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Trade: Import Substitution

Volume 753: debated on Wednesday 19 March 2014


Asked by

To ask Her Majesty’s Government what steps they are taking to correct the United Kingdom’s trade imbalance, and in particular with the European Union, by encouraging import substitution with a view to repatriating those jobs currently created overseas.

Trade and investment are essential to returning the UK economy to balanced and sustainable growth. This Government have focused efforts on creating an attractive business environment in the UK, increasing support for UK firms to grow through exporting and introducing a new service supporting UK businesses to bring jobs back to the UK. Our actions will help UK businesses to compete across the globe, including in Europe and the high-growth market.

I thank the Minister for his very sagacious reply. Does he agree that, as mentioned in today’s Budget, we cannot go on borrowing abroad indefinitely to fund our huge trade imbalances, not least our £88 billion deficit with the EU last year? Currently, our exports are made even less competitive by an ever rising pound which then subsidises the import of goods, many of which we could perfectly well make here at home. Does he agree that, as a trading nation, we cannot ignore our exchange rate and that, by getting this down, we would bring home hundreds of thousands of jobs that our borrowings are creating overseas, reduce our indebtedness and help exports? Is this not a virtuous circle to be recommended as the best way of reducing unemployment and balancing our books?

The Government recognise the scale of the trade deficit as a problem that only a substantial expansion in exports will fix. Building upon the work of my noble friend Lord Green, my noble friend Lord Livingston has refreshed UKTI strategy to focus on helping more medium-sized companies into overseas markets, thereby delivering up to £50 billion-worth to the economy.

My Lords, the noble Lord, Lord Harrison, mentioned Bentley, which is now moving the manufacture of all its 12-cylinder engines from Germany to the UK. Is that not marvellous news? In declaring my interest in my own business, we used to manufacture the vast majority in Europe and then reshored because Burton-on-Trent is capable of producing the best beer in the world. The Chancellor mentioned manufacturing in great positive terms in his speech today. What are the Government specifically doing to encourage manufacturing in this country that will help reshoring and help our exports?

Manufacturing remains the most important part of what we do in the UK. UKTI has joined forces with the Manufacturing Advisory Service to relaunch Reshore UK, which will be a new, one-stop-shop service to help companies bring production back to the UK. This will give greater reassurance to hard-working people that there is increasing job security and a better plan for them to make for their families for the future.

My Lords, do the Government have a case that the Minister could tell the noble Lord, Lord Vinson, about for substituting more expensive and worthless UK products for good cheap products that are coming in?

It is fair to say that imports are also important for the UK. It is not just exports. The balance has to be right.

My Lords, is not the best contribution that the Government could make towards improving the trade balance a firm commitment to the single market and a policy of strongly supporting the completion of the single market as a committed member of the European Union?

My Lords, the Government could not be clearer that membership of the EU is in the UK’s interest. We will continue to make that case vigorously as we progress with our proposals for reforming the EU. We recognise that the EU supports UK jobs, prosperity and growth through increased trade and investment both inside the single market and through free trade agreements.

My Lords, is it not true that, according to the ONS, only 12% of our GDP goes in trade with clients in the European Union and that is declining and in deficit, 14% goes to the rest of the world and that is increasing and in surplus, and the remaining 88% stays right here in the domestic economy? Is not the answer to this perfectly obvious?

My Lords, I was not intending to be drawn into a discussion on Europe, but the House will like to be reminded that an estimated 3.5 million jobs—some one in 10—are linked to, but not dependent on, trade with the EU. Since the single market came into being, our trade with Europe has tripled. Some 45% of UK exports currently go to the EU, so it remains a most important market.

My Lords, does my noble friend agree that the measures on energy and on support for investment and manufacturing announced in today’s Budget will improve the competitiveness of our industries and therefore encourage import substitution and improve the trade balance?

Yes, indeed. The announcement that has been made today will very much help the trade balance, and exports, which I have mentioned already on this Question and on the previous PQ, will benefit.

My Lords, the Government will be aware from the recent CRESC report that the UK pigmeat supply chain is in crisis. The national pig herd has declined by around 50% and the UK has gone from 80% self-sufficiency in bacon sandwiches to less than 50%. Would the noble Lord the Minister—sorry, the sagacious noble Lord the Minister—agree with me that the Government need to take action urgently to encourage the horizontal integration of producers, to support the creation of farm co-operatives and to provide assistance with marketing?

The decisions that we are taking, particularly in the light of today’s Budget, will lead to a better climate and to more jobs being created and greater security in that sector.

My Lords, is it not true that the European Union’s policies on increasing the cost of energy and, of course, widening fuel poverty are also driving chemical engineering firms out of Europe and out of Britain and will cause a grave loss of jobs? Can we not just tell them that we do not wish those policies to apply here?

My Lords, I have already given my views on Europe. In terms of energy, as the House will be aware, we are continuing to develop some energy-friendly policies, particularly focusing on the automotive sector.

My Lords, will the Minister clarify for the sake of all of us—because we are really quite confused—whether he agrees with his noble friend, the noble Lord, Lord Taverne, or with the fanatics from the United Kingdom Independence Party?