Turkey: Free Trade Agreement

Lord Purvis of Tweed Excerpts

Tuesday 27th April 2021 Grand Committee

Moved by

[Lord Purvis of Tweed]

That the Grand Committee takes note of the Free Trade Agreement between the United Kingdom of Great Britain and Northern Ireland and the Republic of Turkey, laid before the House on 24 February.

Relevant documents: 8th Report from the International Agreements Committee (special attention drawn to the agreement)

[Lord Purvis of Tweed (LD)]

My Lords, it is a pleasure to move this take-note Motion on the UK-Turkey trade agreement, and in so doing I thank the Members who will participate in today’s debate. I note the breadth of experience that they bring on trade issues. I am also grateful to the committee for its report. The International Agreements Committee is one of the most valuable in the House at the moment, and it is serving a great role in drawing to our attention issues that we should debate. It is my pleasure to move this debate in accordance with the committee’s recommendation that we take note of the agreement.

I am also grateful to the Minister for keeping to his word in emailing me and keeping me informed of developments in his department, and I am grateful to his office, and to the noble Lord, Lord Ashton, and the Government Whips’ Office for facilitating the debate in such good time. I am not used to that happening, and it will not go to my head—I reassure the Minister that I will not expect the Government to allow debate on any Motion within a week.

The agreement is now ratified. It was agreed on 29 December, so businesses did not have sight of it before it was operational two days later. This continuity agreement is unlike others in that it is temporary and the parties are committed to review it no later than two years after it enters into force—effectively 18 months from now—with the aim for an enhanced agreement covering services, agricultural goods, investment, subsidies, labour, sustainable development and climate. Given that the average time that it took the Government to make continuity agreements was over two years, it would be helpful to know what timescale they are working to for a full permanent agreement with Turkey.

The agreement also covers goods. Turkey is a relatively small but important trading partner with us. ONS data published on 13 April shows that, in 2020, we exported £4.8 billion of goods to Turkey, down from £5.4 billion in 2019, and imported £8.2 billion, down from £9 billion. In 2020, trading goods with Turkey represented 1.75% of all goods trade for the UK. As the Committee can see from the figures, we operate a considerable trade deficit with Turkey, so the motivation for the agreement was from Turkey and thus leverage was with us. We chose not to use that leverage.

Our trading relationship with Turkey is unique, owing to its membership since 1996 of a partial customs union with us, which reduced barriers to trade. That has now ended and those barriers have been re-erected. Therefore, downgrading to a lesser FTA arrangement has meant businesses now needing to adjust to higher import and export administration costs, more bureaucracy, slower port of entry and exit procedures, and complex rules of origin requirements.

This latter point, which the committee picked up specifically, is of great significance given the categories of imports and exports and the fact that the largest elements—vehicles, machinery and engineering—are all part of complex supply chains with EU manufacturers. The fact that we have only a temporary allowance on rules of origin, because of our failure to secure this in the TCA, will mean that there is a stage 2 level of greater burden coming with our trade with Turkey in the permanent relationships.

There is a great line in paragraph 2 of the Government’s parliamentary report:

“It is in no one’s interests to disrupt existing trade flows.”


I agree. This was also highlighted in paragraph 10 of the committee’s report, quoting from the parliamentary report:

“HM Government has worked closely with Turkey to ensure that customs processes are as simple, clear, and predictable as possible, and that any changes do not affect current trade flows.”


They demonstrably have. The ONS data released on 13 April has the latest figures showing the disruption. UK imports of goods from Turkey fell 27% from December 2020 to January 2021, down from 967 million to 714 million, and they fell further in February. Exports in the same period fell 8%, before picking up again in February, and this is on top of the year-on-year falls I cited earlier. For Turkey, we have a double- stage downgrading of free trade. The committee’s recommendation in paragraph 6 for wide consultation is very important.

The Government, in their response, said that they would consult stakeholders, but if it is simply stakeholders, that is limited. They also said that they would consult in a similar approach to the US proposed trade agreement. That had a wide consultation open to the public; I even went on to it and submitted a response. Will the Minister clarify what level of consultation there will be for the permanent trade agreement, with not just trade stakeholders to be included, but all those with an interest in the wider aspects? This is to be a comprehensive trade agreement, so as wide a consultation as possible will be necessary. I also fully endorse the recommendation in paragraph 16 of the report calling for a full impact assessment. We need to know which of the effects that we have witnessed are likely to be temporary effects, and which are systemic, because of the new barriers in perpetuity. That needs to inform differing policy responses.

The two major areas, as the committee pointed out, are short-term disruptions and long-term increased barriers. I am afraid that the Minister completely ignored that recommendation in his letter to the committee, so if he can respond to it today it would be helpful. Given the evidence that the committee received from manufacturers and those in supply chains, the Government owe the committee a response.

Given that businesses that have traded with the EU can access some form of support package and lending to tackle the Government’s new barriers with EU trade, these are the same kinds of barriers that businesses will now see for trade with Turkey, so will businesses be able to access those trade support areas too—for example, the SME Brexit Support Fund? That is contracted out to PricewaterhouseCoopers. I emailed three weeks ago, on its online inquiry form, asking for details of the fund, how PwC was being paid and how it was being administered. I have received no reply. I hope that businesses are faring better at getting a response from PwC than I have. I would be grateful if the Minister would write to me to say how much the Government are paying it for the administration of this fund.

Critically for this debate, are this scheme and the others open to businesses which trade with Turkey and which have new barriers as a direct result of the TCA with the EU? Also, there is continuing guidance now being issued to businesses exporting to the EU. Will there be the same guidance to businesses exporting to Turkey? For example, HMRC outlined, in an email to me and all others who have registered for its updates, on 1 April:

“When exporting goods from a roll-on roll-off port or any other listed locations, you, or the person submitting your customs declaration, must submit your declaration as ‘arrived’. The declaration must be submitted as ‘arrived’ in order to finalise the declaration process before your goods reach border locations, where customs controls are being staged in. If the declaration isn’t ‘arrived’,


customs

“will not recognise that the goods have left the country.”

I have to admit that I thought this was HMRC’s April fool’s joke but it seems as if, unbelievably, if we are exporting now to the EU, we have to declare that the goods have arrived before they have left the country. Can the Minister confirm that? Is the same approach being taken for goods exported to Turkey?

Another area where the Government need to provide more information is on rules of origin. The committee has picked this up and has done us a service for analysing it carefully. The system for pan-Euro-Mediterranean cumulation of origin allows for the application of diagonal cumulation between the EU, EFTA states, Turkey, the countries that signed the Barcelona declaration, the western Balkans and the Faroe Islands. That free trade measure has now been ended for UK trade. The committee is right in paragraph 22 to call for comprehensive and detailed guidance on any new arrangements, but what is the impact assessment on trade with the other countries with which we can no longer have diagonal cumulation with the EU?

I mentioned the trade deficit that we currently have with Turkey. We operate a wide trade deficit with many other countries too, and there will of course be some areas where a deficit is not a major worry, such as in certain areas where the UK does not or cannot produce. In other areas, however, it is a concern. The answer is not in protection measures, but in securing better terms for UK exporters to market access in those countries, often through them levelling up on standards. So far in the Japan agreement, worth £15 billion, the Government say that only £2 billion of that is widening UK market access to Japan, while £13 billion is for Japanese access. The Minister replied that it was good for the UK because it allows for cheaper imports; this is in line with what was repeated by Liz Truss on Sunday when she was asked to comment on the Australian trade deficit as well.

Free trade in the 21st century should be fair trade, too. When it comes to the UK negotiating FTAs, we should do it for the benefit of UK exporters and consumers. If not, what was the point of Brexit? So far, the agreements reached by this Government will see competitive trade advantage decline as deficits grow. As an example of this agreement’s lack of using leverage, we are abolishing in it the long-standing entry-price system, designed to prevent seasonal low-cost fruit and vegetables below an agreed floor price from flooding the UK market, rendering domestic soft fruit and vegetable producers uncompetitive. Given that we have sought to have higher standards of seasonal agricultural workers’ conditions than, say, Turkey, this is important. What was the response by the soft fruit producers in Scotland and across the UK to this? Also, the EPS allows for a competitive playing field to the least developed countries, which already benefited from preferential access. What was the Government’s modelling for the impact on this? The Government have failed in this and other areas in seeking reciprocity on competitiveness. On subsidy control and others, we see Turkey having an advantage, and are yet to see what the Government are signalling to the benefit of UK exporters.

Finally, on human rights, last week the noble Lord, Lord Ahmad, said that we had values-based trade. The Minister has repeatedly said that trade is not at the cost of human rights. The Government have promised draft human rights clauses on trade and human rights approaches. If any agreement requires this, it is the permanent Turkey agreement. If the Minister can respond to these points and others that will be raised in this debate, I will be most grateful.

--- Later in debate ---

[Lord Purvis of Tweed (LD)]

My Lords, I am grateful for the Minister’s final comment. He always honours his commitment to follow up things in writing, and I am sure that the noble and learned Lord, Lord Goldsmith, and his committee will reflect on his closing remarks.

I wish to reflect briefly on two points made in the debate. First, of course, it was a delight to have the noble Lord, Lord Hannan, reference Adam Smith in a trade debate. I think that Adam Smith totally nailed it on consumption—I am a free trader—but he was weak on diagonal rules of origin cumulation, regulatory equivalence and supply chain standards, which is the realm of trade in which we now have to operate. Of course Smith said that

“Consumption is the sole end and purpose of all production”,


but not all production is fairly competitive in terms of subsidy control—as the noble Lord, Lord Lansley, referred to—labour rights, environmental standards and supply chain human rights approaches, which have all been addressed in contributions throughout the debate. I live in the Scottish Borders and have close links with the textile industry there. We know that approximately 60% of workers in the garments industry in Turkey are unregistered. We wish to see improvements in the production of Turkish garments so that our consumers can make informed choices.

Even if the purpose of the FTA is to seek continuity, my noble friend Lord Foster and other noble Lords indicated that we wish to see further improvements. It is right to ask what the Government’s intentions are for supporting UK exporters as well as UK consumers. If we are to have a fair approach on subsidy control, as the noble Lord, Lord Lansley, indicated, it is of great importance that we have more information from the Government. It is of interest to me that, under the United Kingdom Internal Market Act, there are now greater strictures on subsidy notification and control for a business in Scotland selling to a consumer in England than there is for a Turkish business selling to a consumer in England. That cannot be sustainable if we have a trade policy that is looking for subsidy control to be equitable internally and externally.

It was not entirely convincing for the Minister to say that the Government had a limited mandate for some of these decisions. The Government set their own mandate, which was different from the one that they had for the discussions with Japan, so I think it was valid to highlight how the Japan agreement included elements which are not in the Turkey agreement.

Those two points having been made, and given the Minister’s commitment that he will come back to address some of the other points, I close by mentioning the valid request made by the noble and learned Lord, Lord Goldsmith. I welcome the Government’s intention to publish negotiating objectives and that they will have a discussion with the committee about parliamentary scrutiny of those. I think that there is great interest not only in the House but among the public about our trading relationship with Turkey, and I hope that, if the committee calls for a debate on those mandates, we will have a full debate in the House on what should be a good deal for the UK and for Turkey. The Minister is right on that point: we will be returning to this topic.

Motion agreed.