Negotiating Objectives for a Free Trade Agreement with India

Lord Purvis of Tweed Excerpts

Tuesday 6th September 2022 Grand Committee

[Lord Purvis of Tweed (LD)]

I thank my noble friend for his contribution in the gap. He gives a very good example of why the agreement that we are likely to have with India will require strong human rights clauses. This House twice resolved that there should be a trade and human rights policy and passed amendments for it to be included in the Trade Bill, but they were turned away by the Conservative majority in the Commons. This agreement will be a litmus test when it comes to human rights and labour standards. My noble friend is not alone in raising that issue in this debate.

This debate has been characteristically sensible and serious. I say to the noble Lord, Lord Kerr, that I have adjusted to the fact that contributions in Grand Committee do not always have the world’s eyes upon them and certainly cannot secure 10 million viewers like the noble Baroness, Lady Bennett. However, sometimes we make the news. After the noble Lord’s comments, I looked at Lords Grand Committee on Google News and two bits of news came up, other than the Parliament’s constant press releases promoting what we are doing:

“Chinese Embassy in the UK condemns wrong remarks on Taiwan by members of House of Lords”


and

“Peer voices concerns as Cumbria council restructure is approved”.


So we make the news in global ways from China to Cumbria.

I am very confident that this agreement will be a success according to the Government because we have not yet had an agreement under this Government that has not been gold-standard, world-leading, a Brexit bonanza or the most advanced ever signed—those are all quotes from government press releases about agreements. Therefore, I have great confidence that this will be amazing deal, in the Government’s press release anyway. As the noble Lord, Lord Kerr, indicated, with the former Prime Minister leaving, I wondered whether the boosterism would be toned down. I got a sign that that might not necessarily be the case because on 31 August the FT reported that

“Anne-Marie Trevelyan, secretary of state for international trade, told the Financial Times in an interview during a trip to Australia that the deals would help curb inflation in Britain”.


Given that this is likely to yield 0.00% to 0.08% over 15 years, I wonder exactly how that not-yet-ratified agreement is curbing inflation. I look forward to the Minister giving in his summing up an illustration of what the impact of the Australia agreement on UK inflation has been so far.

This debate has highlighted to me very clearly that negotiating objectives should be put to the Commons and debated there on a Motion for approval to allow there to be proper scrutiny of the important issues so clearly raised and illustrated by the committee’s excellent report. I commend the noble Baroness, Lady Hayter, and all members of the committee for this yet again gold-standard report.

This draws out the fact that either, as the noble Lord, Lord Udny-Lister, said, we are going to be in “extremely challenging” negotiations, or, as the noble Lord, Lord Lansley, indicated, it is pretty much a done deal already and we are now debating it. I do not know what the current situation is. To be fair to the noble Lord, Lord Grimstone, he was assiduous in keeping the Opposition Front Benches and committees informed of progress in rounds of negotiations, but the Government have been rather quiet on this, so I do not know what position they are in. I do not know what kind of chapters have been closed or not; I do not know whether our debate on this is utterly pointless or whether the Government can feed back from this House to the negotiators that there are emerging areas of concern. I simply do not know, so I hope the Minister can state where we are.

It also highlights, as we have asked today, the question of the trade rationale for Diwali. Obviously, there was a political rationale, which I understand, but I do not know what the strategic trade rationale was, especially in the context, in the intervening period, of the aggression and war in Ukraine and our strategic relationships with India. These are material circumstances which would of course have an impact when we discuss opening up significant UK markets which we have closed to Russia and which India now has policy positions to actively circumvent.

We know that some of these areas are significant, as the noble Lord, Lord Kerr, indicated. We know that India is not currently supporting the G7 consensus on an energy cap; we know that there is increased purchasing of oil; we know that, as the noble Lord indicated, there are Russian military war games and exercises which India is participating in at the moment. When I raised concerns to the noble Lord, Lord Ahmad, a couple of months ago that there would be a rupee/rouble swap, I was told that I was being premature. We now have that rupee/rouble swap mechanism to purchase increased levels of oil, which is a direct strategic difference from the UK.

These are material strategic interests of the UK. There is of course an argument that free trade should be completely separate from other areas of foreign policy, but when you intend a deep and comprehensive agreement, you cannot separate them. I would be interested to know from the Government whether, during the discussions on access to financial services and other areas, we have raised the foreign policy objectives of the UK.

We also do not start from a year-zero approach—or a 2016 year-zero equivalent—because we know, as the noble Lord, Lord Frost, indicated, that there were previous discussions on whether there would be an EU free trade agreement. Expanding what had been a trade and investment agreement had been problematic, because of Indian barriers on FDI and a lack of consensus on greenhouse gas emissions, nuclear energy, farming subsidy and policy, regulation of the financial sector and technology transfer. If the UK is now to have a full FTA covering all those areas which had been problematic previously, we need to understand how we believe these areas will be overcome.

I also recall that, for India, 20% of the trade with the EU 28 was with the UK. I have a perhaps incorrect recollection—I am sure the noble Lord, Lord Frost, will correct me in due course—that during the negotiations it was the UK which was not in favour of mode 4 reforms on visas. I recall that it was the UK that did not want any liberalisation on movement of people at that time. It was not the case, as he sought to give the impression, that as a minor shareholder in the EU 28 we wanted an agreement but were overruled because of other interests from other European countries. It is patently not true, because we effectively vetoed the process because of the desire from India for visa liberalisation.

It also does not explain to me that if we were in such a poor position with our clout, why, as the Government indicate, we are 17th as a trading partner and why Belgium is ahead of us. Why is Germany sixth? Why is Belgium able to be two places higher than us as a trading partner and not feel utterly constrained by being part of the single market, whereas we are now suddenly able to make the benefit from when we were in the single market?

There are other valuable areas that the committee highlighted across different areas of public policy that will need to be addressed. This is not just about agriculture or rural areas, but I am glad that the noble Baroness, Lady McIntosh of Pickering, and the noble Viscount raised pesticides. During the Trade Bill and subsequently, this has been an area where we have time and again raised concerns about not only the standards that our trading partners will be operating to but their practices. The Australia trade agreement effectively gave the game away: it allowed for products to come into the UK that have had pesticides banned here used on them. That, in effect, is a precedent, so we will need to look very carefully at whether the concerns of colleagues in this Grand Committee are realised, because I also fear that situation.

Obviously, we want a situation where we open up on services. However, without robust data agreements and robust legal frameworks to govern this, it is difficult to see how we will be able to have significant growth of this economic activity. In many respects, India has had ample opportunity to reform its legislation so that it is opened up for UK and EU data transfers, but it has chosen not to do so. Of course, we cannot determine or dictate to a trading partner its legislative framework, but in a trade agreement we can make sure that we do not offer concessions without there being a robust framework around them. That will be exactly the same on legal services or other areas of the service sector.

That is why, on agriculture and other areas, I very strongly but with respect disagree with the noble Lord, Lord Frost, when he spoke about the interaction with the devolved Administrations. One of the downsides of having this constrained period of negotiations for Diwali was the concern that has been raised, yet again, about what kind of consultation there will be. He is absolutely right that trade negotiations are reserved competences, but he is absolutely wrong to say that they are not the interest of the devolved Administrations and that he therefore does not see the need for them to be involved. Some of the founding documents of our constitutional arrangements since 1999 have been the concordats—he was a Minister, so I am sure he is aware of them—which state categorically that where there are policy areas that are reserved competences which have an impact on areas of devolved competence, there should be consultation and openness in that policy formation. This is a fundamental part of our devolved relationship. As the report clearly highlights, the fair position is that an agreement with India will have an impact on the devolved competences.

When it comes to areas of protection, I thought the noble Lord might have raised whisky, which I would probably strongly agree with him on; I know his experience with that. But, as has been mentioned before, we have not been able to protect geographical indications in the Australia agreement, so I wonder how we will do it in the Indian agreement. Indeed, we had the nonsense in the Australia agreement that the only way that UK GIs will be protected is if Australia signs an FTA with the EU in order for the EU to protect our GIs. I am not certain that that was the control we sought to bring back.

The final element, on which I want to close, is one of the most fundamental of those from the Government’s documentation. I commend the Department for International Trade’s officials on some of their documentation and understand the vagueness and opaque nature within it but, as is my wont, I often look at the technical papers. Page 36 in annexe 9 gives a table that fundamentally demolishes the Government’s case for this agreement and the benefits of it. That helpful table—I will come to this in a moment but it did not have a tabulated element to it—shows what the trade diversion of other countries would be under the assumptions of this agreement. The Government say that we are likely to have £5 billion of extra UK trade over the next 13 years and that there will be a £5.2 billion increase in imports from India for consumers, who the noble Lord, Lord Hannan, said should be paramount. That, from the summary page, is all well and good.

The Government did not then take into consideration the net impact from the trade diversion and the reduction in imports and trade with other countries. In annexe 9 of the technical paper, they listed what the experience of preference erosion and trade diversion would be—the negative impact. It is £3,262.1 billion. You have to discount every part of the benefit and take from it the loss of import trade of that £3.25 billion. This is not from insignificant countries. This is important because they are developing countries; they are exactly the countries, mostly in the Indo-Pacific, with which we want to increase our strategic relationships.

I will close on this. The countries that will have a negative impact are Botswana, Sri Lanka, Bangladesh, Pakistan, Kenya, Senegal, Ghana, Indonesia, the Philippines and Jamaica. The impact on Bangladesh is £1.5 billion less trade. The Government need to be much clearer on how they discuss net benefit because this agreement not only will have potential concerns for our public policy but is likely to cause a direct negative impact on a swathe of other countries. We need to debate this with our eyes very widely open.