CPTPP (International Agreements Committee Report)

Lord Purvis of Tweed Excerpts

Tuesday 1st February 2022 Grand Committee

[Lord Purvis of Tweed (LD)]

It is a pleasure to follow the new member of the committee. I happily restate what I said on previous occasions: that this committee does the House a great and important service. This has been an important debate and I commend the noble Baroness on how she introduced it and the members of the committee on their thorough assessment. I appreciate also that they have taken by necessity an almost agnostic position while analysing the Government’s accession aims.

The Committee and the Minister will know that this House on a number of occasions has resolved that we would prefer that negotiating objectives were put to a resolution of Parliament, primarily the House of Commons. That would allow the very points raised in the helpful box 1 in the committee report to be attached to consideration of a resolution which improves the Government’s negotiating objectives. However, we have been round this course on a number of occasions, and I will not rehearse it.

As the committee indicated, and I will put on the record again, the Minister in particular is unfailingly accessible and helpful—as helpful so far as he can be in many regards—and he and his office are always very approachable, which is greatly appreciated.

The noble Lord, Lord Oates, and I are from the Liberal Democrats and our founding principles as a party are supporting free, fair and open trade. To that we now can add “sustainable”. That is why he made points about this being an opportunity for tackling climate change, and one we should not miss. It is to be noted, with regret, that even the Government’s own document suggests that acceding to this in the current way could increase emissions. That would be a retrograde step. I will return to that towards the end.

There have been a lot of column inches about the UK’s potential accession to the CPTPP. We heard a little from the noble Lord, Lord Udny-Lister, about this being a Brexit opportunity. The Minister is not known for hyperbole, which is welcome in this Committee. Nevertheless, we saw a glimpse in Questions of part of this narrative when he said that reductions in trade with the EU were being offset by growth from non-EU trade, primarily from the Indo- and Asia-Pacific area.

On the one hand, this could be seen as positive, but we need to analyse where that growth has been. It has been imports from China and Chinese trade that have seen that growth. It has not necessarily offset the reductions. But that trade with China in 2021, according to the Department for International Trade, was £92 billion—up 8.6% and double what it was a decade ago. The fastest period of growth of imports from China has been during Liz Truss’s tenure as Trade Secretary. Of that £92 billion, £66 billion was imports, representing a trade deficit with China of over £40 billion. That is unprecedented in our trading history and strategically worrying given that we now have a trade in goods dependence on China in many sectors. The Government have placed us in this situation. Our trade deficit is more than twice that of France with China, and Germany has a trade surplus in exports to China. Therefore, I question the narrative selling this application as one of the strands of an alternative to trade with China.

I have a further slight question mark over the net opportunity of growth in the UK’s trade with the region, because we tend to assume that the CPTPP’s trading growth in recent years has somehow not been connected with its growth of trade with China directly too. We could have seen the growth in that region simply as a result of the growth of trade with China. If we deduct that, we get a more realistic view of what the real opportunities for our growth are likely to be.

I agree with the noble Lord, Lord Lansley, when he counselled Liz Truss to stay quiet on China and CPTPP. He did not use those exact words; I am putting some words in his mouth in order for me to agree with them. But he hit a good point because he suggested, as the committee did, that we would probably stay a little quiet and wait and see. However, by having a quick look at elizabethtruss.com on 28 June 2021, I can see that she was far less reticent than the noble Lord. I can quote:

“By joining the CPTPP, we would strengthen it as a bulwark against protectionism and unfair trading practices from nations like China.”


It is some bulwark if we are dependent on the goods from that; it is even less of a bulwark if China is applying to be a member itself.

What also frequently goes unnoticed, and it has not been mentioned in the debate today, has been the creation of the world’s largest trade deal: 15 Asia-Pacific countries, including China, Australia and New Zealand, are members of the Regional Comprehensive Economic Partnership. According to UNCTAD, that represents 30.5% of global GDP in comparison with the US, Mexico and Canada agreement of 28% and the EU of 18%. The RCEP’s growth alone is estimated to be $200 billion to the world’s economy by 2030, according to UNCTAD. So, we would have a benefit from this growth regardless of whether we accede to any agreement.

Apart from the trade dependency aspect, China has applied to accede to the CPTPP itself. Furthermore, separate to those two agreements, there have been 16 rounds of negotiation between China, Japan and South Korea, for a CJK FTA. It seems as if China has prioritised the RCEP and has the CJK—if I get all of these correct during this debate, I will be impressed with myself. I cannot judge the respective prospects of China or Taiwan. As the noble Lord, Lord Hannay, indicated, we do not know whether they will indeed join the CPTPP, but the fact that there are common areas between those three is significant. It is significant to the terms that we want to have when we have to fit their rules. As the noble Lord, Lord Hannay, indicated, in many respects, that integration is already there. Therefore, we are acceding to a separate set of rules, over which we will have very little leeway if we accede to it, unlike the bilateral agreements we are a member of.

It already means that Liz Truss’s geopolitical assertion, that there will be a bulwark against China is plainly nonsense. First, we are dependent now on imports from China, and we are increasing our trade barriers with the EU, distorting our trade patterns over the coming years. It means that our strength, to try to secure carve-outs on any area of CPTPP, will be more important, but potentially weaker. So, I would be grateful if the Minister could say, during the discussions that are under way, what openness there has been to any UK carve-outs. My understanding of meeting the benchmarks on application is that we meet their rules—we simply demonstrate that we meet their rules. So, what areas and scope are there for specific UK carve-outs?

Secondly, taking up the point made by the noble Lord, Lord Hannay, with regard to accession, I looked at the accession rules. Rule 3.2 states that the commission of the CPTPP

“can take a decision as to whether separate Accession Working Groups are needed for individual aspirant economies or the processes can be combined into a single Accession Working Group.”

So, what is the position? Is there an accession working group that is unique to the UK accession, or are we part of the accession of other members? Is there clarity on the scope for the UK to deliberately state that it will not meet the rules?

It is the case, in the Government’s own estimates, that we are likely to see a very modest £800 million benefit to UK GDP over 15 years. I think it is worth reminding the Grand Committee that in one year we increased our imports from China by £18 billion. That is the comparison of the situation with our trade.

Before I conclude, returning at the end to what some of these areas of concern or carve-outs may well be, I note in passing a similar geopolitical argument has been made by the Minister in good faith, and by others, about our trading relationship with the GCC and the Gulf—because we also have other trade negotiations with other trading blocs, such as the Gulf. I know the noble Lord, Lord Udny-Lister, is very experienced in this regard as well. It is also worth noting that with the recent meeting between President Xi and the GCC Secretary General, after the fifth round of talks, there is a new impetus into that area too. The narrative of the UK geopolitical basis being a bulwark to China really is not the case at all.

Finally, returning to the very helpful box 1 of what the UK red lines may be, my noble friend Lord Oates indicated the concern about net-zero and the right reverend Prelate raised issues of standards. We will no doubt return to these areas with great focus, as we have done in all our previous trade discussions. It was very depressing to see two omissions in box 1; it is not the fault of the committee, but it is how the committee discerned what the red lines would be. We have raised many times the need for there to be a trade and human rights policy. One of the deficiencies of this agreement is the lack of a robust element on labour rights, human rights and the triggering of processes. That omission in the box is of great concern. Furthermore, as we raised in our debates on the China agreement, there is an omission on gender focus on those trade opportunities as well.

I agree with the Minister that trade agreements mean nothing if they cannot be operationalised and we cannot take up their opportunities. We have not needed a trade agreement to see some of the growth with some of our key competitors in these areas, and our dependence on China has been a result of there being no agreement. If we are part of a bloc over which we have little say, and if China is also a member, geopolitically we are weaker. That is an area of great concern, and I hope that the Minister will be able to reassure me.

--- Later in debate ---

[Lord Grimstone of Boscobel (Con)]

I apologise to the noble Lord. I should have said “brief”—I misnoted it as “consult”. However, I can equally confirm to him that we will not brief the EU on our negotiations. However, I can also confirm that our top priority is to protect the Good Friday agreement and the gains from the peace process, and to preserve Northern Ireland’s place in the UK. When we negotiate, the Government are negotiating on behalf of the whole UK, representing the interests of all the UK’s nations, including Northern Ireland.

I will say more on China, Taiwan and other economies seeking to accede to the CPTPP. As I have explained, as a non-member, the UK is not commenting—it would be inappropriate to do so—on the specifics of other economies’ interest in the agreement. The noble Lord, Lord Hannay—I hope I do not misquote him again—set out three theoretical scenarios. I will not give him my views on these in detail other than to confirm that we are the only country in negotiations with the CPTPP at the moment. It may also help the noble Lord if I note that there must be a full consensus between existing members to admit any new applicant. Once we are party to the agreement, the UK will have the same rights as other parties in respect of future applicants, which amounts to an effective veto. I hope noble Lords will understand that it is not appropriate for me to comment further at this stage on what are hypothetical situations.

CPTPP members and the UK rightly share the intention to be part of an agreement that embodies high standards in areas such as intellectual property, investment, procurement, rules on state-owned enterprises and data flows. Any applicant will have to satisfy CPTPP members that it can and will meet these standards. My noble friend Lord Gold and I share a common interest in financial services, and I welcome his comments on that topic. CPTPP has a dedicated chapter on financial services, which we believe will open up new opportunities for British businesses. The provisions in that chapter include matters such as non-discrimination obligations and liberalising cross-border flows of financial information. There is also an annexe on professional services that encourages mutual recognition of professional qualifications, which I think will be very helpful to us going forward.

It is a very good thing that more and more economies want to sign up in due course to the high standards of CPTPP, with Ecuador being the latest country to indicate an interest in doing that and submitting an application shortly before Christmas.

The right reverend Prelate the Bishop of St Albans certainly gave us food for thought in his speech. Of course, I have heard both his and other noble Lords’ concerns about potential impacts on UK food standards through the agreement. Let me be crystal clear: there are no provisions in this trade agreement that will force the UK to lower food standards in any area. I can give the noble Baroness, Lady Chapman, complete reassurance on that matter. I am pleased to be able to put that firmly on the record.

The Government’s strong position is that there is no inconsistency between the approach set out in the agreement and our existing domestic regulatory system. In other words, nothing in the agreement will change or lower the standards of food that we let into our country. The Trade and Agriculture Commission will no doubt be carefully studying that and will report to the House in due course on that matter.

Our wider environmental, product, labour and animal welfare standards will be protected too. CPTPP explicitly affords members the right to regulate for their own desired levels of domestic protection and thus will not undermine the UK’s objectives—on net zero, for example —in any way.

The noble Lord, Lord Oates, spoke eloquently about climate change. CPTPP retains the rights of members to regulate for their own levels of environmental protection and contains commitments to protect the environment. The system robustly protects the right of members to achieve their own ambitious net-zero goals. Of course, other CPTPP members, such as New Zealand, are also world leaders alongside us on climate action.

On the NHS and in answer to the noble Baroness, Lady Chapman, I do not think we could be clearer: protecting the NHS is a fundamental principle of our trade policy. During our negotiations to accede to CPTPP, the NHS and the price it pays for its medicines will not be on the table. The sustainability of the NHS is an absolute priority for the Government. We could not agree to any proposals that would put NHS finances at risk or reduce clinician and patient choice. This includes—and I say this categorically—making changes to our intellectual property regime that would lead to increased medicine costs for the NHS. I hope that reassures my noble friend Lord Lansley.

The Government have been listening closely to feedback from your Lordships and the wider business community about the importance of the European Patent Convention to the UK services and creative sectors, including today from my noble friend Lord Astor of Hever. I can once again confirm that accession negotiations will be consistent with the UK’s existing international obligations, including the European Patent Convention.

Regarding scrutiny, we remain committed to transparency. I wrote to the noble Baroness, Lady Hayter, about this yesterday evening in response to correspondence that the noble Baroness and I have been having. I can reassure the noble Baroness and other members of her committee that we will ensure that parliamentarians, businesses and the public have access to the information they need on our trade negotiations. The same transparency and scrutiny commitments we put in place for bilateral FTAs with Australia and New Zealand will apply to CPTPP.

The noble Baronesses, Lady Hayter and Lady Chapman, emphasised the importance of engagement with the DAs. I assure noble Lords that our approach to engaging DAs on trade policy is very comprehensive. We have engagement structures at all levels to make sure the DAs’ voices are heard. These include a quarterly ministerial forum for trade, regular bilateral ministerial meetings and the six-weekly senior officials’ group. The chief negotiators have regular calls running parallel to each negotiation round to keep the DAs fully informed of what is going on. Additionally, there are our six-weekly chapter-specific policy round tables and weekly working level engagement.

Your Lordships enquired about the potential for us to seek changes to the CPTPP text. I think that noble Lords recognise that this is an accession process, not a new negotiation, so it is not feasible to be seeking significant changes to the agreement. In this context, our negotiation objective is to be a part of a high-standard agreement, not to change it radically.

We are aware that other CPTPP parties have used side benefits to clarify certain specific policies. Let me reassure the noble Baroness, Lady Hayter, that this may be an option that is appropriate to explore in some cases. However, I hope noble Lords understand that the precise nature of that solution will be determined by negotiations. Offering a running commentary or setting out our intentions for side letters in public will undermine our negotiators’ leverage to secure any such solutions. It would be undermining the very thing we would seek to achieve through the side letters. I hope that the noble Lord, Lord Purvis, will accept that that is why I cannot be any more helpful in this regard. I can confirm that all such letters will be published before the CRaG process and thus will be open to the same full scrutiny as the agreement itself.

I will turn to a couple of other themes raised in the report. Regarding the sequencing of further applications, we have been repeatedly assured—this comes back to a point I made earlier—that our accession will be dealt with first, and interest from China or any other economy will not slow us down. In answer to my noble friend Lord Lansley’s question about ISDS, the extent of its coverage will be subject to negotiation during the agreement, but I am clear that we have nothing to fear from its use going forward.

On the expected economic benefits for the UK, our modelling does show—

[Lord Purvis of Tweed (LD)]

The Minister may not have anything to fear but the House does, and it has debated ISDS on a number of occasions. I recall from when we scrutinised the Canada agreement that it supports moving away from ISDS towards a multilateral approach, whereas the Japan agreement was neutral on it. Does that mean that the Government are now off the fence, as the noble Lord, Lord Lansley, asked us to be, and that we have landed squarely in favour of ISDS? I remain confused.

[Lord Grimstone of Boscobel (Con)]

My Lords, let me try to clear up that confusion, which I probably unwittingly added to. I know from my contact with investors that they all welcome some form of arrangements which allow investor protection to be secured. Many investors believe that the exact format of ISDS—one uses it often as a shorthand for how disputes should be settled—is not always necessarily the correct format. As the noble Lord will know, there are discussions about that in various multilateral organisations. When I talk about ISDS, perhaps it would be better if I said that appropriate forms of investor protection, with the right arbitration mechanisms agreed either bilaterally or multilaterally, are the way forward.

I thank noble Lords again for giving me the opportunity to speak on this topic today. I apologise for replying at probably too great a length, but I was anxious to deal with the points raised. CPTPP accession will boost prosperity and help to level up the country at home. It will deepen ties with key partners in the Indo-Pacific. I thank the noble Baroness, Lady Hayter, and the International Agreements Committee once again and look forward to further engagement with your Lordships, as I am sure we will have, on CPTPP in the future.