G7 Summit and Future Trade Relations

Lord Stevenson of Balmacara Excerpts

Thursday 21st June 2018 Lords Chamber

[Lord Stevenson of Balmacara (Lab)]

My Lords, I, too, thank the noble Baroness, Lady McIntosh of Pickering, for securing this debate, which comes at a good time, poised as we are to go into the Trade Bill. “Poised” may be an overstatement; I think that we might get to it at some point in the next six months, but we are not being told when. This debate gives us a chance to reflect on some of the issues that arise, specifically from the G7’s failure to reach agreement but also in a wider context.

I agree with the noble Baroness that the G7’s failure to deliver even the pre-agreed communiqué was astonishing, and it was right that she drew attention to it—I think that we are at a crisis point in that sense. I agree also that deteriorating trade relations represent one of the biggest security threats around. More worrying is the US abandoning, or seeming to abandon, a rules-based system—if indeed it is doing that. It may make for good domestic US politics, but it sends a tremor over the whole world, as growth will be affected. I look forward to the Minister’s responses to the noble Baroness’s specific questions.

My noble friend Lord Whitty took a slightly wider approach to this issue, drawing attention to the lack of agreement on the benefits that free trade can bring. I agree that it is also a particular problem. If we are going to make a success of where we are post the EU withdrawal Bill, we will have to spend a lot more time thinking harder about what we want to say to people about the benefits that can flow from a much more engaged approach to free trade. It is also true, as the noble Lord said, that another series of actions is going on in the world, with a different, perhaps more populist, approach to politics that is anti a sense of engagement with an open basis for trade and which will have a wide impact if we do not think harder about how to counter it. His comments were important and should be listened to. The noble Lord, Lord Purvis, also picked up, as did my noble friend Lord Whitty, that we were already in trouble before the G7 summit. The WTO seems to have stalled in terms of its activities; it has lost credibility in the last decade or so and there will be real problems if a trade war gets going in any real sense.

Although the numbers signed up to this debate might suggest otherwise, I believe that there is a burgeoning interest in trade issues, and I think we will be able to capitalise on that as we go forward to the Trade Bill. Having said that, I take the Government’s view that this narrow, technical Bill is not something we can use to expand very widely on considerations to do with trade. However, I argue that if we are seeking to emulate, post Brexit, the arrangements currently in place for the making and amending of EU trade agreements, which is the main, narrow purpose of the Bill, it must make sense to see the Bill in the light of where the Government see us ending up on this more generally. Of course, we have to scrutinise the main measures in the Bill, such as the powers of the new trade remedies body. We need to check that the TRA has sufficient expertise, knowledge and resources; we need to think about government procurement; and there is the question of state aid rules, particularly following the announcement that the CMA is to be given responsibility for this area across the whole country.

We need to have more detail on the Government’s thinking on what exactly our trade policy is. What, for example, is trade? It sounds a very simple question: it obviously includes goods, but what about services, intellectual property and investment? Most modern trade agreements deal with all these issues—they are interwoven and inseparable. Our policy will need to reflect that approach. How does trade interface with development? There is clearly a link between grant in aid and the economic activity that follows from it: it may be based initially in agriculture, but it soon works out that it needs to be involved also in economic growth.

The noble Lord, Lord Purvis, said that one of the biggest threats to free trade was non-tariff barriers such as regulation. How do we approach that? Are we going to look for a mutual recognition approach or will we be reliant on detailed agreement on our regulatory framework, making sure that it stands up to any tests that anybody might wish to put it to? If we are a rule taker, that does not sound a very good place to be. How will we be sure that our regulations will be effective and where will disputes be settled? Does the WTO have the skills to expand and act as an enforcement regulator if we are talking about much broader issues than simply goods and not services?

Others have talked about country of origin rules, which are really important, and not just for the EU. I was at a meeting yesterday at which someone was talking with expertise about what happens to New Zealand chickens. It may be a familiar story to others, but I was completely shocked to discover that the average chicken is divided into 48 different component parts, each of which goes three times around the world, virtually, before it finally gets consumed—the mind boggles. Not just the mind—the stomach boggles as well. And don’t get me started on what happens to chickens in Northern Ireland, where the problem is not so much what happens to the actual chicken but what happens to its feathers, which are apparently taken off early—don’t ask—and taken to another country, probably the Republic, and dealt with under different rules. That will cause real difficulties in any trade agreement. We will perhaps not be working at the level of detail of chickens, but I think we will be going to interesting places on the Bill. Yes, it has narrow issues, but it has to be much broader.

How are we going to balance consumer rights and producer rights? Will we be able to assert professional standards in a way that will allow us to make sure that they are treated properly across the world? Will we even be able to get membership of the world’s standards bodies when we are not part of the EU? On the much broader canvas of engagement with other groups, we are not going to be part of the EU single market, it seems, but we already hear suggestions that we should join NAFTA and the CPTTP, which is the Trans-Pacific Partnership agreement that took over from the TTP when the United States left. Membership of those bodies is a very different concept from engaging with free-standing free trade arrangements—it may indeed be a jump out of the frying pan into the fire.

In some ways, that makes a much broader point. If we are talking about joining other trade blocs, these are also about geopolitical alignment. The fact that we are in a trade alliance with this bloc or another may actually be more important than the volume of trade, however it is defined, that is being done. Who decides that? What interest does the Foreign Office have in these matters?

I will end by talking a bit about human rights. If we are going to take this step into the unknown with a new set of trade arrangements, we have to think very carefully about what we in Britain want to see coming out of them in terms of our respect for the various rights. Most of us will be interested in the fact that many companies increasingly understand that there is a very good business case for respecting human rights. It brings business benefits in various ways. It helps protect and enhance a company’s reputation. It helps it to protect and increase its customer base. It helps it attract and retain good staff. It reduces risks to continuity from conflict inside the company and it appeals to institutional investors, many of whom have interests in human rights. Companies told us that they need policy coherence and clear and consistent policy messaging from the Government. It is interesting that the Foreign Office has adopted the Ruggie principles, emanating from the United Nations Human Rights Council, almost lock, stock and barrel. Can the Minister confirm whether DIT will do the same?

In any case, we have ratified a series of international treaties that need to be accommodated. Our treaties and agreements include the International Labour Organization’s eight core conventions, the International Covenant on Civil and Political Rights and the International Covenant on Economic, Social and Cultural Rights. The Government may have turned their face against incorporating the European Convention on Human Rights, but I sense that the issue has not gone away. In any case, the Human Rights Act ensures that individuals in the UK have a remedy for the breach of rights that are protected by the ECHR, and it applies to all public authorities and to other bodies performing public functions, as private companies sometimes do. So this is definitely going to be in play—and this is before we look at broader legal frameworks such as employment regulations, equality legislation, the Health and Safety at Work Act, environmental protection and most recently, of course, the Data Protection Act.

So there is a lot of regulation already in place and we have a lot of history and practice in this area. There are many instruments, such as the Bribery Act, the OECD guidelines for multinational enterprises, where we have a national contact point, and our own Companies Act 2006, which makes it clear that directors have to have regard to the impact of a company’s operations on the community and the environment, and the desirability of the company maintaining a reputation for high standards of business conduct.

The Trade Bill is not just a simple, technical exercise in making sure that we can move from an EU-led series of negotiated agreements to agreements negotiated with the UK: it is not cut and paste with a word processor. It raises all sorts of questions about where we want to be on trade, how we want to define it and take it forward, which elements are important to us as a country going forward, and which will pay the best dividends in terms of the negotiations we have. Are we going to go to blocs and join them in much the same way as we do with the EU? Are we going to continue to try to plough our own furrow? And all this comes at a time when there are upsets and difficulties in the whole rule-based system that we are used to. We need much more certainty about that. It would therefore be worthwhile taking this forward. I look forward to the Minister’s comments.