deal of sympathy with the contribution made by the noble Lord, Lord Lilley. Having sparred quite consistently with him during the trade negotiations on this, I hope that it will not offend him or make him feel uncomfortable if I say that I agree with every single thing he said in his speech today. I am not sure if that helps at all with our relationship, but I do. To try to get a balanced view, I did something I have not done before, which was to read the report of the Regulatory Policy Committee, the existence of which I admit I was not thoroughly au fait with before. It has reviewed the impact assessment well. Page 5 of the report indicates something quite interesting when looking at the baseline data:

“The uncertainty around the use of the ‘do nothing’ baseline should be made clearer in the IA and set in context with the existing EU-Japan FTA.”


I agree. In judging the long-term versus the short-term benefits, in a wonderful understatement it also states on page 5 that:

“There is a noticeable tendency towards highlighting and exploring the beneficial sides of CEPA.”


It goes on to say:

“The motor industry will see a contraction as a result of this.”


The Regulatory Policy Committee goes on to talk about there being no information about the comparative people movement, as the noble Lord, Lord Lansley, indicated. I shall conclude on the element of the UK-Japan balance of trade. On the key element of what our strategic comparison of benefit would be and the impact on our balance of trade, page 43 states that UK exports would increase by 17.2%, as we have heard, but that:

“The paragraph focuses on the increase in the overall trade between the UK and Japan, but does not discuss the UK’s balance of trade, which according to these figures would weaken by £10.4 billion.”


If we are to judge the merits of a trade agreement, we have to look at the comparative benefits for each of the two signatories. We have to compare accurately what the Government said it would be, and the reality. On the overselling of the agreement, I agree with noble Lords: it will put at risk the reputation of all trade agreements going forward if the Government actively oversell the agreement. We are in debt to the committee for bringing many of these points to our attention and I hope the Minister will respond positively to many of the contributions made in this debate. If he can do anything, perhaps he can persuade the Secretary of State to sell a little less and to deliver a little more.