International Trade and Geopolitics

I beg to move,

That this House has considered international trade and geopolitics.

I thank right hon. and hon. Members from across the House, and the Backbench Business Committee for granting the debate today. I declare my interests as set out in the Register of Members’ Financial Interests.

I applied for this debate because I am concerned about Britain’s standing in a world that is changing more quickly than we appear to be responding. From trade and industrial policy to innovation and skills, we have just sticking-plaster policies and no long-term economic plan. There is no strategy for UK plc that shows the path to prosperity, and I hope this debate may trigger some answers from the Government on their plan to drive economic growth within the UK and through exports abroad.

The era of increasing globalisation that we have come to know over the past decades is coming to an end. We are now in an era of economic retrenchment, higher levels of state subsidy and new forms of partnership between the public and business, but how is the UK responding? Ministers are merely saying to competitor countries, “This is not how you’re supposed to play the game,” but they are not listening, and we are losing. There are several factors underpinning these changes: geopolitical competition between China and the United States; war in Europe and security tensions in Asia; the need for democratic nations to show their people that our system of government can deliver good jobs, good pay and prosperity; the net zero transition; and the technological arms race in both its military and civilian contexts.

Based on current data, our direction of travel as a country is not a good one. Only this morning, the Government announced that the UK fell from being the fifth largest exporter of goods and services in the world in 2020, to seventh in 2021. Our trade deficit has ballooned from £2.3 billion to £23.5 billion, meaning that we are exporting fewer goods and services, while being increasingly dependent on other countries for our own supplies. According to the International Monetary Fund only last week, the UK is set to have one of the worst economic growth projections of the seven most advanced economies. Even Russia, to our shame, is projected to experience better economic growth than we are.

Our drop in exports to the European Union, coupled with the Government’s deeply short-sighted decision to agree a trade deal that blocks the sale of most UK-based services to the EU, while allowing the EU to sell services to us, has been a structural blow to the UK economy. In that context, our high levels of national debt, which have increased year on year since the Conservatives came to power in 2010, have put us in a fiscally precarious position. The Government should be ashamed of their record on UK national debt. We all remember David Cameron and George Osborne telling us that the Conservatives would fix the roof while the sun was shining. But what do we have now, 13 years after those promises to the country? A national debt that is projected to be larger than the entire size of the UK economy. A national debt that has increased year on year—yes, in response to covid and the energy crisis, but it was also increasing year on year before those crises.

It is a great pleasure to be part of this debate and to listen to the hon. Gentleman, and I hope he will not mind me picking him up on this point. He kindly acknowledged that the sizeable increase in UK debt is due to the response to covid, and I do not think he has concerns about the major schemes that comprised that. He also talks about the increase in debt that occurred in the intervening years. Will he accept that for each of those intervening years, the Labour party was calling for more expenditure and more debt?

The hon. Gentleman and I, perhaps surprisingly, share something in common, in that we would like to get the national debt under control. He will recognise that his party was in government for each of those years from 2010 when debt increased, year after year. The Opposition can come forward with policy proposals, but he must take some responsibility for the fact that the Conservative party was in government, taking decisions that resulted in a significant amount of national debt before covid and the energy crisis, due to the mishandling of Brexit, the inadequate trade deal with the EU and to the failure of austerity economics, which cut our public services back to the bone without adequate investment to create opportunities for economic growth in the future.

One might have assumed that in that context, the latest form of Conservative Government would wish to do everything they can to underpin, support and incentivise growth in the UK economy. Their most whizzy recent announcement has been the UK’s entry to the comprehensive and progressive agreement for trans-Pacific partnership for trade in Asia—a trade arrangement that is estimated to grow the national wealth by only 0.08%. It is a trade arrangement with 11 countries, nine of which we already have a trade deal with, and one that will pose due political challenges to the UK as China seeks to join it too.

My hon. Friend is making an extremely powerful case. Does he agree that geography still matters when it comes to trade, and if we as a country choose to make our trading arrangements with our biggest trading partner, which is still the European Union, more difficult, more costly and more bureaucratic, that is bound to have an adverse effect on the British economy?

I think everybody recognises that that is completely right, and my right hon. Friend recognises that with both the European Union and the United States, the bulk of our trade exists in this bit of the planet in which we find ourselves. Trade with Asia is welcome, but it will not be able to deliver larger economic opportunities for the UK than trading with our closest partners. Our arrangement with the CPTPP could cause conflicts in future trading negotiations with the European Union because of issues such as embedded carbon in the case of imported goods. Although we might want to do more trade with the European Union in line with our net zero targets, that might cause difficulty with imports from parts of Asia.

China’s growing assertiveness on the international stage is rightly cause for concern, and the CPTPP is an example of where the Government need to be cautious. If China is successful in joining, it could block Taiwan’s application in the face of growing tensions between the two. Does the hon. Gentleman believe that the UK Government should formally acknowledge Taiwan’s sovereignty?

I thank the hon. Lady for giving that suggestion to those on the Treasury Bench, and perhaps the Minister can answer when she responds to the debate.

I have two examples that are relevant to intervention of the hon. Member for Rutherglen and Hamilton West (Margaret Ferrier), but I will give way one more time, for old times’ sake.

It’s not that old-time! As the hon. Gentleman will realise, the Benches are not replete with Members for his debate, so I hope he will continue to be generous.

The hon. Gentleman has put his finger on an important issue, and this could be an informative debate on both sides. He has just mentioned one potential conflict between this country’s trade engagements and those of others, regarding our engagement with the European Union and with CPTPP, and different paces of change when dealing with net zero. As Chair of the Business, Energy and Industrial Strategy Committee, will he give the House a little more detail on his thoughts about what this country’s pace should be, and in particular his views on the carbon border tax?

I will do so briefly so that I do not test the patience of the Chair too much, given the number of pages I have left to read before the end of my speech. My initial observations are that it is in the UK’s interest to be a global leader on the net zero transition, both because that is the right thing to do and because it is a significant industrial opportunity, and that we should be partnering with the European Union to do so through our trade deal. In my view—I have not taken evidence on this; it is just my view—that would generate a larger rate of return for the British economy and British people than some of the other opportunities that have been presented.

Does my hon. Friend share my concern that in pursuance of net zero and the decarbonisation agenda, the automotive industry, for example, faces significant challenges in ensuring not only that we have a self-contained supply chain, but that we can engage with the European Union on our doorstep given restrictions on rules of origin? Will that present a difficulty, and is there an opportunity with the review of the trade and co-operation agreement to address that issue once and for all?

My hon. Friend is exactly right, and electric vehicles are a prime example. He and I were in Sweden last week on a Select Committee visit to look at how its electric vehicle battery manufacturing looks in comparison with the UK. If we are to continue to export cars to the European Union, we will have to hit the so-called rules of origin requirements where the components come from local or regional sources. Eventually they will have carbon embedded within them, in order to meet carbon border adjustment mechanisms and net zero targets. It is therefore crucial that the UK Government work with the private sector successfully to deliver that industrial policy outcome, or I fear we will see the near total decline of car manufacturing in the UK. While it is not for me as Chair of the Business, Energy and Industrial Strategy Committee to prejudge the conclusion of its inquiry into this issue, the contrast between what we saw in Europe last week, and what is happening in the UK, was stark.

May I cast the hon. Gentleman’s mind back to his comments about the CPTPP? The Northern Ireland constituency that I represent has a large farming and agricultural manufacturing sector, and we export right across the world. Businesses in my constituency tell me that they are looking forward to opportunities that will potentially arrive from the far east. Does the hon. Gentleman recognise that farming in Northern Ireland has the potential to grow more, and that part of that growth will be in the far east through the CPTPP? If that grows, there will be extra jobs, extra opportunity, and real growth in my constituency and across Northern Ireland.

I have to take the hon. Gentleman’s suggestion at his word as he knows much more about his constituency and farming than I do. If there are export opportunities that is great, but the question is whether that will deliver the wholesale economic growth that we need across the whole UK economy. It will be an important piece of the puzzle, but my proposition is that there is a much broader area where there are problems, and where Government policy is lacking.

In Sweden last week, we learnt about the sheer complexity of delivering a so-called gigafactory for electric vehicle battery manufacturing. We held in our hands, physically, fossil fuel-free iron made using hydrogen, which was being turned into low-carbon steel. I finally saw, after years, a carbon capture facility working, plugged in and capturing carbon in real life. Here in the UK, we just have ministerial statements setting out our intention to be world leading, without anything real or tangible to show for it. The British people will soon realise, if they have not already, that at the end of this yellow brick road set out by the Government there are just Conservative Ministers blowing smoke. The tragedy is that this is not just a dream: it is 13 years of Conservative economic mismanagement that will take years to clean up.

This sorry story is not just about what is happening in the European Union; it is about what is happening in the United States, too. During our Committee visits last year, it quickly became clear that the US is doing what Europe is doing, but on steroids. The Inflation Reduction Act, which is really a green new deal for the United States, sets long-term, multi-decade, easy-to-access tax incentives, grants, loans and market-setting standards to not only drive the net zero agenda but reinvest in the industrial capacity of the United States. This $500 billion multi-decade initiative is acting like a magnet, pulling investment, jobs and businesses into the American economy. Access to those tax incentives, grants and state-level support is predicated on agreements to train and employ Americans in areas that have been crying out for investment for years. In some circumstances, it is even predicated on business owners investing in childcare to help optimise the economic activity of the American labour market, including women.

Was my hon. Friend not struck by the stark report on Sky News, I think from Ed Conway, from AMTE Power in Thurso, one of the British manufacturers of car batteries? It was indeed attracted by the Inflation Reduction Act, so much so that we risk that factory—a gigafactory we do have—being relocated to the United States. Should that not be sending a signal warning to the Government that time is not on our side?

Once again, my hon. Friend is absolutely right. That is why the European Union has responded to what is happening in America, but what do we have here in the United Kingdom? I tried to be generous to the Government in a collegiate fashion, but the only thing I could find that allowed me to give the Government credit was the recent establishment of the Office for Investment, whose job it is to secure inward investment to the UK. But it has no budget.

As I understand it, when two American businesses looked at the UK as an investment destination, they did not know who to contact. Was it the Department for International Trade, the Department for Business, the Department for Transport, the Treasury, the regional mayor or the local council? The Germans, meanwhile, put together an inward investment package with significant incentives and the Americans presented a map with different options in different states, topped up with significant federal incentives. In the UK, we have an Office for Investment whose job it is to go around Whitehall, cap in hand, trying to put together an offer within existing budgets. The tragedy is that the reason those companies were looking at the UK in the first place was that we have great natural resources: huge potential for low-carbon fuel energy supplies, great industrial clusters, world-leading research and development, and great pools of highly skilled labour. But we just did not compete and we lost out on both investments.

Let me take another example, which we have already talked about: the semiconductor industry. The United States is securing multibillion dollar inward investments, as too are the Europeans. As my Committee concluded in its recent report, while we will never have end-to-end supply chains in the UK, we should be collaborating with our American and European allies to agree that the UK invests in the parts of the supply chain where we excel: chip design and advanced compound semi- conductors. Britain can play a crucial exporting role within a multinational supply chain. So when the Government take decisions to decline or unwind Chinese-linked investments, such as Newport Wafer Fab, they must follow through with finding new investment and new owners. Instead, we have a semiconductor strategy that is now even more delayed than it was already because, as it was reported, Ministers cannot decide who is going to announce it. Meanwhile, other countries are racing ahead of us.

Absolute rubbish.