Future Free Trade Agreements

Stewart Hosie Excerpts

Thursday 21st February 2019 Commons Chamber

[Dr Fox]

I know that the hon. Gentleman feels very strongly about this. He did not like the result of the referendum and he does not like the decision to leave the European Union, but we are leaving the European Union and we need to ensure that we have sufficient access to the European market, but in a way that does not tie our hands in relation to increased access to other global markets. He makes assumptions on growth in other markets that I do not accept. Nor is this purely about access to goods markets; it is also about the growing access to services markets. In the global trading environment, we have simply not seen the sort of liberalisation in services that we have seen in goods since the establishment of the World Trade Organisation. There is huge potential to unlock the economic benefits to the United Kingdom in seeking global liberalisation in services trading, which is not factored into any of the equations that the hon. Gentleman has mentioned.

[Stewart Hosie (Dundee East) (SNP)]

My hon. Friend the Member for Na h-Eileanan an Iar (Angus Brendan MacNeil), the Chair of the International Trade Committee, has got to the nub of this. The National Institute of Economic and Social Research said 18 months or so ago that we would lose around 20% of total UK trade even with an FTA with the EU. However, FTAs with the main English-speaking economies and with all the BRICS countries would only see trade rise by 2% or 3% respectively, which goes nowhere close to filling the gap. The point that my hon. Friend is making in GDP terms and the one that I am making in trade terms is at the heart of this. Liberalisation or not, there is no way that we can fill the gap left by what we are about to lose.

[Dr Fox]

As I said, the Government’s ambition is to have a full and comprehensive agreement with the EU, as set out in the Prime Minister’s model. Of course, if the Opposition parties want to avoid what they regard as the terrible scenario of no deal, they can vote for the Prime Minister’s deal. In arithmetic terms—if the hon. Gentleman looks at where Britain’s exports are going—just over a decade ago some 56% of our exports were going to the EU, whereas today that is down to about 44%. Why? It is not simply because the EU has grown more slowly, which it has, but because the economy of the rest of the world is growing faster. Clearly, that is where the markets are going to be for a United Kingdom that has an outward, global vision.

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[Stewart Hosie (Dundee East) (SNP)]

I start by agreeing with what the Secretary of State said about looking to have trade deals with developing, emerging and growing markets. That is absolutely right, whether the UK or the EU does it. He made big play of Australia and New Zealand, which we just heard about from the hon. Member for Mole Valley (Sir Paul Beresford). Australia takes about 1% of the UK’s exported goods—half of what we sell to Turkey. New Zealand takes 0.1%—about the same as we sell to Algeria—so however important Australia and New Zealand are, they are not developing growth markets. They are mature, established markets.

The Secretary of State also spoke about being dictated to by the EU—I much prefer the language of “working together with our European partners”—and even that language tells us a great deal about where some of this is driven from. Of course, he made big play of a potential deal with the US. I visited the US last year with the Treasury Committee. We were told in no uncertain terms by anyone who spoke to us about trade that the UK would be required to put everything on the table and that the US would be required to put nothing on the table.

[Drew Hendry (Inverness, Nairn, Badenoch and Strathspey) (SNP)]

My hon. Friend is making a great point about the demands made by countries such as the US. A lot of constituents are rightly worried that we will have to sacrifice such things as a public NHS to get a deal done with countries such as the United States. Does he agree that that is a clear and present threat?

[Stewart Hosie]

I am going to say more about the ISDS component—the arbitration competent—of these things later. I do not want the public sector to be impacted on in any way by trade globalisation with the US. If there is to be some deal cut, there is language that can be used—for example, that used to exempt military and intelligence operations. That should be included rather than the vague protections for the NHS that many of our constituents simply do not believe are robust enough.

[Angela Crawley (Lanark and Hamilton East) (SNP)]

One of my constituents’ biggest fears is that private companies will be able to buy off parts of the NHS in future deals with the USA. Does my hon. Friend agree that it would be catastrophic for our NHS to be sold off to the highest foreign bidder?

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[Stewart Hosie]

I do. It was interesting to listen to what the Secretary of State said earlier. He laid out very clearly, to be fair, the component parts of the NHS that were to be protected. I listened very carefully, but let me give an example of something that was not included: cleaning. People might say, “Big deal,” but in Scotland, when cleaning was contracted to the private sector, hospital-acquired infection rates went up. We then took a decision to bring back NHS cleaners, and hospital-acquired infection rates came down. Had that contract been won under the terms of one of these agreements, we could have been sued and challenged if we had tried to take a public health measure to return something as simple as cleaning from the private sector to the public sector. When it is considered on terms that people can understand—my hon. Friend is absolutely right to raise this point—it demonstrates how, and I will give a few more examples later, public health concerns can be overridden by some of the provisions in these international trade deals.

I look at trade and the proposed deals that we are discussing today through four prisms: how they will affect the success of Scotland’s export businesses; how they will support the Scottish Government’s trade and investment strategy; by asking if the processes suggested ensure that there is proper scrutiny of trade deals; and the attitude towards investor-state dispute settlement arrangements, which can give foreign companies special legal rights outwith our national legal systems. I think it is right that we look at trade through these four prisms.

Scotland’s exporting businesses—it is businesses, not Governments, that export—have done a remarkable job. Last year—I use these figures because they were immediately to hand—Scotland’s exports rose to £29 billion. That was 12% up on the previous year, the largest rise in any part of the UK. With imports at £24 billion, Scotland is a net exporter, which is a fantastic position for the economy to be in—a position that we should strive to retain but one which is put in jeopardy not just by a hard Tory no-deal Brexit, but by any form of Brexit, and that is the point. We hear about the Prime Minister’s deal, but that is only the transitional arrangement. It is not the deal we will have to cut to kick in in 20 months’ time, at the end of the transitional period; that is the bit the Government always seem to ignore.

I said it is businesses that export, not Government, and that is true, but Governments do and must support exporting companies. The Scottish Government’s trade and investment strategy is first class. It brings together trade, investment and the internationalisation of our economy. It defines our ambition and the importance of the “One Scotland” approach. It links to Scotland’s innovation and investment hubs. It tells us what our global opportunities are, and it supports global Scotland and our approach to boosting export performance. Anything the UK Government do should support that.

Although we can and do support trade, we do not negotiate our own deals or have a seat at the top table in the EU, which strikes the best trade deals currently. Until we do—this relates directly to any new deal—we demand a formal, statutory input to trade deals, including the ones being discussed today, at every stage of every trade deal, from setting the mandate for negotiations right through to implementation.

[Ben Lake (Ceredigion) (PC)]

My hon. Friend is making an important point about how Parliaments across the United Kingdom should have a thorough input to trade negotiations, including the mandate. The Welsh Affairs Committee received evidence from representatives from Canada, who engage thoroughly with the devolved legislatures in that country, as well as with businesses, before even coming up with the mandate for negotiations.

[Stewart Hosie]

That demonstrates that it can be done and there is nothing to be afraid of. It is vital so that Scotland’s national interests, as well as those of Wales and Northern Ireland—all the devolved nations—are given equal weight to the needs and ambitions of exporting companies in London and the south-east.

[Angela Crawley]

To pursue that point, the increasingly broad scope of modern trade agreements is such that often we will have to deal with a wide range of reserved and devolved policy areas. Does my hon. Friend agree that if the UK Government consider Scotland to be an equal partner in the Union, they must commit to allowing legislative consent in the Scottish Parliament for any deals that affect Scotland?

[Stewart Hosie]

Yes I do. That ties in directly to the powers the UK Government have seized over public procurement. In Scotland, we have a fantastic record of small and medium-sized enterprises winning public sector contracts. The Westminster figures are rather less compelling. We could lose that advantage because of what has happened in Westminster; equally, we could lose it if foreign companies were able to challenge the way in which we currently do our public procurement.

Trade deals need to be fair, not only to every partner in the UK but to every citizen. That means we cannot accept deals that allow secret investor dispute courts where taxpayers can be put on the hook or public services subjected to forced privatisation and competition in a one-way ratchet, limiting the ability of any Government to deliver services the way they feel is best for the benefit of their public, not for the profit of international businesses.

Even excluding the EU, many of the UK’s biggest trading partners already have or will soon have a free trade agreement with the UK via the EU, so it is unlikely—perhaps even impossible—that net trade with those countries could be increased as a result of the UK leaving the EU. It is far more likely, because the UK will be in a weakened position, that the terms of trade will be less advantageous, but even if they were not, any new FTAs would simply be filling the gaps in trade left behind, and that gap is likely to be very wide indeed.

I intervened on the Secretary of State to ask about the NIESR report published in 2017, which showed a 22% to 30% fall in total UK trade, depending on the type of Brexit. It also suggested a total rise in UK trade of about 2.6% from an FTA with the main English-speaking economies, and a similar rise with an FTA with the BRICS countries—Brazil, Russia, India and China and South Africa. That is nowhere near close to filling the trade gap that Brexit will cause. It is hard to believe that the deals being discussed today with the main English-speaking economies, plus the CPTPP deal, would do any better.

My key questions today are mainly about process. Current procedures are such that this could be the only opportunity MPs have to debate four major trade deals. That would be woefully inadequate. General debates unaccompanied by objectives, strategies or impact assessments, and lacking a vote or the possibility of tabling amendments, do not provide adequate scrutiny and could lead to trade deals being signed that are bad for the UK, contain controversial provisions, or do not have public support. Is this, in effect, the debate on the mandate for these trade deals, or will other debates follow? If they will, how will they be conducted? Will there be a public set of negotiating objectives and comprehensive impact assessments?

Modern trade deals can have major implications across the economy and society. They can touch on financial regulation, public services, environmental policy, intellectual property and Government procurement—all areas where sovereignty normally resides with the legislature. A vague proposal to initiate negotiations is, therefore, concerning. We know that the US is insisting on an agriculture chapter, which would seriously affect UK farming. The US also wants to change chemicals regulation and access to public service contracts—potentially locking in contracting out for public services such as the NHS.

The CPTPP is already written. It contains worrying provisions, including ISDS mechanisms that allow investors to sue Government in secret arbitration courts. Have the Government produced impact assessments of the CPTPP and other deals, and when will Parliament see those assessments? Will they include consideration of third country impacts? Will the Government accept ISDS provisions in any trade deal they sign? Will they promote such provisions? Will the Government exclude public services from future trade deals, and will they use the same strength of wording as is used for military and security exemptions?

It is encouraging that some 600,000 individuals have contributed to the consultation so far, but it was woefully inadequate because it failed to give any sense of negotiating objectives or red lines. What steps will the Minister take to address the serious public concerns raised in the consultation? Will there be a further consultation based on the negotiating objectives accompanied by impact assessments? Will this consultation be a model for future consultations on other trade deals?

My final substantive remarks are more about ISDS or equivalent arbitration. The SNP and many members of the public have real concerns about the impact those provisions could have on Governments. I will give two brief examples.

In the first case, between 1995 and 1997, the Canadian Government banned the export of toxic PCB— poly- chlorinated biphenyl—waste, in order to comply with their obligations under the Basel convention, to which the United States was not a party. Waste treatment company S. D. Myers then sued the Canadian Government for $20 million in damages under chapter 11 of the North American free trade agreement, which is a similar arbitration scheme. The claim was upheld by a NAFTA tribunal in 2000, even though Canada had taken action to remain in compliance with an international treaty.

In the second case, in April 1997, the Canadian Parliament banned the import and transport of petrol additive, MMT—methylcyclopentadienyl manganese tricarbonyl—over concerns that it posed a significant public health risk. Ethyl Corporation, the additive’s manufacturer, sued the Canadian Government, again under NAFTA chapter 11, for $251 million, to cover losses resulting from the “expropriation” of both its MMT production plant and its “good reputation”. That was upheld by the Canadian dispute settlement panel, and the Canadian Government repealed the ban and paid Ethyl Corporation $15 million in compensation.

Those cases involved toxic PCB waste and a petrol additive that was deemed to have a public health impact. It is quite wrong for large corporations to be able to sue Governments simply for taking steps to protect the wellbeing of their citizens, or for enacting public health measures which they believe to be right and for which they may well have an electoral mandate.

While we will welcome new trade deals, whether the United Kingdom cuts them or, better still, they are cut by the EU—for those would be better deals—they need to be fair, and the process of agreeing them needs to be transparent and inclusive, with, for instance, the formal involvement of the Scottish Government and other devolved Administrations at all stages. There needs to be an honest appraisal by the UK Government of the fact that no number of new FTAs can possibly compensate for the damage to trade that will be done by Brexit. There also needs to be a clear understanding that FTAs that include secret ISDS-type courts, which limit the ability of Governments to act in the best interests of their citizens, are simply unacceptable.

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[Graham Stuart]

As ever, the hon. Lady speaks powerfully on behalf of her constituency and, indeed, Northern Ireland. That is a really important point for us to take note of. As I have said, we are led by the Secretary of State in our determination to make sure that we get this right and fully engage people. One of the well-informed Opposition Members said earlier that some of the concerns about TTIP were asinine but, the allegation was, badly politically mishandled. By engaging all parts of the United Kingdom, as I have set out, we are absolutely determined to try to make sure that asinine, false issues do not blind us to the real ones. There are genuine trade-offs to be had in trade agreements, and we should look at and understand them. We need to make sure that we are not spending our time dealing with issues that are not in fact real and are just peddled, often by groups, for political purposes.

[Stewart Hosie]

I agree with the Minister that it is better to take one’s time to analyse the responses to the consultation, but does he or the Secretary of State intend to go back out for further public negotiation once the negotiating mandate for the deals is agreed?

[Graham Stuart]

First, I should say that parliamentarians will continue to be able to inform the negotiations. Parliament will be updated regularly as the negotiations progress, and it will be Parliament, through the process set out in the Constitutional Reform and Governance Act 2010, which was passed by the Labour party, that will ultimately play its role in the ratification of any new FTA.