Comprehensive Economic Partnership (EUC Report)

Lord Stevenson of Balmacara Excerpts

Thursday 26th November 2020 Grand Committee

[Lord Stevenson of Balmacara (Lab) [V]]

My Lords, I thank all speakers for their contributions today. I welcome the noble Lord, Lord Darroch of Kew and congratulate him on his maiden speech. His reflections on the trade agreement before us after such a short time in your Lordships’ House illustrate that he will fit in very well, and we all look forward to his further contributions. I also welcome back my noble friend Lady Liddell and thank her for her contribution today. I extend my sympathy to the Minister on his recent eyesight problems and wish him a speedy recovery.

I welcome the report from the International Agreements Sub-Committee and thank my noble and learned friend Lord Goldsmith for his excellent introduction. From the comments of members of the committee who have spoken today, it is obviously a committee which is already working well in what is a new activity, which is probably just as well, as it seems to have quite a lot on its plate. This first substantive report from the IAC is, as its chairman pointed out, about the CEPA signed earlier this year between the UK and Japan, but it is also witness to the scrutiny process for trade treaties that the Government are bringing in. In that sense, it is an historic first for this House and for Parliament. We have had useful and insightful comments on both issues and, as was the case in the Commons when it debated the report of its Select Committee on International Trade yesterday.

Several speakers have mentioned that, notwithstanding changes relating to agriculture and data, and the inclusion of dedicated chapters on women’s economic empowerment and SMEs, CEPA almost entirely replicates the EU-Japan free trade agreement. I agree with the noble Viscount, Lord Trenchard—a rare occurrence—that there is a lot to commend the fact that a roll-over continuity deal is a good thing to have at this time of uncertainty, but the Government would do well to learn from the criticisms made today and elsewhere about their apparent overclaiming of benefits, unwillingness to provide accurate baseline figures and testable estimates of benefits. There is a sensitivity about gaps in the treaty, such as pointed out today, about the lack of an inward investment chapter and better and more targeted support for our creative industries.

I will not go through every issue raised by speakers today, but I would like to mention a few. First, it is obvious that there is an imbalance in the treaty. It is tilted very much in Japan’s favour with the final estimate, if we can believe the figures, revealing that about 83% of the projected increase in trade will go to Japanese exporters. Obviously, no Government should design a trade policy around the minimisation of trade deficits, given that that would lead to a protectionist rejection of imports. Nevertheless, these figures demonstrate that there much greater benefits in the deal for Japanese exporters. However, according to the impact assessment, increased imports from Japan will boost employment in certain industries. But the Government also estimate that there will be negative effects for employment in sectors where Japanese imports will provide cheaper alternatives to home-grown products. As the noble Lord, Lord Kerr, said, it is a bit ingenuous of the Government not to make it clear how much CEPA depends on a satisfactory deal with the EU on cumulation, rules of origin and zero tariffs. I hope the Minister will respond to this when he comes to reply.

Secondly, we need to do better on tariffs, and particularly on TRQs. The EU has 25 separate TRQs with Japan on agricultural goods, of which the UK has managed to secure partial access to 10. Of those 10, the UK gets only leftovers of what the EU has not taken up that year. When you learn that, in practice, Japanese importers have to secure a bank guarantee to import UK goods at the reduced tariff, with a higher tariff charged retrospectively by the Japanese authorities at the end of the year if the EU has taken up its full quota, that means that this bureaucracy and uncertainty will inevitably reduce what Japanese importers will opt for in terms of UK agriculture, which is surely a great pity. The Government have argued that UK exports will not lose out because, by the time the EU increases its use of the TRQs, we will have already joined the CPTPP, therefore securing zero tariffs. However, as others have said, that is hardly a proper response to the issue. Perhaps the Minister will comment when he comes to respond.

On labour issues, trade unions were not able to provide input on any text during the negotiations and drafting of the UK-Japan EPA. This is the latest of a long list of times when the DIT has brushed aside union concerns and rejected opportunities to consult them. Why is this? In many cases, the lack of trade union consultation shows. The labour provisions of the deal have not advanced on those agreed in the EU-Japan EPA, and they are weak and unenforceable. Alongside the missed opportunities to strengthen labour provisions, the UK-Japan CEPA rolls back civil society dialogue. The UK and Japan have to meet with civil society groups only two years after the deal comes into effect, rather than the one-year wait that was contained in the earlier agreement. Will the Minister comment on that?

On digital matters, raised by several noble Lords, including the noble Lord, Lord Oates, the Government say that CEPA will enable a free flow of data while maintaining high standards of protection for personal data. However, many of these elements of the UK-Japan deal are not new. Some are but, by not requiring each other’s companies to follow data localisation, disclose algorithms or hand over encryption keys used to guard proprietary tech and data, CEPA has removed some of the provisions insisted on by the EU to give it control over the activities of Japanese tech companies. Is this a good thing? As well as bringing benefits for UK firms operating in Japan, as it largely will do, these provisions will reduce burdens on and increase proprietary protections for Japanese digital firms wanting to expand business in the UK. However, is this light-touch approach really the way forward? I would be grateful if the Minister could respond when he comes to reply on whether this light-touch regulatory system does not run counter to the Government’s concerns over data protection or, indeed, the imposition of stricter controls on companies over the access to online content. What about the online harms Bill? Does the Minister believe that the positions taken on data localisation can be squared with getting agreement with the EU on the data equivalence issues, and will the position on net neutrality not cause difficulties with the US and Australia, where powerful media interests have been engaged in long-standing campaigns against the principle?

Finally, as others have said, this is a report on the new system of scrutiny, which the Government—sometimes somewhat reluctantly—are ushering in. The Japan deal is being ratified under the procedures laid down in the Constitutional Reform and Governance Act 2010, which dictates that all international treaties must be laid in Parliament for 21 sitting days before they become law. There is no obligation under CRaG for the Government to hold today’s debate but they are doing so, in part to nullify criticism from us, from the committee, the International Trade Select Committee, their own Back-Benchers and the House of Lords about the inadequacy of CRaG as a mechanism to allow scrutiny and approval of trade agreements.

We ought to do better on this. As the noble Lord, Lord Trees, and other noble Lords have said, today’s debate focuses on the signed treaty but ignores the other important steps in this process: the approval of objectives, the receipt of progress reports and the ratification procedure itself. We can do better, and I do not believe that we are far apart. The Government seem adamant that we should continue to operate under the royal prerogatives and leave the CRaG processes alone. I happen to disagree. In the interests of making progress, I suggest to the Minister that we use the time before Report to find a way forward which builds on the progress so far evident today and the experiences that we gain in the next few years, to sort out a proper process worthy of the importance of trade to our country.