UK-Israel Trade Negotiations

Jim Shannon Excerpts

Thursday 20th January 2022 Westminster Hall

[Jim Shannon (Strangford) (DUP)]

It is always a pleasure to serve under your chairmanship, Mr Paisley, and to be in your company—I want to have that on the record. We are close friends and colleagues, having come into this House at the same time.

I congratulate the hon. Member for Harrow East (Bob Blackman) on setting the scene. We missed him this morning at International Trade questions. I figured if he was not there, something must be seriously wrong, but he was there later on—he was alright. His question was still asked—I do not know how he did that. He is always very helpful to me when I go to the Backbench Business Committee to ask for a debate. I am not aware of any occasions—touch wood—when I have been refused a debate by the Backbench Business Committee, and the debates have always been on topical issues, so it is good to have them. Today’s issue is very close to my heart, and the hon. Gentleman outlined it incredibly well.

I see that the hon. Member for Hendon (Dr Offord) has a debate scheduled for Westminster Hall under a slightly different topic heading; we will probably repeat the points that we have addressed today. If God spares me until then, I will be here at 9.30 on Wednesday morning to support the hon. Gentleman in the debate, as will others.

The hon. Member for Harrow East often raises the importance of securing a trade deal with Israel, and I agree. In 2017, Israel was voted the fifth most innovative country in terms of technology and cyber-security. There is absolutely no doubt that we need to increase our co-operation, business and economic growth alongside Israel, so that both countries can benefit. It is imperative that we continue to improve trade relations with our friends and partners.

When I was at the Northern Ireland Assembly—I was there for 12 years—I was a member of the Northern Ireland Friends of Israel group. When I came here, I continued that relationship with the Friends of Israel. I am keen to see relations between the United Kingdom and Israel continuing and, indeed, increasing. The hon. Member for Harrow East said that, too. We should appreciate that that is for everyone’s benefit. Figures from the year 2017 show that UK exports to Israel were £2.3 billion, making it the UK’s 42nd largest export market—accounting for 0.4% of all UK exports. UK imports from Israel were £1.6 billion, making it the UK’s 47th largest import source, accounting for 0.3% of all UK imports. Most recent figures from 2020 also show that the UK had bilateral trade with Israel amounting to £5.1 billion. It is clear that we have a good relationship, but we always want to do better; that is the reason for this debate. It is what the hon. Member for Harrow East is looking for.

There is certainly evidence that there is a need for progressive trade relations with Israel in regards to security—that is an important factor for us all and a key one for me. The Foreign Secretary stated back in November, along with her Israeli Counterpart, that,

“there is a need for a new strategic plan for the next decade, spanning cyber, tech, trade and defence.”

The opportunities are enormous. It was also mentioned that the two countries would work night and day, 24/7, to prevent the Iranian regime from ever becoming a nuclear power. That would be to the benefit of everyone, and to the benefit of world peace, not just the UK and Israel. That is brilliant and we should all try and achieve that. Even the couple of Members here who do not have active participation with Israel should want to make sure the Iran does not achieve nuclear power.

It was former Secretary of State William Hague who labelled science and business ties

“one of the cornerstones of the relationship between Israel and the UK.”

The strategic agreement signed with Israel is the starting post for a series of activities that will deepen our trading relationship. I understand a public consultation on our enhanced bilateral free trade agreement will be opened this month, and there will be further trade strategies in March, as the hon. Member for Harrow East said. It is crucial that we do all we can now to progress this trading relationship. It is important to remember that our trade connections help to strengthen our relationships not only with Israel, but with the rest of the world. It is only right that trade connections benefit every one of us, and Israel is a key friend and trading relationship.

The Minister says that there will be a joint innovation strategy. With that in mind, will there be discussions with Education Ministers? There is the possibility that we can do things in that area, such as combining specialised research through our universities. We have been very good at that with other countries, so maybe the Minister could tell us what could be done in relation to that with Israel.

Israel has proven successful through some of the world’s leading companies, such as Teva Pharmaceuticals, which is worth over £57 million, and computer specialist Intel, which is worth over £27 million. Combined, both of those companies employ over 53,000 people. In addition, UK exports to Israel amounted to £2.6 billion in the four quarters to the end of 2021, which represents a slight decrease—I find that hard to comprehend, but it was probably due to the pandemic and other factors. Could the Minister give us an explanation of why there was a small decrease? Total UK imports from Israel amounted to £9.1 billion at the end of 2020, which was also a decrease of 10.8% from 2021. Again, was the pandemic the reason for that? If it was, then we know that those numbers can only go one way, which is upwards. We must do all we can to ensure that those figures do not decrease any further. I am sure the Minister will respond to that point.

Israel was the UK’s 40th largest trading partner at the end of 2020. I encourage the Foreign, Commonwealth and Development Office to do all it can to ensure that we continue to show interest through trade. I understand that trading figures may have decreased due to the covid-19 pandemic, but it is essential that we do not continue to let this become a problem. Our economy is essential to our success, for jobs and for the benefit of all of us in the UK, Israel and, of course, the world.

I understand that other Members want to speak, so I will conclude my remarks. It is crucial that we prioritise our trading links with other countries. More discussion must take place between the Minister and his counterparts to expand our products’ scope, and how we can build on what we have and perhaps even develop it more. When it comes to trade deals, our Government have been very successful so far, so we look to see where we are with Israel. We all welcome the prospect of an enhanced trade deal with Israel, as well as strong support from UK Export Finance to help finance exports into Israel. With that in mind, I very much support what the hon. Member for Harrow East has said, and look forward to the Minister’s response. It is good to see him in his place: he has been missing for a while, but wherever he has been, it is good to see him back.

[Ian Paisley (in the Chair)]

The Minister will be able to explain those sleepless nights very soon.

--- Later in debate ---

[The Parliamentary Under-Secretary of State for International Trade (Mr Ranil Jayawardena)]

It is a pleasure to serve under your chairmanship for the first time, Mr Paisley, and I welcome the hon. Members for Brentford and Isleworth (Ruth Cadbury) and for Airdrie and Shotts (Ms Qaisar) to their places. I should also like to thank my hon. Friend the Member for Harrow East (Bob Blackman) for securing this important debate and all Members who have been present this Thursday afternoon and made important contributions.

The hon. Member for Strangford (Jim Shannon) raised the question of why I had been away from the House in recent weeks. In his absence, but for the record, I should say that I have been away for a couple of weeks due to the birth of my son. [Hon. Members: “Hear, hear.”] Thank you.

That explains why the hon. Gentleman has not seen me in the Palace, but I am delighted to be back and discussing this important topic, because Britain is strongly committed to her trade and investment relationship with Israel, one of the middle east’s most dynamic and innovative economies. Israel is a key ally and friend to the United Kingdom. We share the same values and are key strategic partners in the middle east. The bilateral trade relationship is very strong, and we want to continue to work with Israel to strengthen our relationship as we emerge as an independent trading nation for the first time in 50 years.

Let me be crystal clear at the outset: we are strongly opposed to boycotts. Open, honest conversations best support peace efforts. The United Kingdom is very clear about this—always has been and always will be. We have also made clear our commitment to supporting the Abraham accords and to working with Israeli and Arab partners to promote our shared prosperity and regional security.

The continuity agreement that we signed on 18 February 2019 was one of Britain’s first. It replicated the scope of the EU-Israel agreement, with key provisions covering tariff liberalisation, customs, regulation and public procurement. This trade and partnership agreement, which entered into force on 1 January last year, secured the future of our bilateral trade relationship. Anglo-Israeli trade was worth £4.6 billion in the four quarters to the end of Q2 2021, making Israel—I am pleased to say that I agree with my counterpart, the hon. Member for Brentford and Isleworth—the United Kingdom’s 40th largest trading partner globally. The United Kingdom is Israel’s second largest trading partner, behind only the United States.

While it is difficult to disaggregate trade figures, it is certainly true—to respond the comments by the hon. Member for Strangford—that covid has depressed trade around the world, but that makes trade with Israel all the more important. Co-operation between us in sectors such as science and technology—and particularly medical science, which we have heard a lot about this afternoon—is already very strong, with Israel’s status as a start-up nation and the United Kingdom’s as a science superpower going hand in hand.

We have heard some great examples from so many colleagues, including my hon. Friend the Member for Harrow East. I was also particularly drawn to the examples given by my hon. Friend the Member for Southport (Damien Moore), which showed the huge scale of imports that we benefit from here in Britain, but we export to Israel too. We should not lose sight of that benefit to both countries. The London Electric Vehicle Company, for example, makes taxis in Warwickshire—I am sorry to say that to my hon. Friend the Member for Harrow East, although I am sure Members from Warwickshire will be pleased with that news. LEVC vehicle exports totalled something like £1.46 million in 2021—a year when trade was depressed because of covid—and the company anticipates purchases of something like £730,000 a month this year. That is just one example but, to the point made by the hon. Member for Brentford and Isleworth (Ruth Cadbury), as far as I am concerned, the sky is the limit.

As my hon. Friend the Member for Hendon (Dr Offord) said, around 500 Israeli firms operate in the United Kingdom. That investment from overseas is creating thousands of jobs in high-value sectors, and over 20 Israeli firms are listed on the London Stock Exchange or AIM—its alternative investment market—demonstrating the benefit and strength of capital markets in the City of London. Of course, we can always do more to assist the relationship, and I know that Ministers across Government will look carefully at the comments made by Members, including their suggestions on changes to the visa regime.

We can always do more to help businesses succeed, and the Department for International Trade is doing that right now. We have a dedicated team of trade advisers in Tel Aviv, and UK Export Finance has a risk appetite for Israel of at least £4 billion, which is helping firms operating from the United Kingdom to win contracts, insure their operations and obtain trade financing. The United Kingdom and Israel share a world-leading culture of entrepreneurial, tech-savvy and innovative businesses, which will be celebrated in an innovation summit later this year—a clear opportunity to highlight our ambitious trade, science and innovation relationship, and a chance to showcase the shared talents and skills of world-leading British and Israeli businesses. My hon. Friend the Member for Harrow East asked about what more we could do to enable binational approaches to research and development, and I am pleased to say that the UK Science and Innovation Network is already making great strides in that direction.

Outwardly, the stock of foreign direct investment from the United Kingdom to Israel was £1.4 billion as of 2019. We trade across a huge range of sectors, as I have said, but both our economies are also highly oriented towards services, which represent over 70% of GDP for each country. After the United States, we are Israel’s second-largest collaborator in pharmaceuticals and medical products, and the pandemic has catapulted the need for digital health solutions, with Israel already being the world’s leader in this area. It has therefore become even more important. Beyond that, we seek opportunities in business services, research and development, and professional and management consulting services—the biggest traded services between our countries, making up 12.5% of the overall trade relationship. Although our trading relationship continues to be predominantly goods-based, at around 65% of our trade, our economies are highly services-oriented, and I believe that huge scope for the future lies in our trade in services.

As two like-minded partners, with expertise in areas such as technology, innovation, data and digital, we are confident that the United Kingdom and Israel can agree an ambitious deal that will complement both our economies. On 29 November, the Prime Minister announced that we would begin talks with Israel this year on an enhanced free trade agreement. Given both the political and economic importance of our trading relationship with Israel, we expect the FTA to form a substantial part of our bilateral trading relationship. I should emphasise that Her Majesty’s Government are committed to scrutiny and openness in our FTA negotiations. We aim to be transparent, consultative and accountable throughout our trade agenda, and we believe we compare favourably with other parliamentary systems around the world.

On 2 December, the Secretary of State for International Trade announced that the United Kingdom would open our formal call for evidence very shortly. This call for input will allow the views of businesses, the British people, civil society and others—not only parliamentarians —to be fully heard during the mandate development process, helping us shape the negotiations for our comprehensive FTA. The specific coverage of the objectives for an FTA, as asked for by the hon. Member for Airdrie and Shotts, will be concluded following this call for input, to ensure that we have fully listened to the views of all British people, businesses and civil society. It simply would not be appropriate to speculate on the contents of such a call for input—and, indeed, on our objectives—before completing that work. However, I am pleased to be able to say that the Secretary of State plans to travel to Israel in early February.

We will publish our strategic approach, an initial scoping assessment and a Government response to the call for input before starting negotiations, giving the House the means to scrutinise our negotiation approach, its projected impact, what we have been told by British people and businesses and our response to their views. We will, of course, update the House in the usual manner after each negotiation round and when requested to appear before the relevant parliamentary Committees.

[Jim Shannon]

I must apologise for not being present when the Minister mentioned me. I have a private Member’s Bill tomorrow and the Minister responsible has been trying to catch me, so I had to speak to her. I just wanted to ask if, when those meetings are held with the Minister’s counterparts in Israel, we could have some indication of the input of Northern Ireland companies in that process? Obviously we want every part of the United Kingdom—all the regions—to benefit.

[Mr Jayawardena]

The hon. Gentleman can be absolutely assured that the views of every part of our United Kingdom will be fully taken into account. In fact, the Board of Trade recently visited Belfast to demonstrate our commitment to ensuring that the Department for International Trade works for every corner of our United Kingdom. The timings of the negotiations will very much depend on the readiness of both sides, which, of course, means agreement with the Israeli Government.

My hon. Friend the Member for Harrow East and the hon. Member for Strangford raised the potential opportunities that a future FTA might provide. While British businesses already benefit from our existing trade and partnership agreement and we would not, of course, want to prejudice the call for input, I believe the potential to take our trading relationship to the next level through an enhanced and improved FTA is very clear. There is the opportunity to remove or significantly lower tariffs for major British exports, such as in the food and drink sector. We see opportunities to give easier access for all British companies—whatever corner of the country they are from, and including small and medium-sized enterprises—to set up, do business and access the Israeli market.

There is significant scope to expand our trade in services, including digital services, which grew a remarkable 73%, albeit from a low base, between 2010—remember 2010?—and 2020. Co-operation in this area is, frankly, very limited in the existing trade and partnership agreement, and we see real opportunities for an enhanced FTA to supercharge the trade in services, which would complement our services-based economies, as we have discussed during the debate, and cement the United Kingdom as the international services hub.

My hon. Friend the Member for Harrow East and the hon. Member for Strangford asked how such an agreement would fit into the United Kingdom’s wider trade agenda. Of course, our potential FTA with Israel is just one component of our ambitious wider international trade strategy. As an independent trading nation, the United Kingdom has the freedom to forge new bonds of trade with partners, friends and like-minded souls worldwide, based on British interests and shaped by British priorities. We will continue to carefully plan and sequence our negotiation programme to ensure that it delivers the maximum benefits for the United Kingdom. No longer restricted by anti-competitive and protectionist one-size-fits-all regulation from the EU, the United Kingdom will pursue prosperity through free and fair trade with sovereign nations, based on our shared interests and underpinned by the agreements we are forging worldwide.

We have signed deals covering 70 countries, plus the EU, that account for more than three quarters of a trillion pounds-worth of trade, and we intend to continue that record of success in 2022. We have a clear and ambitious goal that will put global Britain in pole position to pursue new opportunities to connect British businesses to the most dynamic economies of the decades ahead.

The International Trade Secretary recently kicked off negotiations with India, one of the world’s largest and fastest-growing economies. We are looking to accede to the trans-Pacific partnership, one of the world’s largest free trade areas, and we have launched our consultation on a potential deal with the Gulf Co-operation Council. Of course, Members will already know that we have secured an agreement in principle with New Zealand and have finalised our agreement with Australia. Those deals are aimed at unlocking growth in every corner of our United Kingdom.

The hon. Members for Brentford and Isleworth and for Airdrie and Shotts raised the matter of the Occupied Palestinian Territories and their status in a potential FTA. The United Kingdom has an interim political, trade and partnership agreement with the Palestinian Authority, which entered into force on 1 January 2021, which we are committed to implementing. That will help protect our bilateral trade relationship, which was worth £24 million in the four quarters to the end of Q2 2021. We value our bilateral trade relationship with the Palestinian Authority and will continue to work closely together to build on our trade continuity agreement.