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Trading Relations: USA, EU and China

Volume 825: debated on Monday 7 November 2022


Asked by

To ask His Majesty’s Government which of the world’s three largest economies—the United States of America, the European Union, and China—they will prioritise in seeking to improve trading relations.

My Lords, we are engaging with all three trading partners to remove trade barriers. In the year ending June 2022, the US was our largest single trading partner, accounting for 16% of total UK trade, worth £234.7 billion. In this period, the EU remained our largest trading partner overall. We exported goods and services worth £298.1 billion, which is 42.9% of our total trade. China was our fourth largest single trading partner, with £92.9 billion of bilateral trade, which is 6.3% of total UK trade.

My Lords, I thank the Minister for that Answer. Given that trade with the EU makes up around half our imports and exports, it is vital that FTAs with larger non-EU markets, such as the US, China and India, are advantageous to the UK economy. In recent departmental questions in the other place, Ministers seemed unable to put an estimated net value to any future trade deals that the Government are pursuing, including CPTPP. Is this because the estimates do not exist or because the Government are unwilling to share them? Will the Minister therefore provide an estimate of net values to the UK of trade agreements currently being negotiated, either now or in writing if he does not have the figures at his fingertips?

I certainly will. I will read Hansard tomorrow, in terms of what I am about to say. We have agreed trade deals with 71 countries, plus the EU—partners that accounted for £814 billion of UK bilateral trade in 2021. As the noble Lord will know, we have signed FTAs with Australia and New Zealand and a digital economy agreement with Singapore. We have in progress India—a long way to go—Greenland, Canada, Mexico, the Gulf Cooperation Council and Israel.

My Lords, what does the noble Viscount say about having a trade deficit with the People’s Republic of China of some £40 billion, when China is upgraded by the Government themselves as being a threat to the security interests of the United Kingdom, and about spending some £10 billion—the size of our entire overseas aid and development budget —on items associated with Covid, not least 1 billion lateral flow tests, bought from the People’s Republic of China? Is it not time that we increased our own manufacturing capacity to ensure that such items could be made in the United Kingdom by British workers? Surely we must see that the lack of resilience and too much dependency at a time like this, given what has happened with Ukraine and Russia, is not something that this country should follow.

I always listen carefully to the noble Lord. He makes some good points. I start by saying that 61,000 jobs in this country are reliant on Chinese companies. However, human rights are a major issue; I hope that chimes with the remarks made on many occasions in this Chamber in providing evidence of the extent of China’s efforts to silence and repress the Uighurs and other minorities. It is important that we create a balance between continuing trade with China and the fact that we are not looking at forming an FTA with China at present.

My Lords, we were promised that there would be no friction in our trade with Europe. There is enormous friction. We were also promised by now a full FTA with America that would mop up any slack in our trading relations with Europe. That has not happened. As the noble Lord, Lord Alton, said, we now have the largest trade deficit in our nation’s history with one country—China—making up £40.5 billion. Is it not now in our strategic interest to reduce the barriers between us and our nearest neighbours—democratic countries—and to make sure that our economy is no longer wholly dependent on imports of goods from China? Why are the Conservative Government making the UK dependent on goods from China?

I do not believe that we are doing that. On the noble Lord’s points, I say that our free trade agreement negotiations with the US—it is, as we know, a very important market—are paused at the moment for reasons he will know. On the EU, we know that progress is being made. Obviously, some extremely difficult and sensitive negotiations are ongoing, but we are firmly of the belief that we will be able to resolve these.

My Lords, with all the talk about deficits and the mercantilist mood in the House, will my noble friend the Minister take this opportunity to remind the House that imports are a prize, not a concession, and bring prices down—especially for people on low incomes? As Adam Smith pointed out as long ago as 1776, there is no point in amassing great surpluses except in so far as they pay for imports. Would it not be a good thing if we cut some of our own tariffs unliterally to stimulate this process further and grow our economy?

Well, it is imports versus exports. My noble friend makes a good point: the Government’s vision is to create a UK that trades its way to prosperity. We will achieve this by championing free and fair trade multilaterally, plurilaterally and bilaterally through engagement at the WTO, our free trade agreements and our bilateral market access work. As I said, this allows us also to export using our great skills in services, digital, science, technology and advanced manufacturing.

My Lords, the Minister says that an agreement with India is some way away, just 10 days after the target date for completing the negotiations. Can he explain why that target date was not met?

I understand that the target date tied in with Diwali rather neatly, but I am sure that the noble Lord, with all his experience, will tell me that it is right to have a date that people can work towards. India is a huge prize for this country. It is a dynamic, fast-growing trade partner and offers a terrific opportunity to deepen our already strong relationship, which was worth £29.6 billion in the four quarters to the end of quarter 2 in 2022. However, there is a lot of work to be done on this deal. It is right to have a deadline but we certainly need to work hard on the deal.

Can the Minister give any details of work that the Government have undertaken, or ensured that others undertake, to ensure that no products coming into this country from China contain cotton grown in Xinjiang? During our debates earlier in the year, two Ministers stood at that Dispatch Box and agreed to check products containing cotton, such as mattresses and nurses’ uniforms, to see whether the cotton was grown in Xinjiang. You can do that from the product. What have the Government done about that, because they have never reported any results?

The noble Lord makes a good point. The Government are committed to tackling Uighur forced labour in our supply chains and are taking robust action. Over the past year, we have introduced new guidance on the risks of doing business in Xinjiang, introduced enhanced export controls and announced the introduction of financial penalties under the Modern Slavery Act. These followed the Government’s announcement in September 2020 of an ambitious package of changes to the Modern Slavery Act.

My Lords, will easing border formalities be in the sights of the Government? They serve as a major barrier to trade, particularly in relation to the European Union. While the sentiment behind the Question is clearly understood, does the Minister equally recognise that emerging markets present great opportunities for British companies and government? What strategy is there to persevere with those opportunities?

I mentioned earlier a number of countries that we are actively in discussion with. However, we also have 32 hard-working trade envoys covering even more countries. Now that we are outside the EU, our aim is to reach out wherever we can. We cannot do it all at the same time but, wherever and whenever we can, we aim to agree deals with as many countries as we can that are in our best interests.

My Lords, will the Minister not accept that it is misleading the House, and his headquarters is misleading the country in its leaflets, to say that the Government have signed 71 new trades when the only two new deals have been with Australia and New Zealand? In the other 69, “the EU” has been Snopaked out and replaced with “the UK”.

No, it is right that we say that we have agreed trade deals with 71 countries plus the EU. That is a fact, that is what I meant to say and that is what I will stick by.