Comprehensive and Progressive Trans-Pacific Partnership (IAC Report)

Lord Purvis of Tweed Excerpts

Tuesday 19th March 2024 Lords Chamber

[Lord Purvis of Tweed (LD)]

My Lords, I declare that I co-chair the All-Party Parliamentary Group on Trade out of Poverty. I thank the Minister for the advanced information through correspondence regarding the treaty. He is unfailingly accessible, as is his office; I appreciate that. He and I are enthusiastic free traders. He has a skill of finding greater enthusiasm for certain agreements than I do, but nevertheless we are both free traders. He must have erred in some other policy areas for him to be on those Benches and not these. Nevertheless, we share an ambition for the growth of UK exports and trade.

I also thank the noble Baroness, Lady Hayter, and the committee for their work. The IAC report is another excellent publication, building on its first report, as the noble Lord, Lord Lansley, indicated. It is especially important given that not only has the House of Commons not been debating the CPTPP but it no longer has a committee that specifically looks at international trade policy—so the service that this committee does for this House is even more important. The report’s opening probably gave the most succinct post-Brexit summary I have ever read. It said that

“it remains to be seen whether the Government’s intended trade and geopolitical benefits will materialise”.

We are still waiting with anticipation.

We understand from the Government that this component of that ambition will amount to a contribution to the UK’s GDP of between £1.8 billion and £2 billion a year after the 15th year—0.08% of GDP, as the noble Lord, Lord Anderson, said. The noble Lord, Lord Lansley, believes that will be the floor, not the ceiling, of the ambition. Sophisticated modelling by the civil servants takes all the optimism into consideration, but optimism bias is not unique to policy areas other than trade. There has always been a trade agreement that we hoped would do better than the one we were replacing. We also know that the OBR has suggested a lower figure, equating the likely growth to 0.04% of GDP.

The Financial Times humorously said that if the impact of the CPTPP was described in decibel terms, it would be the equivalent of

“a cat sneezing three rooms away”.

Now, it seems as if next door’s cat has the sniffles. Nevertheless, any growth is welcome, given the state of the UK economy. As the committee says, the Government have indicated that it is not just about economic growth. Indeed, that might not even be the primary aim. It is about greater integration with those economies. This is news to many of the nine countries with which we already have an FTA with the purpose of integrating our economy with theirs. What extra integration will the agreement to which we have acceded allow us? It may well be there.

I want to put into context what the level of growth activity would be after the 15th year. The £1.8 billion for the British economy is the equivalent of five and a half days’ trade with Holland. When we put up barriers to our nearest trading neighbours, we do much greater harm than any anticipated long-term benefit we gain from agreements such as this. The noble Lord, Lord Lansley, said that we can perhaps deduce the direction of travel from the Government’s activity. In the foreign affairs debate, the noble Lord, Lord Cameron, said we should never confuse activity with action. Therefore, we have to see not what the Government’s good intentions are but what their resulting actions realise.

In February the Sussex University trade observatory highlighted that

“the UK’s trade in goods with the world has underperformed compared to other comparable countries over the last few years”.

This anticipated growth with the rest of the world, other than the EU, is eluding us so far. Nevertheless, it may come about.

This is where the narrative starts to be challenged. Later in the debate, I suspect we will hear about how we need to be part of the fastest-growing part of the world’s trading economy within the Indo-Pacific area and how this agreement will allow the UK the increased growth benefit that those countries have seen. But the growth in the economies of the countries we are joining in the CPTPP has been almost exclusively because of the growth of the Chinese economy. Strip out the growth of China’s economy and its trade with Vietnam, Malaysia and the other countries in the CPTPP, and the figures look very different. In fact, their growth looks almost static. Now, with the slower growth in the Chinese economy, we will see what that level of trajectory looks like. Are we putting a lot of tariff-free eggs in this CPTPP basket when we are being very shoogly with our European Union neighbours?

This also has to be seen in the context in which the UK, more than any other European country, is now dependent on goods imports from China. The House has heard me say time and again that we have a trade deficit in goods with China of £40 billion. Germany has a trade surplus.

What also frequently goes unnoticed is that the world’s largest trading deal is not the CPTPP but the Regional Comprehensive Economic Partnership of 15 Asia-Pacific countries, including China, Australia and New Zealand. That represents 30.5% of global GDP, compared with the US-Mexico-Canada agreement at 28% and the EU at 18%. The RCEP’s growth is estimated to be far beyond that of any other agreement that we are acceding to. As much as this is a strategic debate about trade with the CPTPP, it is actually about the UK’s relations with China. The Government have said that this is an Indo-Pacific tilt towards those countries as an alternative to China. But there have been many rounds of negotiation between China, Japan and South Korea for an FTA between those countries. Whatever we do with our trade in the Indo-Pacific, we will be impacting on our relationship with China. We support an industrial and trade strategy because what our trading relationship with China will look like needs to be clear.

Finally, where we have seen bureaucracy, costs and paperwork added is in our trading relationship with the European Union. Yes, we will see a marginal, minimal decrease in bureaucracy with CPTPP countries, but we are seeing it actively increase for our nearest trading bloc—£100,000 of extra costs per typical UK business. That far outweighs even the most optimistic benefits mentioned by the noble Lord, Lord Lansley, that we would see for UK businesses in the CPTPP.

However, as I have said to the Minister, when we tilt towards one area, we are tilting away from another. Our trading partners in the Caribbean in CARIFORUM and in Africa in the African Continental Free Trade Area are seeing and hearing mixed messages from the UK. Therefore, I have called out the Government, time and again. For example, when we have signed an FTA with a Commonwealth country, not a single one has had a Commonwealth chapter for trade facilitation for the Commonwealth, allowed for under the WTO, which I have called for.

There may be one further final aspect. I close with a question to the Minister. It is likely, as the noble Baroness, Lady Hayter, said, that our relationship with China will come into more context if it wishes to join and accede. But we have a friendly, free, democratic nation within the region, Taiwan, with which we can see the expansion of UK trade. I have been on a number of occasions. It is a reliable and trusted trading partner which has demonstrated that it can be a stable, democratic and rule of law-based country. I hope that the Minister will agree with me that it is time for a UK Cabinet Minister—a Cabinet Trade Minister—to visit Taipei, sending very clear signals. If we are seeking to tilt to the region and sending signals that it is not towards China, then a Cabinet-level official visiting Taipei would probably be the strongest signal of all.