Comprehensive Economic Partnership (EUC Report)

Lord Risby Excerpts

Thursday 26th November 2020 Grand Committee

[Lord Risby (Con)]

My Lords, it is a pleasure to be a member of the International Agreements Committee, and I warmly congratulate the noble Lord, Lord Darroch, on his speech.

I begin my remarks by referring to our trade and investment exports, which in recent years have been supported in a transformed way. For the past eight years, I have been one of the Prime Minister’s trade envoys. It has been a dramatic change, not least of course the huge expansion of the facilities of UK Export Finance.

It is widely accepted that the UK-Japan agreement is not significantly different from the precedent of the EU-Japan agreement, and inevitably there will be caution in Japan pending the outcome of the Brexit talks, most particularly on trade and goods. But given that the only committee briefing I have participated in was on financial services, it is appropriate that I should confine my remarks to services and data. Last year, 56% of service exports to Japan were financial, so there is certainly further scope, and an agreement has potentially opened the door to that and, importantly, to further regulatory co-operation in financial services and digital trade.

We all know how often individual countries are most reluctant to embrace fully foreign banking and insurance activity. There is considerable professional admiration for our financial service structures. The CEPA, including our three pillars—HM Treasury, the Bank of England and the Financial Conduct Authority—sends a clear signal. It is now possible for our financial services to offer products on the same basis as Japanese companies, but that has to involve mutual trust. Although it is the intention that meetings will take place regularly, it will be done within a voluntary framework, not forced, with regulators eventually controlling the dialogue. I wonder whether my noble friend the Minister believes that this voluntary framework adequately sets out a mutually beneficial trajectory.

If we look at CEPA as the basepoint for future advances, during our time as members of the European Union, in my view we greatly benefited from mutual professional recognition. My understanding is that this matter will be explored further and is to be strongly encouraged. Again, my noble friend may wish to express a view on how we can take this matter forward.

What is gratifying is that both Japan and the United Kingdom instinctively favour open economies, but work needs to be done to address the challenges of digital e-commerce, given that half of services trade is now digital. This is a hugely sensitive area, not least to prevent money laundering and enforce the know-your-customer rule.

It is also clear that the matter of investment protection needs to be revisited; again, perhaps within a voluntary mutual context, but certainly that of a defined dispute resolution that may require additional powers.

Unfortunately, the view on trade matters of both countries is not widely shared internationally. However, I acknowledge that both Governments, in being committed to the free flow of data, are also committed to a legal framework that provides for the protection of personal information. This is certainly an area that is beset with potential concern and abuse, so it is good that CEPA addresses only data flows between the two countries directly, with onward transmission abroad disallowed. This is an understandable concern with regard to personal and medical data, but the two countries are of like minds, as indeed are New Zealand and Australia.

Thus, while it is perfectly true that CEPA largely mirrors the Japan-EU agreement, the architecture has been put in place for future digital advance. It is not a matter of controversy that higher levels of economic growth are forecast for countries broadly in the Pacific basin. I hope therefore that the successful conclusion of CEPA will open the way to our participation in the CPTPP in due course, not only for economic but for geostrategic reasons, bringing together countries that believe in open markets at a time when their value has been challenged, with negative consequences for world trade and prosperity.

I believe that the committee’s report clearly points to areas where further clarity and progress can be advanced.