Negotiating Objectives for a Free Trade Agreement with India

Baroness Hayter of Kentish Town Excerpts

Tuesday 6th September 2022 Grand Committee

Moved by

[Baroness Hayter of Kentish Town]

That the Grand Committee takes note of Her Majesty’s Government’s negotiating objectives for a free trade agreement with India.

Relevant documents: 6th Report from the International Agreements Committee

[Baroness Hayter of Kentish Town (Lab)]

My Lords, I am absolutely delighted to open this first debate under the auspices of the country’s new Prime Minister, a woman—I am sorry, but we can never let an opportunity to say that go. We hope that the new Prime Minister will welcome full parliamentary scrutiny over future trade deals and international agreements.

I am delighted to note that the name of the noble Lord, Lord Frost, appears on the speakers’ list. I looked twice to see whether there was a V beside it. Having heard the rumours of him searching for a Commons seat, I wondered whether he would be using this as his valedictory. From our point our view, I am delighted that there is no V after his name. We will certainly be interested to hear his and other views not only on this deal but on what it says about the Government’s approach to trade.

The International Agreements Committee has long called for a full position paper on how the Government see our future trade relationships, and how these sit alongside their broader foreign policy, defence and security approaches. In the Lords, we owe thanks to the noble Lord, Lord Grimstone. I was going to announce, with great delight, that he is about to join our committee, but if the speculation in the Spectator is true, he is actually going to become Leader of this House. I understand that this may be the Spectator speaking out of order; he was indeed thinking of joining our committee before. As the Minister, the noble Lord has made sure that the International Agreements Committee has had time to peruse the main trade deals and, when requested, has granted a debate, as today. I again welcome the noble Viscount, Lord Younger, who is either holding the fort or, for all we know, a new role—in which case, I welcome him twice over.

Today is important but perhaps also irrelevant. I will explain. We are here to debate the Government’s objectives for their negotiations with India, but the FT reported even before the Summer Recess that 11 of the 26 chapters were done and dusted, and the Department for International Trade claims that everything will be complete next month. So although the Government have had our report since the end of July, it looks as if they proceeded without awaiting any parliamentary input.

This haste brings two risks: first, that the final deal might be unacceptable to the Commons, which can delay ratification, theoretically indefinitely; and, secondly, that by tying itself to an arbitrary target date, Diwali, it risks settling for less than an optimal outcome. I would have thought—I cannot help looking at the noble Lord, Lord Frost, again—that the Government would have learned from the experience of the EU deal having to be sealed two years after Article 50 was triggered that when time is a major card in the hand of negotiators it makes no sense to gift it away. The committee worries that prioritising speed over content means that, come October, we will see something very thin by way of a deal, or worse—that in the rush we will compromise, and give away more than is needed for less than is wanted.

Indeed, business warned the Secretary of State to put the brakes on the talks or risk leaving important sectors behind. Eleven trade bodies stressed that

“It is the content of the deal which matters ... not speed of negotiation”.


They urged the Government to hold out for a meaningful, comprehensive deal, even if it means missing the self-imposed deadline of Diwali. So why the haste? Politico reported that the Secretary of State’s office had concerns about pressure to deliver a deal as a symbolic win for the new Prime Minister, and City AM was being told by various “trade department sources” that the Diwali deadline came from above, leaving little time to negotiate a thorough deal with the traditionally protectionist India. We hope, therefore, that the Minister will reassure us that UK interests, not a photocall for the new Prime Minister, will determine the content of any FTA and that a pre-publicised target date will not lead to an unsatisfactory outcome.

What is the outcome that the UK wants from a deal? Most Indian imports are duty free already, whereas some of our exports to India face very high tariffs—some of the highest amongst WTO members, with different tariffs in different states. These changing tariffs are of a size that makes exporting extremely testing, so movement here should be a major objective.

As importantly, if a trade deal is to mean anything to UK companies it needs to be easier to do business in India. As our report makes clear, there is much to do in this respect, yet this vital issue is absent from the Department for International Trade’s documentation. Our worry is that it is absent because the department does not understand its importance. It is regrettable that Ministers have not set out their priority areas. Government should be engaging with Parliament and stakeholders as to how it is seeking to lower business barriers, which is key for future trade.

Our report uses the word “corruption” to spell out just one of the challenges. But there is also uncertainty, delays, changing rules, lack of enforcement even when adjudication favours a UK exporter, inadequate policing of rules and procedures, ownership requirements favouring local providers, and so forth. For some areas, there is a complete lack of access. These issues need to be high on the Government’s list of demands. The committee is also worried by the lack of any push from our side for an independent dispute mechanism which UK investors and businesses can access, because without this the costs of doing business are very high, given all the risks that already face them in exporting. There was such a mechanism in play until ended by the Indian Government in 2017. We are worried that we are actually regressing on this issue.

One key indicator of the quality—the breadth and depth—of an agreement will be: does it make business easier? If India is to continue with the wide access it already has to our markets, and perhaps get greater access for its citizens to work here—and possibly not even pay NI—it behoves our Government to stand up for UK plc and ensure that this vibrant, expanding and potentially exciting market really is open to our service and manufacturing sectors.

There are two further questions for the Government before they offer a deal to India. These flow from our constant request of Ministers that they spell out their policy on trade and how it fits into their wider defence, security, development, environmental and domestic objectives. We raised this question of strategy with the Minister in our debate on Australia, after which he kindly wrote emphasising that the Government’s trade policy is framed by the strategic context set out in the integrated review. However, it is hard to see how expanding our economic relations with India sits with our unequivocal commitment to European security when we see India undermining our sanctions on Russia —indeed, profiting from increased trade with Russia—and failing to condemn the invasion of Ukraine.

Although the Government might argue that a trade deal will help build relations and therefore influence, elsewhere they suggest that they already have those relations, but they do not seem to be very effective. The Minister’s letter says that the Government will publish strategic cases for each new FTA and that each strategic case places the trade agreement within our wider strategic approach. If that is the case, can the noble Viscount set out how this deal sits happily with the Government’s welcome, and appropriate, stance on Ukraine?

Even more important, perhaps, is the second issue: the lack of a tie-up with the integrated review’s frequent references to tackling climate change. They are not evident from these negotiating objectives, which say nothing about India’s reliance on coal, nor about how the deal would help achieve the reduction in greenhouse gases to which we are pledged. Perhaps the Minister could again explain how the strategic case for this FTA really does, in his words, fit within our wider strategic approach.

Our trade with India is already substantial and will, I hope, become even more so. Any FTA would be the most consequential to date of any post-Brexit deal. We are talking about a large and expanding market, a Commonwealth country with which we have strong ties, and an economy that is becoming one of the world’s most significant. Such an FTA must therefore be robust, forward-looking and fair to consumers, workers, the environment, business and future generations, respecting both human rights and democracy. As we have made clear, a major issue is how business can be helped to make increased trade with India a reality, given the obstacles I have outlined. Will moves to overcome them be in such a deal, or will they be forgotten? We share the Government’s ambitions for trade deals, although we wish that they were realistic and that the objectives set out were less vague so that Parliament could see what Ministers are seeking to achieve.

Members of the International Agreements Committee, our clerk and advisers have worked hard to bring this report before your Lordships. I thank them all for their efforts; we will shortly hear from some of the committee’s members, covering different aspects of the report. Although we welcome Anne-Marie Trevelyan’s recent undertaking on greater involvement prior to the setting of objectives going forward, I fear that we are now too late to influence these particular negotiations one iota. I hope that, in future, the Government take soundings from us and our opposite numbers in the Commons so that, having taken back control—the noble Lords, Lord Hannan and Lord Frost, have often spoken of this—that control really will go to Parliament, not simply to the Executive. I beg to move.

--- Later in debate ---

[Baroness Hayter of Kentish Town (Lab)]

I thank all those who have spoken in the debate. I thank them for their tributes to the work done, needless to say, not by myself but by our staff and my fellow committee members, some of whom we have heard from today: the noble Earl, Lord Sandwich, and the noble Lords, Lord Kerr, Lord Lansley and Lord Udny-Lister. I thank the anorak, the noble Lord, Lord Purvis, who managed to find supplementary bits, particularly about trade diversion, which is really important.

I thank the Minister for his response. We will take up the issue of a policy with whoever will be the new Secretary of State, and I thank all the speakers who have supported that today. It is really important, particularly hearing from the noble Lord, Lord Frost, and others. There has been support for not just that wider policy but the role of Parliament in it.

I was slightly worried by the noble Lords, Lord Frost and Lord Hannan, being worried about opening doors to domestic lobbies. I thought democracy was all about hearing from consumers, business and the DAs, so I was slightly surprised, but I think the tone was very supportive of that.

The Committee will be pleased to know that I am not going to go through the issues that were covered. They were wide-ranging and all were serious, whether it was legal and professional services, GIs, human rights, as raised by the noble and right reverend Lord, Lord Harries, and the noble Lords, Lord Hussain and Lord Balfe, labour rights and gender, as raised by the noble Lord, Lord Udny-Lister, the noble Baroness, Lady Bennett, my noble friend Lord McNicol and others, or the environment—an interesting point raised by the noble Earl, Lord Caithness, and the noble Baroness, Lady McIntosh, was that there could be opportunities for helping India move on this, as well as the challenges that we must ensure we do something about.

There were a variety of views on ISDS, which is something we need to discuss with the Government. I think there is clarity, even from the noble Earl, Lord Caithness, who has issues with it, that some independent arbitration is necessary to give people confidence, but without it being potentially used by those who have a different agenda from what it was meant to be for. I hope the Government will come up with something that we can all support.

I shall say two things to close. First, on Ukraine, this seems absolutely pertinent to the view that we are all pointing to. I think it was the noble Lord, Lord Kerr—he always gets the best phrases—who said that you cannot red-line trade; it is part of our global world relations and at the moment Ukraine is central to that. The noble Lord, Lord Balfe, may not quite have agreed, but I think the rest of us felt that it was the exemplar, if you like, of how we must see trade as both a tool and a part of our wider relations.

Secondly, my noble friend Lord McNicol reminded us that, just as India celebrated 75 years of independence, it overtook the UK as the world’s fifth-largest economy. The noble Lord, Lord Udny-Lister, and the noble Earl, Lord Sandwich, said that it will move towards being the third-largest within 20 years. This is clearly a market that is not just of potential interest to us but important in its own right. It is a major economy, but it is not perfect, as noble Lords have said. The challenge is to make sure we have a deal that is good for business, good for consumers, good for workers and good for UK plc, but also good for India and the global economy. I hope we can work with the Government to move towards that.

Motion agreed.