Trade (Comprehensive and Progressive Agreement for Trans-Pacific Partnership) Bill [Lords]

John McDonnell Excerpts

2nd reading
Monday 29th January 2024 Commons Chamber

[John McDonnell (Hayes and Harlington) (Lab)]

I will raise three issues: the scrutiny process, ISDS and my ongoing concerns about the impact of the measures.

I am a member of the Public Administration and Constitutional Affairs Committee. I am the sole Committee member present in the Chamber because the others are on a delegation to Berlin at the moment—I am sure that they are working hard at this time of night, and not having a dinner. As has been mentioned, we published our report today; it is a comprehensive report, agreed by all parties. We have been looking at the overall parliamentary scrutiny process for treaties and free trade agreements and, to be frank, we have unanimously found that the current process is unfit for purpose.

At the moment, Parliament—I do not disparage the Government for this; it has happened consistently in the past—is treated as an afterthought in trade policy. We have not been able to find any meaningful mechanism by which Parliament can influence the negotiating objectives at the beginning of the overall process or oversee negotiations as they proceed, and we are never guaranteed a vote on the final agreement at the end of the process—a point that has been made on a number of occasions by Members across the House.

That contrasts with what happens in other legislatures, particularly the US Congress, where legislators play an incredibly proactive role. I do not think the Government should see the parliamentary process as an imposition with regard to future treaties, but as a method of improving the trade negotiations by allowing Members of Parliament to have an early and ongoing voice in those discussions. It is interesting that other Members—including the former Secretary of State for Environment, Food and Rural Affairs, the right hon. Member for Camborne and Redruth (George Eustice)—made exactly the same point during a debate in this House on the Australia free trade agreement, way back in November 2022. The right hon. Gentleman set out how during talks with Japan, the Japanese negotiators used parliamentary motions that their Government could not breach to protect their country’s interests.

People will see from the report that we have put forward a fairly comprehensive process by which the House can efficiently and effectively engage itself in such negotiations, with a sifting committee and a scrutiny committee. The House would always have the right to a vote at the end of the day, but more importantly, it would have an influence at the beginning of the negotiations when the overall objectives are set. The proposed process is part of an overall attempt to create greater transparency and, indeed, greater interest within the House in trade negotiations. I hope that the Government will take the Select Committee report away and come back with a positive response, because it contains some very constructive recommendations.

I now turn to the much discussed investor-state dispute settlement procedure. In debates in recent years, Members from across the House have expressed concern about the investor-state dispute mechanism, and those concerns have moved into the mainstream—not just in this country, but in other countries that are moving away from that system. As we have heard, Australia and New Zealand have committed to exclude the ISDS procedure from future trade agreements on the basis that in many instances, that procedure is not in the public interest. I cite the energy charter treaty. That has been the biggest vehicle for ISDS claims, and it is collapsing, with France, Germany, the Netherlands, Spain and others withdrawing. President Biden has now come out and criticised the ISDS procedures, and has basically excluded them from any future US trade agreements.

As the Minister knows, I have raised this matter in the House a number of times. I am sometimes perplexed: we are told that the Government are committed to the ISDS process, but on the other hand, they have acceded to both Australia and New Zealand exempting themselves from that process with regard to the UK. The last time I raised this issue, the Minister responded by saying—exactly as the Chair of the Business and Trade Select Committee, my right hon. Friend the Member for Birmingham, Hodge Hill (Liam Byrne), noted—that the UK has never been successfully challenged under ISDS. That is true, but there is an element of hubris in that position.

[Liam Byrne]

My right hon. Friend is making an excellent speech, and he is absolutely right to flag this issue. The UK Government have not hitherto been successfully challenged under ISDS, but for the first time, countries with very significant foreign direct investment into the UK are involved in this treaty. The figure for Canada alone is $56 billion. When it came to Japan—the other big investor—ISDS was excluded from the UK-Japan bilateral investment treaty. We need an awful lot more reassurance from the Government on this point, given the scale of investment from countries such as Canada in our country in general, but in sectors such as the water industry in particular.

[John McDonnell]

I do not know how excellent my speech is—I will just ramble on as usual, I think.

The argument that was put to me by the Minister responding today, the right hon. Member for Chelsea and Fulham (Greg Hands), was that if we cannot trust Canada in these deals, who can we trust? That is precisely the point, though: Canada will now have a parallel system, and Canadian firms will be able to take legal action in their own country. As a result of that statement by the Minister, I went away and had a look at the figures for Canadian firms under this process, and those firms stand out as being particularly litigious. They have brought over 65 ISDS cases in recent years. I therefore think that there is a chilling effect, exactly as the Chair of the Select Committee said, which at the end of the day can have implications for the UK’s right to regulate. If a number of cases are waged against the UK, that may undermine our ability to act more freely when it comes to regulation of the water sector, and also policy development, particularly on issues around water and future public ownership.

Again, I have previously raised this matter with the Secretary of State. What I cannot completely understand is that at the same time that the UK Government are defending the ISDS process with regard to the CPTPP, in the negotiating process for the bilateral free trade agreement they set out a specific objective to exclude the provisions of the ISDS system. That is a contradiction, and the Government’s thinking on that matter has not yet been explained to me. As the Minister will also know, there is a remarkably broad range of concern about the ISDS: in October 2023, a letter was submitted to the Government—supported by 30 non-governmental organisations and trade unions and over 50 academics and legal professionals from both the UK and Canada—calling for the immediate negotiation of a side letter between the UK and Canada to disapply the ISDS provisions between the two countries. That is exactly what happened with regard to New Zealand and Australia, and for the life of me, I cannot understand why the Government have not gone down that path for this particular negotiation.

I also want to express some concerns that have been raised about environmental issues and about labour standards. The CPTPP includes a number of countries where abuses of labour rights are widespread. To give a few examples, independent trade unions are banned in Brunei and Vietnam, while forced labour has been widely documented in Malaysia in various pieces of research, and a number of CPTPP member states have not ratified some of the core International Labour Organisation conventions.

The protections for labour rights within the CPTPP are particularly weak: a member state can only challenge another member state over a failure to uphold labour rights if it can be demonstrated that such a failure affected trade, which is notoriously difficult to prove in such cases. The ineffectual nature of that chapter is demonstrated by the fact that since the agreement’s conclusion in 2018, no Government have challenged another for abusing rights. The TUC has described the risk of CPTPP making it

“easier for unethical companies and investors to do business with countries where it’s easier to exploit workers”—

a risk that it considers to be significant. I do not think we have addressed that issue sufficiently.

There are also concerns regarding standards in partner countries. For example, as has already been said, pesticide standards could be undermined. Some 119 pesticides that are banned in the UK are allowed for use in one or more CPTPP member states. Although accession to the CPTPP does not necessitate any lowering of UK standards in this regard, when the peers debated this issue, there were really practical questions about the sufficiency of the UK’s border testing regime in keeping banned substances out. Again, it is an issue that needs further consideration in more detail as we go through the whole process.

The issue has been raised—and I know that the Chair of the Select Committee said that this may well have been exaggerated or overestimated in some of the debates—that the UK has acceded to Malaysia’s demand to lower tariffs on palm oil to zero. I have to say that the evidence I have seen and the representations I have received from the Trade Justice Movement and others is that this is highly likely to increase palm oil exports and, with that, the risk of deforestation, which will serve to undermine indigenous and local community land rights and threaten natural habitats for species such as orangutans. We have seen the various research and the range of evidence mounting on this particular issue. Again, it was debated in the Lords in the context of the potential protections afforded by the UK forest risk commodities legislation, under section 17 of the Environment Act 2021, but it is unclear when these regulations will actually come into effect, and therefore many believe that the protections are not in place at this stage.

There is also a view that accession to the CPTPP will bring risks of the erosion of preferences, under which current preferential trade agreements afforded to exporters in one country will bring negative development impacts on others. One example cited by the Trade Justice Movement is that Afruibana, the association representing banana exporters across Africa, has set out concerns regarding the potential impacts of tariff liberalisation in South and central America for those they represent.

Finally, one of the reports sent to me was a health impact assessment produced by Public Health Wales. It identified a range of diverse potential impacts, including the worsening of global air pollution due to transport distances for goods, the loss of employment for some population groups and, of course, the risk of ISDS cases being brought against regulations that seek to support public health outcomes. It is an important impact assessment that needs further scrutiny and examination. It leaves me with the impression overall that there has been a lack of impact assessments, so I look forward to the Select Committee report, which will go into further depths on this.

I come to the conclusion that, with all the risks involved and with such doubt surrounding the CPTPP, it will achieve what we could not even describe as a marginal economic gain over the length of time it will be in place, and I fear to tread on treaties and agreements of this sort. I just think that, although there is not going to be a vote tonight, I might be tempted at a later date to vote against the Bill—so I had better let the Labour Whips know that.

--- Later in debate ---

[Greg Hands]

My hon. Friend is quite right. Of course, successive Secretaries of State have pursued that relationship, including the current Secretary of State, who is personally obviously very committed. I think that I have made two visits to Malaysia in my time as Trade Minister, and we are really excited about having a better trade relationship with Malaysia.

It seemed a logical move to join the CPTPP, as it included many of our global free trading cohort, including Japan, Australia and New Zealand, but it did not have the controversial aspects of free trade zones in Europe, such as free movement, financial contributions and dynamic alignment of rules. As the Secretary of State said, the agreement will grow. Joining the CPTPP will be great news for the UK as an independent trading nation, and for UK goods and services exporters. They include beverage producers in Scotland—I did not hear the SNP extolling that virtue—machinery manufacturers in Wales, and car manufacturers in Northern Ireland and the west midlands.

According to 2022 data, the UK is the world’s second largest services exporter—a point also raised by my hon. Friends on the Government Benches. Joining the CPTPP will help minimise unnecessary data flow barriers, empower UK services exporters and encourage inward financial investment—a point made by my hon. Friend the Member for Rugby (Mark Pawsey). Overall, it will provide us with a new presence in the wider Indo-Pacific region—a region of paramount geopolitical and economic importance, and one that is expected to account for 54% of global economic growth by 2050.

I warmly welcome the constructive comments made and the support from sectors across the country. In her opening speech, the Secretary of State quoted the president of the National Farmers Union and the director-general of the Institute of Export and International Trade. I would like to add just one more quote, from the Federation of Small Businesses. We had an intervention earlier about SMEs; the FSB said that it is

“very pleased to see the UK officially join”.

In FSB research, 45% of small exporters said that access to this market will be important for future growth.

Today we have heard a number of important points raised, and I will try to answer as many as possible in the time available. I remind the House of the specific purpose of the Bill: to enable the implementation of aspects of the CPTPP when the UK accedes, specifically relating to chapters on intellectual property, Government procurement and technical barriers to trade.

First of all, we heard from the hon. Member for Harrow West (Gareth Thomas), who gave us his familiar explication of how we are not doing enough trade deals, even though he has voted against every single one of the deals that we have done. We heard about his attitude to Canada, and his faux outrage about the idea that there might be a weakening in the existing trade deal with Canada. We heard that from the right hon. Member for Birmingham, Hodge Hill (Liam Byrne) and the hon. Member for Walthamstow (Stella Creasy). They also said that the Government are letting down people by not having an effective continuation of the Canada trade deal. We can differ on that, but the difference in the case of the hon. Member for Harrow West is that he voted against the Canada trade deal in the first place. He is now taking time to complain about the weakening of an agreement that he did not support from the very off.

On China, the hon. Member for Harrow West has been reminded about the Auckland principles, and that all countries acceding to the CPTPP must accede to the high standards of the agreement, have a history of conforming with trade agreements and command the consensus of the parties. The investor-state dispute settlement, which was also raised by the right hon. Member for Hayes and Harlington (John McDonnell), is in the agreement, but I remind the House that the UK has never lost a case. The right hon. Member for Hayes and Harlington called it hubristic to mention that, but it is a fact, and the agreement never prevents the right to regulate. On performers’ rights, raised by the hon. Member for Chesham and Amersham (Sarah Green), the CPTPP is an existing agreement, and changes will have to be made.

[John McDonnell]

I have made this point on previous occasions, but I just want to understand the logic of the Government’s position of allowing the ISDS in this particular deal, but trying to avoid it in the free trade agreement with Canada.

[Greg Hands]

These are all matters for negotiation. What happens in one negotiation will not always be the same as what happens in another; it is impossible to compare them. I can say that we already have ISDS provisions with seven of the 11 CPTPP members.

[John McDonnell]

Will the Minister give way?

[Greg Hands]

I will not, because I am trying to respond to the right hon. Gentleman’s earlier points. On performers’ rights, raised by the hon. Member for Chesham and Amersham, we expect the practical impact to be small. The Intellectual Property Office is carrying out a consultation on how the provisions will be implemented.

My hon. Friend the Member for Totnes (Anthony Mangnall) made a characteristically upbeat and excellent speech, pointing out that the region has £12 trillion in GDP, how the UK will be—and is—at the forefront of global trade, and how the deal will make no alteration to our standards.

From the SNP spokesperson, the hon. Member for Gordon (Richard Thomson), we heard a familiar tale of woe. He failed to stick up for Scotland and to point out all the trade benefits for Scotland. He said that he has been against every single UK trade deal, and that is correct, but he failed to mention that he has also been against every single EU trade deal that has ever been negotiated. He wishes to rejoin the EU and be subject to those very trade deals that he spent years campaigning against. He was against the Canada deal, the South Africa deal, the Japan deal, the Singapore deal and the Korea deal.

The hon. Member failed to mention the particular benefits to Scotland. He was wrong when he said that the GDP increase is £2 billion—it is £2 billion per annum. Then, he went down an extraordinary road of talking about eggs. Ninety per cent. of our egg consumption comes from domestic production. All eggs are subject to sanitary and phytosanitary checks, and from Wednesday, EU eggs will be, too, under the border target operating model. We have imported hardly any eggs at all from CPTPP countries since 2015. I think he mentioned eggs from Mexico, but there has been not a single import of an egg from Mexico since 2005. This is the most extraordinary scaremongering. The Trade and Agriculture Commission said:

“we found it was unlikely that eggs from CPTPP parties…would be imported into the UK”.

The hon. Member is sacrificing the interests of those selling Scotch whisky and other high-quality Scottish produce by starting scare stories about the importation of eggs, which are not coming to this country. He mentioned workers’ rights; I have already said that there is a comprehensive labour chapter.

The right hon. Member for Birmingham, Hodge Hill, made a constructive speech. He said that the deal was good for farmers, good for whisky and had a good digital chapter. He is right that we are doing more trade deals— we are going further with Switzerland, Turkey, South Korea and others. He is right on the scale of the CPTPP and growth. On pesticides, there is no change to our right to regulate or to our import standards. We set the maximum limits on pesticides—there is no change to that.

The hon. Member for Chesham and Amersham said that we already have deals with nine of the 11 members. Well, it depends on what is in the deal. As I pointed out in response to the intervention from the hon. Member for Liverpool, Walton (Dan Carden), the existing deal with Mexico is very old—it goes back more than 20 years. The CPTPP is a very modern deal. We can get a lot more done with a very modern deal than with a deal that is many decades old. She complained about the lack of parliamentary scrutiny. There have been two oral statements, 16 written ministerial statements, and Ministers and officials have appeared before five Select Committees to give evidence on the CPTPP. That is a lot of parliamentary scrutiny over the years. On palm oil, the TAC said that it is unlikely that the CPTPP will lead to an increase in palm oil being grown on deforested land. We have had impact assessments galore, but I am happy to look at the public health assessment mentioned by the right hon. Member for Hayes and Harlington.

Finally, we heard a speech from the hon. Member for Somerton and Frome (Sarah Dyke), which was alarmist in its impact on farmers. The NFU supports the agreement. She described the “toxic tendrils” of the deal, and even blamed “insipid sandwiches” on this Tory Government. There are many things that I am not quite sure can be blamed on any Government, and the quality of sandwiches is going too far. She started verging into what sounded a little like conspiracy theories.

The Bill is the next step in the creation of the outward-looking and internationalist UK that we envisage for our country’s future. Through the UK’s accession to the CPTPP, the Government will place the UK at the centre of a modern, progressive and values-based partnership that spans the Americas and Asia, and which other economies are queueing up to join. It is the gateway to new business opportunities and greater consumer choice benefits that will be felt in every corner of the UK. While the legislation may be narrow, it is crucial to the UK’s ability to accede to the CPTPP. I therefore commend the Bill to the House.

Question put and agreed to.

Bill accordingly read a Second time.

Trade (Comprehensive and Progressive Agreement for Trans-Pacific Partnership) Bill [Lords] (Programme)

Motion made, and Question put forthwith (Standing Order No. 83A(7)),

That the following provisions shall apply to the Trade (Comprehensive and Progressive Agreement for Trans-Pacific Partnership) Bill [Lords]:

Committal

(1) The Bill shall be committed to a Public Bill Committee.

Proceedings in Public Bill Committee

(2) Proceedings in the Public Bill Committee shall (so far as not previously concluded) be brought to a conclusion on Thursday 22 February 2024.

(3) The Public Bill Committee shall have leave to sit twice on the first day on which it meets.

Consideration and Third Reading

(4) Proceedings on Consideration shall (so far as not previously concluded) be brought to a conclusion one hour before the moment of interruption on the day on which those proceedings are commenced.

(5) Proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion at the moment of interruption on that day.

(6) Standing Order No. 83B (Programming committees) shall not apply to proceedings on Consideration and Third Reading.

Other proceedings

(7) Any other proceedings on the Bill may be programmed.—(Robert Largan.)

Question agreed to.