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EU: Free Trade Agreements

Volume 751: debated on Monday 13 January 2014


Asked by

To ask Her Majesty’s Government what progress is being made in European Union free trade agreements.

The EU is currently negotiating 12 free trade agreements, including those with major trading partners such as the United States and Japan. The EU has also reached conclusion on 10 more agreements that have yet to enter force, adding to the 50 that have already been agreed and are now active. These negotiations are complicated endeavours, but I believe that the EU has made good progress. The Government will continue to be a champion for free trade and of the benefits that it brings to this country.

I thank the Minister for that Answer, which draws our attention to the huge number of free trade agreements that are in course. I would direct his attention to the EU-US free trade agreement. In that connection, has he seen the projections that were issued of the benefit there would be to both the EU and the US, which, interestingly, appears to be roughly evenly divided? Does he agree that the assumption of a virtually equal division of the benefits should be revisited in the light of the huge competitive advantage that the US now enjoys, thanks to its access to abundant supplies of cheap energy, whereas we are increasingly locked into expensive energy to the disadvantage of our businesses?

My noble friend is right to draw attention to TTIP, the US-EU agreement, which will indeed bring substantial benefits. I believe that the UK is expected to gain around £10 billion a year, which is about £400 for every family in the UK, the US is expected to gain about £80 billion and the EU about £100 billion, so there are very substantial gains. In addition, there will be very substantial gains for the rest of the world, which are believed to be in excess of £80 billion.

I take my noble friend’s point that energy presents some challenges. Certainly, we hope to see the US exporting energy, so that the benefits of shale to global energy prices would help all industry rather than just those in the US. In any event, we believe that helping to have openness and convergence of standards will assist all citizens, not just in the EU but in the US and around the world.

My Lords, if we left the political construct of the European Union, is there any reason why, as one of the world’s largest economies, we could not maintain our existing trade agreements and sign new ones with Commonwealth countries and the markets of the future? Surely we would enjoy our own seat on the World Trade Organisation.

If we were to exit the EU, there would be no certainty that any of the free trade agreements would actually continue. While the UK is a significant economy in its own right—and that is important—these agreements take many years to negotiate. Even assuming that we could renegotiate them, we would not have the leverage that the EU has, as the single largest trading bloc in the world, to make such agreements. Therefore, I think that it would be very difficult to replicate them, particularly within a short space of time.

My Lords, will the Minister comment on progress on the negotiations between the European Union and African, Caribbean and Pacific countries, which have now been going on for 10 years and are meant to focus on development and reciprocal free trade? Is it not the case that there is a strong chance that, unless the October deadline is met, we will see an unprecedented situation wherein African countries will lose their preferential access to European markets?

The noble Baroness makes a good point in raising those countries. There has been a lot of focus on the most developed nations, but we also have an obligation to continue to push the economic partnership agreements that we have been trying to make with Caribbean and African countries. However, I would stress that there was a major breakthrough with the WTO agreements. The WTO agreement to aid trade facilitation is worth around £100 billion to the world economy as a whole and the vast majority of that will go to developing nations, which I think is to be welcomed. Certainly the UK will continue to push for trade agreements with Caribbean, African and ASEAN countries. We are great proponents of free trade and of the benefits that it brings for all nations involved in it.

My Lords, does my noble friend the Minister agree that concluding the EU-India free trade agreement would bring enormous benefits to the economies of both sides and, therefore, that finding solutions to the remaining obstacles should be a priority this year?

Indeed, the Indian agreement would be of great benefit. Of course, India is one of the major powers and is growing fast. However, as we know from our debates in this House, there are challenges with internal Indian beliefs on trade and there are elections in India in, I believe, April this year. Discussions are ongoing, and I believe there will be discussions in Davos with the Indian trade Minister regarding progress on this agreement. We will certainly be pushing the Indian Government for a wide-ranging agreement, but whether that will be feasible this side of the Indian election is extremely doubtful.

Will the EU-US prospective trade agreement as currently envisaged continue to allow the United States to ban the export of crude oil or natural gas, as they do at the present time?

The discussions are still ongoing. Clearly, we would like to see free trade of all descriptions, but the TTIP agreement will be largely focused on reducing import tariffs and particularly on the convergence of rules, which will help all countries. We would certainly like to see its energy exports being made available all around the world, as is the case with UK exports from the North Sea.

Does the noble Lord agree that the advantages of TTIP to the consumer need to be more emphasised? At the moment, most of the emphasis is on the benefits to producers on both sides of the Atlantic, but in terms of price reduction and a widening choice of products and goods the TTIP stands to do the consumer a great deal of good as well.

My noble friend is entirely right that the TTIP will bring a lot of benefit to consumers. When you get a convergence of standards, global models being made and lower tariffs, prices will come down and consumers will have more choice, not just in the UK or the EU but in the US as well. Certainly, we feel it is very important—Her Majesty’s Government have done a number of pieces of good work on this—to highlight the benefits that free trade will bring to consumers on both sides of the Atlantic. I absolutely agree with my noble friend that it is very important to highlight the positive impact that will arise.

Does the Minister agree that it is a very encouraging sign that the US Administration are now pressing for fast-track authority for this agreement, as with the Pacific one, and that this is essential if the agreement is to go through in a reasonable amount of time? Will the Government do what they can to let their friends in Washington know that this fast-track authority is really important and to let our friends in Brussels know that this is a sign that the negotiation really is for serious?

Indeed it is. The timetable for TTIP is very aggressive, with the aim of completion by 2015, which would be almost unprecedented. I met with the US ambassador to the UK just before Christmas and we discussed TTIP at some length. Certainly, his enthusiasm for it is there, albeit that I recognise that not everyone in the American political system feels that way. However, we made that point very clearly. The Prime Minister said at the G8 conference that this is a once-in-a-generation opportunity and, understandably, I would not disagree with the Prime Minister on this issue.

Is the Minister confident that free trade agreements would be good for African economies? Historically, did not the US, our own country and the countries that are now successful—the industrialised countries of south-east Asia—build up their economic strength behind protectionist barriers? Is it not the case that when the countries of the advanced West pressure African countries into free trade agreements, they are doing so not for the benefit of those African economies but for themselves?

As I indicated earlier, from the free trade agreement that was recently conducted in Bali, for example, the biggest beneficiaries by far will be the developing nations. The improvement of trade facilitation will yield £100 billion in benefit, most of which will come to them. Actually, a lack of free trade, rather than the absence of it, has been the challenge for a lot of developing nations. The UK will continue to push to see free trade around the world, not just with developed countries but with developing countries.

My Lords, in all these agreements that the European Union makes with third parties, there is a standard clause on human rights. Can he tell me of any such agreement in which that clause has ever been invoked?

My noble friend is correct that EU agreements, including for instance the one with Canada, have standard clauses on human rights. I am not aware that any of these clauses have been invoked, although it is feasible to suspend all or part of the agreement if human rights have got worse in a particular country. I think that the engagement in free trade and the free movement of people, services and goods, is something that should help human rights. I certainly think that ensuring that human rights are on the agenda when we try to negotiate is a major help.

My Lords, without doubting the importance of free trade agreements to lifting an estimated 800 million people in the world out of starvation, despair or poverty, will the noble Lord nevertheless take into account the exploitation of children in a country like India, for instance, or exploited labour elsewhere in the world? Will he tell the House what balance is struck in determining free trade agreements in relation to protecting the rights of those who are likely to be exploited?

The challenge of child labour in certain countries can happen irrespective of free trade, but I think that free trade will actually help through the exposure and openness of the economies, which is a major help to improving the conditions of workers in individual countries. That is something we will continue to push for. As I said earlier, we also put human rights clauses in the various agreements and the UN has certain statements on human rights, which we also look to comply with. It is an important subject, but it is not peculiar to free trade agreements.

My Lords, is it not inevitable that, as long as European energy prices are double—or, in the case of Germany, triple—that of the United States, there is inevitably going to be a transfer of manufacturing to the United States?

As I said earlier, energy prices are a significant issue for EU-US relations, but they are not the only issue and there are many industries that are not wholly reliant on energy prices. In fact, energy prices are just one part of the total package. We would also look to see the exploitation, for instance, of alternative energy sources in the UK, which will hopefully act to balance some of that. With that in mind, I was delighted to see the comments from the Prime Minister about looking for alternative energy sources. The UK, which is already an energy producer through conventional means, is also looking at alternative sources of energy, and that is going to be very important for the future of the UK.