UK-Israel Trade

Mark Harper Excerpts

Tuesday 3rd July 2018 Westminster Hall

[Chris Green]

I did not quite catch all of the hon. Gentleman’s question. However, I would not want, in this room, to set in stone anything that will evolve over time.

[Mr Mark Harper (Forest of Dean) (Con)]

We have to recognise that strengthening businesses, businesspeople and the economies on both sides—in Israel and the occupied territories—is how we will achieve a viable two-state solution. Doing as the Boycott, Divestment, Sanctions movement wants, which is to discriminate against businesses in Israel without distinguishing where they are, will damage the economy and the interests of not only Israelis, but Palestinians seeking to earn a living.

[Chris Green]

Absolutely. The impoverishment of people, whether in the Palestinian territories or in Israel, is one of the drivers of violence. People who do not believe that they have a future sometimes turn to violence. We ought to ensure that, so far as possible, the whole region becomes increasingly economically successful.

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[Mr Mark Harper (Forest of Dean) (Con)]

It is a great pleasure to serve under your chairmanship, Mr Evans. I should first refer to my entry in the Register of Members’ Financial Interests, which I will spell out a little more fully in the debate.

I was recently on a trip to Israel with a number of Conservative colleagues, and it was specifically focused on trade and investment. I particularly wanted the trip to be focused on trade and investment, for two reasons. One is obviously the context of Brexit and Britain looking outwards to a more global future. My hon. Friend the Member for Bolton West (Chris Green), who very ably opened the debate, focused on the growth in trade between Britain and Israel and the fact that Britain is Israel’s largest trading partner. Also, I wanted to understand the extent to which economic growth and development could at some point, when the political conditions are right, contribute to strengthening and enabling the two-state solution that I think we all want to see.

In the limited time I have—I will try to obey your injunction to be relatively brief, Mr Evans—I will focus on just two areas. First, when we were in Israel we saw a number of examples of its strength in cyber-security. The Prime Minister of Israel spoke at a science gala taking place on the first full day of our visit. He talked specifically about IT and cyber. I come from Gloucestershire, where GCHQ is based, but there are also a number of companies in the cyber sector. The work that Britain and Israel, and their companies, do together does not just develop business relationships; it helps keep both countries safer in a very dangerous world. Those companies work together to keep businesses and consumers safe from the threats from organised crime, but they also help our Governments and security agencies keep us safe from those who would do us harm. That partnership working is therefore very valuable.

Secondly, I want to focus on the specific example of a company that provides a good illustration of how business can help bring communities together. As my hon. Friend the Member for Bolton West said, we visited the SodaStream factory. He mentioned that it had been forced to move from the west bank and that a number of Palestinians were unable to continue working there. When we visited the factory, we saw a company that employs Israeli Jews, Israeli Arabs, Bedouins and Palestinians. We met a Palestinian manager who travels there from the west bank. He manages a team of employees, including Israelis. I thought it was a very powerful symbol. There are people coming together, from a range of different communities, and working together to make their business successful.

One of the things that struck me about how business can be powerful was something that one of the Israeli managers at SodaStream mentioned. They had recently had a day when they could bring their sons or daughters to work, as we do in the UK. When his son came to that business, meeting his father’s colleagues and their children, it was one of the first times he had met Palestinians in an environment that was conducive to sharing ideas and furthering understanding between those two communities.

During the week, we spoke to a number of business people from individual companies, but also from some business organisations, such as those that further business development between Israel and the Palestinian territories. All of those business people were up for, and encouraging of, growing the Israeli economy and the Palestinian economy. I hope that the Minister will take away the message that Britain should encourage economic development in the Palestinian territories as well as growing our trade with Israel, so that when the political conditions are right—I know that they are challenging—we will have a thriving economy to underpin the success of a two-state solution.

I came away from our visit optimistic about the future trade relationship between Britain and Israel, and the prospects for growing our trade in the parts of the economy that will make both countries prosperous. I also came away more hopeful about the prospects for Israeli civil and business society to help create the conditions that will allow politicians on both sides to achieve the two-state solution that the hon. Member for Liverpool, Riverside (Dame Louise Ellman) talked about. That was summed up well by the Duke of Cambridge’s visit, during which he visited both communities and spoke powerfully about the opportunities and hope for the future. I hope that we have more such visits, to help bring Britain and Israel closer together and to heal some of the divisions within Israeli society. I think that business can contribute to that, and I hope that we will see more of that.

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[Peter Grant]

No, I am afraid I do not have a great deal of time.

Although trade in general between the UK and Israel is to be welcomed and promoted, we should not get things out of context. Israel accounts for less than 0.5% of UK exports—it will not fix the huge absence of trade that we will have if discussions with the European Union go wrong. We could increase exports to Israel by a factor of 10 and it would still be only a relatively minor trading partner compared with the European Union and a number of others.

We must try to negotiate an equivalent of 40 trade deals in just a couple of years, if we are lucky—possibly not even that long. I must take to task the hon. Member for Milton Keynes South (Iain Stewart), who said that the Trade Bill will replicate all the current trade deals in British legislation. No, it will not. The Trade Bill will convert EU legislation into UK law, but the only way that the UK can replicate its trade deals with the 40 countries in question is if those 40 countries agree to that. This Parliament cannot unilaterally agree to extend a trade deal after we have left the European Union, and the European Union cannot do that on our behalf.

Although we can speak positively about trade with Israel in general, there are two aspects of that trade about which I cannot speak positively. As the hon. Member for Hammersmith (Andy Slaughter) mentioned—I was very disappointed by the response he received—trade with the Occupied Palestinian Territories should not be treated as if it were trade with Israel. Indeed, at the moment, under the EU agreement with Israel that cannot happen, and when Gordon Brown was in office, he said that it would be an offence to take goods from the occupied territories and sell them marked as produce of Israel. I want the Minister to give an absolute assurance that after we leave the European Union, nothing will be done to land a deal with Israel that will make it easier for goods that have been produced illegally in the illegally occupied territories to be exported here. We should regard those goods as the proceeds of crime.

[Mr Harper]

On that specific point, the hon. Gentleman seems to be mushing two things together. The hon. Member for Hammersmith (Andy Slaughter) was talking about settlements, which is one issue, but the hon. Gentleman seems to be saying that we should not trade with any businesses based anywhere in the occupied territories. That sounds like a recipe for putting out of business every Palestinian-owned business, and subjecting them all to economic devastation. Is that really what he is saying?

[Peter Grant]

To clarify, I am talking about trade with areas that are under illegal occupation by Israel, and where Israel has illegally occupied parts of Palestine. I do not think that “settlements” is the correct term; this is an illegal occupation, and we should not be looking to trade with any business carried out under the illegal Israeli settlement or occupation—call it what you will. Plenty of other Palestinian businesses in Gaza and the rest of Palestine would welcome our trade, if only the Israelis would let that trade get through to Gaza.

Another area that has not yet been touched on but must be mentioned is the UK’s massively increasing weapons sales to Israel. UK arms sales licences to Israel have increased by 1,100% in two years, and in 2017 the value of licences awarded was £220 million. Israel is about our 45th biggest export customer, but it is our eighth biggest arms export customer. Consider what the Israel defence forces have been using some of those small arms to do over the past two or three months—it is time for those arms sales to stop.

I do not deny, and I would never argue about, the right of Israel to exist or defend itself against aggressors, and I would never argue about the fact that Israel faces an aggressor in some of the more militant elements within Palestine. However, children being shot with high velocity sniper rifles; medics whose only weapon is a first-aid box being shot from a distance with high-velocity precision rifles by highly trained and skilled snipers—those are not acts of self-defence, those are acts of unlawful killing and should be called out as that. The United Kingdom should not be selling weapons to anybody who is still under investigation for such crimes.

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[Bill Esterson (Sefton Central) (Lab)]

It is a pleasure, as always, to serve under your chairmanship, Mr Evans.

I congratulate the hon. Member for Bolton West (Chris Green) on securing the debate and I welcome the hon. Member for Beverley and Holderness (Graham Stuart), who is responding to his first debate as a Minister after his enforced Trappist-monk silence in the Whips Office in preceding years—I will not go into what happened before that. I welcome the Duke of Cambridge’s comments on his timely visit. He was right to speak about the importance of economic and trade ties between the UK and Israel, but it is also right to debate where we agree and where we have reservations about our relationship.

The EU-Israel association agreement has governed trade relations between Israel and the UK since it came into force in June 2000. It grants Israeli exports preferential access to the UK market, along with the markets of other EU member states. It was supplemented by an agreement on agriculture that came into force at the beginning of 2010, and by a mutual recognition agreement on pharmaceutical products that came into effect in January 2013. Labour would welcome a new trade agreement with Israel to maintain the same market access opportunities for goods, and to deepen a potential relationship in the trade of services, where the UK has an obvious comparative advantage.

As we argued in the Trade Bill Committee, however, no Government should have a blank cheque to introduce new terms of trade without first undergoing a process of external consultation with business and other stakeholders, as well as a proper process of parliamentary scrutiny. The Government’s delegated powers memorandum to the Trade Bill makes it explicit that all the UK trade agreements needed to replace the 40 existing EU trade agreements with countries such as Israel will be legally distinct treaties. Moreover, the same memorandum acknowledges that the powers afforded to the Government under the Bill would allow the

“implementation of substantial amendments, including new obligations.”

Business representatives giving evidence to the Trade Bill Committee expressed considerable concern.

[Mr Harper]

Will the hon. Gentleman give way?

[Bill Esterson]

I will not give way, because we have been given so little time.

[Mr Harper]

But the hon. Gentleman said he was interested in parliamentary scrutiny.

[Bill Esterson]

This is relevant, because the Israeli trade agreement will roll over, which is covered by the Trade Bill.

However, the Government have so far failed to confirm that they would inform business of any substantive changes to the terms of trade between the UK and its trading partners in the trade deals being negotiated to replace the existing EU ones. Will the Minister take this opportunity to reassure business that the Government will let it know in advance about any proposed changes to the terms of trade under which companies will be required to conduct their operations, so that they can have the required input into those negotiations before it is too late?

The existing EU trading relationship with Israel is predicated on an understanding that export preferences are available to goods produced in Israel only, and not to any goods produced in the occupied territories. Furthermore, Gordon Brown’s Government introduced labelling guidelines to ensure that consumers are properly informed as to the origin of the produce that they see in the shops and as to whether goods are from settlements in the illegally occupied territories. I trust that the Minister will confirm that that crucial distinction will be honoured in any future UK-Israel agreement. I look forward to hearing what further measures the Government are proposing to take to reinforce clarity on that point.

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[Mr Harper]

Will the hon. Gentleman give way?

[Bill Esterson]

I will not give way; I have told the right hon. Gentleman that already.

Will the Minister confirm that any UK-Israel trade agreement will maintain the existing clarity about the fact that market access preferences offered to Israeli exports into the UK do not extend to goods produced in settlements in the illegally occupied Palestinian territories? It is extremely important that we maintain cross-party recognition of the status of the settlements in the west bank.

The Government have consistently reiterated that the UK considers those settlements illegal under international law, and they have continued to speak out forcefully against Israel’s expansion of settlements. Last October, the Foreign Secretary expressed his concern at Israel’s approval of settlement construction permits in Hebron for the first time in 15 years:

“Settlements are illegal under international law and undermine both the physical viability of the two-state solution and perceptions of Israel’s commitment to it.”

We agree with those concerns about the occupied territories.

From the Trade Bill Committee, we know that Ministers intend to replicate the existing EU-Israel trade agreement exactly. Will the Minister confirm that that will also apply to the human rights clauses and that the Government intend to enforce those clauses once we have left the European Union? Will he confirm that the Government fully support the human rights of all those who will come under the ambit of any future trade agreement between the UK and Israel? The trade preferences granted under the EU-Israel association agreement are conditional on respect for human rights by both sides. Article 2 of the agreement reads:

“Relations between the Parties, as well as all the provisions of the Agreement itself, shall be based on respect for human rights and democratic principles, which guides their internal and international policy and constitutes an essential element of this Agreement.”

I trust that the Minister will confirm that respect for human rights and democratic principles will be an essential element of any new UK-Israel agreement.

Last year, Labour’s manifesto said that trade policy should prioritise human rights through our agreements with other countries. We reiterated the importance of human rights in trade agreements during the Trade Bill Committee proceedings in January. They are particularly important in the light of ongoing human rights concerns in Israel and Palestine, yet in February, in a written answer in the House of Lords, the Government stated that they had as yet made no assessment as to Israel’s compliance with the condition in article 2 of the EU-Israel association agreement that it respect human rights and democracy. Will the Minister assure us that the Government will undertake such an assessment as part of a due diligence process when they move towards a new UK-Israel agreement?

Concerns about human rights can dominate the public debate, and if we had longer, we could go into arms sales as well. Perhaps the Minister will comment on the Government’s commitment to the consolidated criteria on arms export controls and the review of whether UK-produced equipment was involved in the use of lethal force by Israeli forces in the last few months.

It is important, however, to recognise the potential for successful trade with Israel. Together, pharmaceuticals and motor vehicles account for almost 30% of our exports to Israel, so supporting those sectors is important. The jobs that they and their supply chains bring are vital to supporting communities, but if the broader trade picture is botched, both sectors will be at risk from the non-tariff barriers that affect their supply chains, due to the just-in-time nature of vehicle components and the risk of drugs degrading in transit.

Our relationship with Israel does not exist in a vacuum; it is directly affected by our relationships with third countries and the wider world. Trade with Israel currently benefits from the fact that we are part of the EU and from the application of rules of origin and regulatory alignment. This weekend, the Cabinet needs to resolve its differences and produce a third way that delivers the certainty needed by business about border arrangements and non-tariff barriers.

Any trade deal that the UK makes with Israel must include strong guarantees that democratic principles and a fundamental respect for human rights will form a large component of that deal. Our policy on trade with Israel is to support a progressive trading relationship that brings jobs and prosperity at home and that also delivers benefits to the Israeli and Palestinian peoples. Any future UK-Israel trade deal must be judged against those goals—

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[The Parliamentary Under-Secretary of State for International Trade (Graham Stuart)]

It is a great pleasure, Mr Evans, to serve under your chairmanship on the first outing for this ingénue Minister.

I congratulate and thank my hon. Friend the Member for Bolton West (Chris Green) for raising this important topic. It is a pleasure to follow the hon. Member for Sefton Central (Bill Esterson), who served with me on the Education Committee for many years.

It is now 70 years since Israel was founded, and the UK-Israeli relationship is firm. In the last month alone, the Prime Minister has met Prime Minister Netanyahu, and Prince William, as has been discussed, has made the first ever official visit to Israel by a senior royal—one that was very well received.

That relationship is also backed by a strong trade and investment relationship, which many Members have discussed this afternoon. As of 2016, our total trade with Israel was worth £3.6 billion per year, with a £570 million surplus for the UK, according to our figures. We are Israel’s largest goods export market in the European Union and its second largest in the whole world. We are also a significant destination for Israeli investment. I will give just a few examples. British brands, from Superdry to Jo Malone London, are continuing to expand in Israel, and Israel’s largest investment house, Psagot, is now owned by a UK private equity firm.

British brands that are already in Israel are going from strength to strength. For instance, easyJet is now Israel’s second most popular airline for international flights after El Al, and 2016 saw the signing of our biggest ever trade deal—Rolls-Royce will provide £1 billion worth of engines for El Al’s new planes. The strength of British exports to Israel is felt across the UK. For example, sales of Scotch whisky have increased by 245% since 2012. UK-Israeli trade is a vital component of the UK’s economic growth and we hope to strengthen it further in the coming years, including as we leave the European Union.

Last December, we signed a new aviation agreement, to make sure that travel between the UK and Israel remains open after Brexit. In March 2017, we launched the UK-Israel trade working group, which is designed both to maximise existing trade opportunities and to ensure a smooth transition of our existing relationship as we leave the EU.

As members will be aware, the draft withdrawal agreement text provides that, during the implementation period, the UK will continue to benefit from the EU’s third-party trade agreements, including those with Israel. We are committed to ensuring continuity for our existing EU trade agreements—that issue came up several times in the debate—and are working to transition the existing EU-Israel association agreement as it stands.

[Mr Harper]

First of all, it is a great pleasure to see the Minister in his place and, frankly, I congratulate him on taking an intervention and on giving us a lesson in how debate is conducted, unlike the hon. Member for Sefton Central (Bill Esterson), who speaks for the Opposition.

As we think about our relationships with Israel, may I just ask the Minister to ensure that we look for opportunities, notwithstanding the complexities around settlement, and that we give every opportunity to the Palestinian economy to grow and to thrive? That matters, because if we do not generate wealth and successful businesses in the occupied territories, we will have no hope of achieving a successful two-state solution, which needs that strong economic partnership between the two future states.

[Graham Stuart]

My right hon. Friend is absolutely right. The Department for International Trade was set up precisely to promote trade around the world, not only to enrich this country but in the sure knowledge that trade and an open, liberal, rules-based system enriches everybody, and most of all the poorest. In places such as Palestine, which are on a developmental path, it is absolutely essential that we engage with business, and it was inspiring to hear stories of businesses acting as a facilitator to bring different communities together. I am sure he is right that, through the building of prosperity, security and development go hand in hand.