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.
My Lords, I thank the noble Baroness, Lady Hayter, for securing this debate, as well as for her broader work in chairing this important committee and producing this report. I assure her that she will be hearing more from me in this capacity and that no valedictory is due—for the time being, anyway.
I go back some way in my interest and involvement in trade issues with India. Ten years or so ago, when I was the UK’s representative on the EU’s Trade Policy Committee—also known the Article 133 committee—I spent a lot of my time promoting the UK’s interests in what we hoped at that time would be a free trade agreement between the European Union and India. Even then, it was clear to me that the task was an almost impossible one. Coupled with the Indians’ reluctance to make major concessions, the fact that the EU Commission had to promote so many interests, both offensive and defensive, and approached the task in such a mercantilist way—as trade negotiators tend to do—made it always seem unlikely that the right balance would ever be found. Indeed, so it proved when the EU suspended the talks in 2013.
Luckily, we in the UK have been given another opportunity to reach an agreement with India thanks to the fact that we no longer have a trade policy in which we are a minority share participant. We are now in a position to prioritise our own objectives, determine our own trade-offs and, let us not forget, conduct a negotiation in which UK officials are actually in the room and negotiating directly rather than having to rely on accounts from a third party.
Moreover, as the committee’s report makes clear, the time is propitious, with India, I hope, taking a more positive attitude to trade agreements and with the strategic case for an agreement with India ever more important. Indeed, this more positive environment is why the EU too resumed negotiations in June, although I suspect it will find the task of balancing its different interests as difficult as ever.
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The Earl of Sandwich (CB)
My Lords, I join the noble Baroness, Lady Hayter, and the committee in welcoming this FTA, but only as far as it goes. I have lived and worked in India and am well aware of the joint prosperity our two countries have enjoyed since Sir Thomas Roe landed in Surat in 1615 and got a very good deal from the Mughal emperor Jahangir. That is summarising more than four centuries in a sentence.
I am well aware of the subsequent implications of colonialism and slavery, both ancient and modern, but they are not part of this debate, which is about the present intentions of our Government. What is relevant is that our two countries have a long common history, language and culture that have already laid a foundation for a range of trading engagements. India will be a valuable business partner under this new agreement. She is not only overtaking China in terms of population but will soon become the world’s third-largest economy. Under President Modi the economy has grown faster, although GDP growth of 13% in one recent quarter is fiercely disputed by Congress. There are also grave concerns about human rights violations and discrimination against minorities, which I know will be mentioned by my noble and right reverend friend Lord Harries in a moment.
I sense that the Government are right to press ahead with the FTA, provided they do not rush it and risk a bad deal, as the Independent put it. A Diwali deadline would mean sacrificing or avoiding some of the tricky core issues, such as the environment, health, fuller intellectual property protection and dispute resolution. The former Trade Secretary said that she wanted a comprehensive agreement, but the July joint outcome statement mentions the end of October and the signs are that the new Prime Minister, still riding on the wagon of Brexit, was right to get on with it. The Government’s drift eastwards since Brexit is also connected with our application to the CPTPP. The tilt towards Asia and the Pacific has been a well-understood priority of this Government, but how does India fit into that? Like China, she is unlikely to quality for the CPTPP and has no interest in joining it. In general, as the noble Baroness said, the committee believes that the international context of this FTA, and indeed of other recent agreements, has been left out. Will the Minister say what is the background?
What is the Government’s longer-term trade policy? The DIT claims as a strategic aim an increase in our exports to India by up to £16.7 billion by 2035. This seems quite possible if enough time is taken with the agreement, but how exactly will it be achieved? With India still famous for red tape and corruption, it is not an easy business environment, as the noble Baroness mentioned. Internal tax barriers are also a serious problem, notably over whisky earlier this year, yet the Government offer no solutions. Restrictions on foreign investors are formidable, and the DIT recognises that, but the published objectives of this deal are too vague to enable us to pick out the real priorities. The number one priority for goods is the lowering of tariffs. Our report points out that India is still a developing country, technically a lower-middle-income country, and is still enjoying many of the benefits of the GSP. This means that two-thirds of India’s exports to us are tariff-free, while we have to pay duty on all but 3% of our exports to India. However, the picture is changing and there are opportunities. The Government now need to prioritise goods that are not covered by the GSP, such as textiles, vehicles, chemicals, electronics and renewable energy, in which India is becoming a world leader.
My Lords, I begin by declaring an interest as an adviser to the board of JCB. I mention it because it has really become, in practical terms, an Anglo-Indian company. Since my noble friend Lord Bamford made at that time a rather countercyclical decision in the 1970s to invest heavily in India, JCB has become an immense employer there, to the point that many Indians think of it as an Indian company or, at the very least, in the same sense that they think of cricket—it may technically happen to have been invented in the United Kingdom but it is essentially, in all practical senses, a largely Indian institution. That company seems to me a symbol of what I would like to talk about: the opportunities for both our countries and why we need to seize the moment.
The noble Baroness, Lady Hayter, asked whether we are getting the timing right. I put it to the Committee that we are getting the timing right both directly and in a more macro sense. For a long time, India was very slow to open its markets at all. Protectionism cast a very long shadow there. Think of the Indian flag, with the blue wheel—the chakra—in its middle. That was a stylised form, as you see very clearly in the flag of the old Congress Party, of the handloom. It is the kind that Gandhi used to carry around with him because, in his mind, independence and self-sufficiency were aspects of the same concept—swaraj. Because of the moral stature of Gandhi, protectionist and mercantilist thinking lasted in India for decades longer than it would otherwise have done, greatly to the detriment of Indian citizens, particularly those on low incomes.
It was really only in this century that India began properly to open its markets and join the global economy, starting in its own region and then signing deals with ASEAN and, more recently, with Japan. As a result, our share of Indian trade has fallen as those other countries have taken our place. In the years since the turn of the century, as a share of the Indian total our goods exports have fallen from 6% to 1.3% and our services exports from 11% to 2.1%.
Despite the undoubted quality of the report so ably introduced by the noble Baroness, Lady Hayter, and despite the expertise available in the Room, I have the feeling that the eyes of the nation are not on us. I think we now know how Rosencrantz and Guildenstern must have felt.
In another sense, this is an oddly timed debate. Here we are, looking at the Government’s objectives in a negotiation that has been going on for eight months and is due to finish in seven weeks. The document in which those objectives are set out is drafted in such general, unspecific terms as to make it clear that its objective is to tick every lobbyist’s box so that the Government can say at the end of the day, “Well, at least we tried.” It is not the basis for a serious debate. It should be possible—I look for support on this from my old colleague, the noble Lord, Lord Frost—to devise a more grown-up relationship between Parliament and the Government on trade negotiations.
However, this is the only document we have, so debate it we must. If we do not, the next thing to happen will be a fait accompli: an agreement that we then cannot change. I hope that, with the help of the noble Lord, Lord Frost, and possibly with that of the noble Lord, Lord Grimstone, we may be able to establish something a little more meaningful. Like the noble Baroness, Lady Hayter, I have never understood why taking back control means Parliament cannot be as well informed as it was when our trade negotiators were Brussels based, or as the European Parliament then was and now is. It would be in everybody’s interest that we be as well informed. As an ex-negotiator myself, I know from Washington and Brussels experience how the oversight of an informed legislature strengthens the hand of the negotiator. Therefore, the Johnson Government’s policy of concealment, highlighted in the ludicrously contrasting texts at appendix 5 in the committee’s report, seems to constitute a severe case of self-harm.
I am very glad to have the opportunity to follow my fellow member of the International Agreements Committee, the noble Lord, Lord Kerr. On the issue which he quite rightly raises, but which our report does not take a position on—the question of conditionality of trade relations with India given the Russian aggression in Ukraine—where I personally stand is that, if we can maximise, as my noble friend Lord Hannan said, the economic partnership between ourselves and India, we can also maximise its adherence to democratic values. It does not always happen—it did not happen in China because of a one-party state—but in a democratic country, which India is and has been successfully, we can look for the economic interrelationships themselves to give rise to a strong feeling within India of who its allies really are. I think that will have an impact. For that reason, I am very much in favour of us trying to have not only a free trade agreement with India but one which is the starting point of a wider economic partnership. That is the point I really want to make.
There is a risk that we focus on what is to be published or not published by Diwali. The Indian Commerce Secretary, Secretary Subrahmanyam, was reported in Mint today as saying that 19 out of 26 chapters have been closed, that there are a couple of areas where we are negotiating, and that the Diwali deadline is not going to be missed. But what does that mean? I think it means a statement of heads of agreement, as it were, between the two Governments. From our point of view, we have a right to expect a free trade agreement which substantially covers all trade and which makes substantial reductions in tariffs, not least on UK goods going to India; but also that the heads of agreement in these chapters initiate a substantial series of relationships between ourselves and India on a range of economic issues, which will be developed over time. Indeed, the statements that might be made this year need to be expanded on and developed.
I thank the committee for its report and the noble Baroness, Lady Hayter, for her introduction. Like other noble Lords, I very much welcome the opportunity for increased trade with India, which can of course benefit both countries, and I have huge respect for India, in particular the resilience of its people. But like all countries, including our own, India has many ills and injustices that have to be recognised and challenged, and some of them have potential links with trade and trade agreements. One of the Government’s negotiating objectives reads
“Reaffirm commitments to international labour standards”.
By itself this is much too vague and general, which the International Agreements Committee rightly picks up on. In paragraph 89, for example, it says:
“India clearly has weaker labour laws than the UK. Witnesses noted … labour abuses in tea supply chains, including forced labour, failure to pay the minimum wage, gender discrimination and suppression of freedom of association”.
The injustice that is particularly relevant to trade and our desire to increase it, on which I want to focus, is bonded labour. This persists in India as well as in other countries in south-east Asia. During the summer we had a vivid example of this cruelty, not in fact from India but from Indonesia. As noble Lords may have read, workers were flown in to help pick fruit on our farms. They had to pay £5,000 fares for their flights and were subject to many other deductions, with their houses in Indonesia pledged as security. The result was that they were trapped in debt and likely to take very little, if anything, home. I am glad to say that the Indonesian Government are looking into this.
In India, this kind of debt bondage is all too prevalent. According to the 2016 world slavery index, there are 19 million Indians in some form of slavery, many of them in debt bondage. We know that the vast majority of these people in some form of slavery are from the scheduled castes, especially the Dalits—the former untouchables. According to Anti-Slavery International, this amounts to 90% of them. When Dalits try to exercise their rights or resist abuse and exploitation, they are faced with extremely hostile and sometimes brutal resistance by the dominant-caste villagers who uphold the hierarchy. Consequently, when Dalits resist their oppression they risk complete boycott, cutting them off from land use, access to markets and employment.
My Lords, in speaking in this debate, I draw attention to my interests as set out in the register and to my work for HSBC. I, too, thank the noble Baroness, Lady Hayter, for securing this debate.
I mention the importance of this debate. It is now, I think, universally acknowledged that India is indeed on the climb and that by some projections it will become the world’s third-largest economy by 2050. As a country now unshackled from the EU and ready to embark on its own programme of international trade, securing a free trade deal with India is of strategic importance to the future success and prosperity of the United Kingdom.
That said, we all knew that this negotiation was going to be extremely challenging. India is well known for having tough and experienced negotiators, long-standing protectionist tendencies and complex regional variations in its bureaucracy. That backdrop provides a challenging, yet not impossible, set of circumstances which our Ministers and negotiators have had to overcome. I must draw your Lordships’ attention to the progress that the Government have made, especially after the Prime Minister’s recent visit to India, which seems to have secured a resumption in proper dialogue, providing a jolt of energy that secured more frequent communication between the UK Government and the Indian Government. The evidence for this is quite clear. We have now seen the problems surrounding Cairn Energy and Vodafone, which have been going on for many years—for Cairn Energy, they are over 10 years old—start to move towards some resolution.
In short, dialogue between the two Governments is important, and we have not had it at this level for some time. Her Majesty’s Government have made it crystal clear for some time now that the intention is to tilt the future of UK trade towards the Indo-Pacific. Thus, securing a free trade agreement with India will not only complement the UK’s existing commitments in the region, but strengthen our ambitions with regard to the CPTPP.
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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.
We now have a new Prime Minister, one who was formerly Secretary of State for International Trade and one who I know to be an economic liberal and believer in the merits of openness and competition. I express the hope to my noble friend the Minister that this attitude will feed through to a new government approach to this negotiation.
The committee’s report endorses the observation of the current Secretary of State for International Trade—at least I think she still is—my right honourable friend Anne-Marie Trevelyan that the Government will sign a deal by Diwali only if it is “good for UK businesses”. Of course, what is good for existing UK businesses is not necessarily the same as what is good for the UK economy overall. This is particularly true when looking at trade liberalisation. We cannot determine whether an agreement is beneficial to us purely by looking at one test: whether it reduces barriers, tariff and non-tariff, for our exports. That is a very important test, but not the only test.
The important judgment to make is whether, taking one thing with another, the agreement is beneficial to our country overall. That requires a broader assessment. It requires looking at the benefits of increased competition to our economy through more openness to Indian exports, notably but not only in agriculture, even if that might make life tougher for some existing businesses. It requires looking at the broader national economic and security interest we have in rebalancing our trade policy away from the current arrangements, which, in effect, are a giant preference scheme for the European Union. And it requires looking at the strategic case for a trade agreement with India, in the context of our broader aspiration to join the CPTPP, which is in many ways complementary, and our aspiration for a broader strategic and defence political involvement in the Indo-Pacific.
That is why, with the greatest respect, I disagree with the committee’s judgment that there is only questionable value in setting deadlines for the conclusion of negotiations. The noble Baroness, Lady Hayter, alluded to this. I know, perhaps better than anyone, how much a deadline focuses minds on both sides, but I draw different conclusions. Without a deadline, we will always be prey to the wishes of our domestic lobbies; there will always be the wish to take a bit longer and to push negotiations that one step further. Like the tortoise in Zeno’s paradox, the perfect moment for concluding talks will always seem a little way in the future. This approach risks us never getting any agreement at all.
It may be that, given events, the Diwali deadline is a bit too soon, although I note that, strictly speaking, it was a deadline
“to conclude the majority of talks”,
not to have a completed agreement. Be that as it may, we should set a credible deadline soon, seek to reach the best agreement we can and reach a judgment on whether it is in our interests overall. If that agreement looks more like an interim than a comprehensive agreement, and it can be harvested so further talks continue, we should be very open to that.
I will briefly make two other points—one on which I agree with the committee and one on which I do not. On the first, I agree that it is time we had a broader UK trade strategy—one that sits within and is consistent with the revised and updated integrated review, which I hope we will see shortly. That strategy should also include some proposals and ideas for the greater involvement of Parliament in signing off agreements, as the noble Baroness, Lady Hayter, noted. I hope that the new Secretary of State for International Trade will take this forward.
My second point is on the committee’s comment that the devolved Administrations have concerns regarding the sharing of information pertaining to areas of reserved competence in the negotiations. The noble Lord, Lord Grimstone, the previous Trade Minister, is quoted as justifying the current arrangements on the grounds of confidentiality. That is all well and good, but there is a clue in the words “reserved competence”. Information need not be shared with the devolved Administrations in areas of reserved competence because, to put it bluntly, it is not their business. Where competence is reserved, it is for the DAs to implement decisions taken by the national Government in the negotiations. I urge the Government and the Minister to be more robust in policing these boundaries; we have seen a tendency for the boundaries to move, and in only one direction.
I conclude by once again thanking the noble Baroness, Lady Hayter, and the committee and by expressing my best wishes and support for their further work in this important area.
Consultation with the devolved Administrations, mentioned by the noble Lord, Lord Frost, has never been one of the Government’s fortes, at least not in the experience of this committee. We heard concerns from the Scottish and Welsh Governments that SPS standards, the environment and possible adverse effects on other developing countries had all been virtually ignored in the agreement. I was sorry that this evidence came late and was not sufficiently reflected in our report. However, we did say that HMG had again failed to consult fully.
I can understand why pharmaceuticals are a sensitive issue and have been played down in the agreement and the UK’s strategic approach. Nevertheless, India’s generic drugs play an essential role in our health service. This must be more openly acknowledged, however contentious. To state it politely, there is a delicate balance between IP provisions and dependence on generics. We have invited the Government to explain how this balance can be achieved. Perhaps the Minister will have a shot at that as well.
Others will be much more qualified than I to speak about the environment, but we hope that HMG will offer India a deal to support its decarbonisation efforts, such as the international Just Energy Transition Partnership agreed with South Africa. With energy prices rising and more dependence on Russian oil, it will become harder for India to forecast the closure of any coal-fired power station. As with the Australia FTA, much more work could be done to calculate deforestation rates in the Himalayas, which are so critical to climate change.
The FTA will increase GHG emissions even before transport is included. What about the boost to green industries promised in January? Is that sufficiently reflected in the agreement? On visas, will the Government further relax the quite successful visa regime in favour of higher education and post-study work visas?
One could cover many other points, but I will leave it there, except to say that India’s long-held reputation as a non-aligned country has again been badly dented by her refusal to condemn the Russian invasion of Ukraine. Although it is not directly relevant to this agreement, it will surely dampen down our enthusiasm for it.
This is a remediable problem; there are institutional solutions to it. Indeed, I would argue that there is no country, certainly no western country, better placed than ours to have a comprehensive and mutually beneficial trade deal with India. It has become commonplace in politics, almost a cliché, to talk about every group of migrants as enterprising, but in this case it is difficult to think of any migrant group anywhere in history that has been more enterprising, more business focused, and has added more to the economy of the welcoming country than the 1.5 million Brits of Indian origin, dominating, as they do, our lists of successful entrepreneurs.
There are also plenty of reverse JCBs; British brands have been extremely popular, from Jaguar to Tetley, as targets for Indian investors. That two-way investment rests on the most obvious congruities of language and law, habit and history, culture and kinship. What has not yet followed is the trade, because we have artificial government-imposed barriers to what would otherwise be a very natural commercial flow. If he was still alive, Gandhi would be astonished to discover that on the question of textiles it is now the other way around; it is not Lancashire dominating the handloom industries of India but now Britain imposing tariffs against Indian textiles, or having at least inherited those tariffs from the EU, including a 9.3% tariff on men’s shirts.
There are, of course, tariffs the other way around, as the noble Earl, Lord Sandwich, reminded us, including on whisky, on which there is an extraordinary 150% tariff. We should always remember that tariffs do the most damage to the country that applies them. Yes, they do some incidental damage to the exporters of the other country, but the cost is paid by the citizens whose Government impose them.
Removing these tariffs is an easy and demonstrable game, but that is not where the biggest opportunities lie. We have to think like a 21st-century economy, not a 19th-century economy. The big gains are in tech, engineering and coding, and in the mutual recognition of credentials and professional qualifications, which will mean changes to our visa regime. I cannot believe that there is no deal to be done there. What has tended to slow it up is that Britain has been pushing for more flexibility from the Indian Government on taking back failed, or illegal, entrants into this country, while India has been pressing for more work permits, more tier 3 visas. Surely there is a landing zone there. It must be possible to hammer out a deal whereby it is easier for Indians to come here legally but not so easy for them to come here illegally. Both Governments could easily trumpet that as a victory.
As for doing it by Diwali and whether we are being too hasty, the best answer I heard was from my Board of Trade colleague Tony Abbott, the former Australian Prime Minister. He was Prime Minister of that country fairly briefly—for 18 months or so—yet in those 18 months he managed to sign fairly ambitious trade deals with China, South Korea and Japan. When I asked him the secret, he said that it was imposing an iron deadline because otherwise the trade negotiators on both sides would string it out indefinitely; they like process and being part of the process, and there is no incentive on them. As my noble friend Lord Frost adds, there is then a constant open door to domestic lobbies to push for further additions or accretions to the deal. It is extremely important to have a deadline, even if it is a deadline by which to have concluded the bulk of the talks rather than one for ratification, which of course is a different question.
Finally, a number of noble Lords have raised the wider geopolitical orientation of India and the disappointing refusal of the Indian Government to take sides on the Russia-Ukraine conflict. I share that disappointment—by the way, it is a policy common to every south Asian Government; I think that they have all taken exactly the same position on the Russia-Ukraine war—but it is especially disappointing from a state that tends to self-define as a democracy. Indians take justified pride in the fact that, unlike some of their neighbours, they have remained a law-based democracy since independence. Elections happen without anyone being exiled or shot; the army does not step in and take power. It is therefore somewhat disappointing that India did not take a stronger line on the Ukraine war—not as a favour to the West, but in accordance with its own values. But whereas some noble Lords seem to see that as a reason to hang back or hesitate, I see it as the opposite. The orientation of India is perhaps the key geopolitical question of this century. If India sees itself primarily as an English-speaking democracy rather than just as an Asian superpower, then the world is an altogether brighter and warmer place.
We have been through a great deal together. The two largest volunteer armies in the history of the human race were the Indian armies in the First and Second World Wars, respectively 1.5 million and 2.5 million volunteers. There was no conscription on either occasion. We have a living link made of the extraordinary enterprise brought here and the extraordinary contributions across our national life made by British people of Indian origin. I am certain that, coming together as free and sovereign equals, we can restore what should be the natural traffic in commerce between two countries bound by what my friend, Professor Madhav Das Nalapat, calls the blood of the mind—a shared habit, a shared way of looking at property and at commerce. I am sure that, in that spirit, the best is to come.
However, a new Prime Minister means a new Foreign Secretary. Perhaps we can turn over a new leaf and have a new start on this relationship. Meeting during the changing of the guard means that we can offer a bit of advice to the next occupant of the great office where Lord Grey watched the lights go out over Europe, Johnson penned his pieces for the Telegraph and Truss put up more flags.
I have three quick tips for the incoming Foreign Secretary, whoever he is; sadly, the forecast is not for frost. First, pay attention to the office experts on international law. They are very good. Defending the international system, as we must, means not just opposing people who scorn and subvert it, such as President Putin, but not breaking our international agreements, such as the 2019 treaty of the noble Lord, Lord Frost, or the 1951 refugee convention. The Foreign Secretary’s job is to remind Cabinet colleagues that our word is our bond and insist that pacta sunt servanda.
Secondly, respect my old service’s understanding of other countries’ attitudes and interests. In international relations, there are few symmetrical, zero-sum games. Widening the parameters in a negotiation and bringing in areas of interest to the other side are usually more effective than pouting and shouting. Use the expertise of the embassies—and not just for arranging photo ops.
Thirdly, believing in alliances means not disparaging allies. France is a friend, not a foe. There are only two types of European state: middle-sized countries and those that have yet to realise that they are now only middle-sized. Like it or not, we are Europeans too. We depend on their co-operation and custom. Naturally, our biggest market is our closest market. It is a pretty inexorable rule that trade halves as distance doubles. Global trade is now 20% above pre-Covid levels; ours has flatlined. We are not going to put that right until we rebuild a productive trading relationship with the rest of Europe. That must be the number one trade policy aim.
So let us get the India deal into perspective. According to the Government’s own analysis, by 2035, it might add between 0.12% and 0.22% to our GNP—not exactly game-changing. Incidentally, I hope that the new Government will tone down the boosterism. I am much less critical than some—including some in this Room—of the new trade agreements with Japan, Australia and New Zealand, but their economic effects will also be pretty marginal. It does not help those ready to defend them when government spokesmen systematically insist that what seem to be perfectly respectable geese are actually stupendous swans.
That brings me to my last, and very serious, point about the negotiation with India. Why the rush? Today’s top geopolitical priority must be the survival of a free and sovereign Ukraine. National Governments tend to be against invasions lest they prove habit-forming. The 1982 attack on the Falklands and Saddam Hussein’s 1990 occupation of Kuwait were condemned; with UNSCRs 502 and 678, sanctions followed. Russia’s veto rules out any similar UN action now, but I am struck by our apparent inability to orchestrate any similar worldwide condemnation of Putin’s aggression and Russia’s blatant breaches of the Geneva conventions. If we have been trying—if we have been calling the Commonwealth from Chequers—we have been keeping quiet about it.
We have not been doing very well in Delhi. Mr Modi’s Government have raised no objections to the invasion of Ukraine or the barbaric methods employed. His Government have refused to join any sanctions. Indian exports to Russia are rising steeply: India bought no Russian oil before February but is now taking close to 1 million barrels a day. Indian forces are, as we speak, taking part in the Russian Vostok military exercise. Are we sure that now is the time to reward Mr Modi with new trade concessions? Are we bringing any Ukraine conditionality into this deal? If not, should we not? If the conditionality is resisted and rejected, should we not go slow?
If Putin eliminates Ukraine, as he said he aims to, there goes the post-World War II international settlement. There goes the rules-based system. There, incidentally, goes the reputation of the new Foreign Secretary, whoever he is, and the new Prime Minister. Trade policy cannot be ring-fenced and immune from geopolitics, so my key advice is to get our priorities right, which, in this case, means not being driven by a vacuous Diwali deadline. I say to the noble Lord, Lord Hannan, that I do not think it is enough to be disappointed at the Indian attitude. We have to use all the means at our disposal and all the skills of our diplomacy, including our trade diplomacy, to try to get the Indians to think again.
From my point of view, the issue in relation to our report is that I wish we could have had this debate six months ago, at the start of the negotiations, rather than two-thirds or three-quarters of the way through—as I think we all agree. However, I think we can still at this point ask, “What is it we are looking for?”, because the Government have not told us what constitutes a successful outcome to these negotiations. To that extent, with no disrespect to the Government, I think people might understandably look at our report and say that it is a good basis for judging whether there has been a good outcome.
Let me give a few examples of where we focused on some of the detail and added to what the Government said in their rather Panglossian way, which would be a good basis for thinking about what constitutes success. The Government talk about the importance of investment protection, but they did not say how or what they are looking for to protect UK investors in India. The committee discussed this a number of times, not least with my noble friend Lord Grimstone, who no doubt will bring a lot of further expertise to the committee. The point he often made was that we have been successful investors abroad, and where dispute settlement and investor protection are concerned the UK has a terrific record; nobody has pursued a successful ISDS case against the United Kingdom. However, we have often needed our investors to have the equivalent protection in other countries, and they have sometimes not had it.
We lost the bilateral investment treaty with India in 2016. The Government are not telling us what the nature of future investment protection should be. In our view, they should be prepared to pursue investor-state dispute settlement agreements, and ideally, in this and other contexts, try to bring India into an internationally agreed system for that purpose, such as through the development of UNCITRAL, not the EU system. As my noble friend Lord Frost accurately said, although the EU is still negotiating with India, it will complete the second round only next June. The EU will demand too many things of its negotiating partners, rather than seek some kind of international consensus. That is where our negotiators might have a valuable flexibility in getting us to an agreement that the European Union might otherwise not achieve. ISDS may be one of these places; it will be very valuable for there to be international agreement and for us to secure it with India.
I will briefly mention one or two other points. We cannot put it all in the agreement now, but it is important to have a process moving towards standard setting in India that meets international compliance. More than 80% of UK standards are ISO-compliant; less than a third are in India. We need India to move. For things such as mutual recognition agreements, which are important for goods, India relies enormously on us getting this kind of process under way. Likewise, our agricultural exports to India are often in premium goods, so we need geographical indications. We have heard the Government tell us that geographical indications are important, but they have not yet secured them through the Australia agreement or in Japanese domestic legislation. We do not even know whether they will seek a commitment to geographical indications in the India agreement, but they should, particularly because the Indian middle-class consumer is a large potential international market for many of these premium goods.
The last question I particularly want to mention, which is really important, is that of an innovation chapter. We have had innovation chapters, for example in the Australia agreement, and I cannot think of a potential free trade agreement for which the process of working and co-operating together on innovation could be more important than between us and India. It will clearly be looking for lots of services mobility and the ability for workers to come here. Much of that will be not only valuable to us, as I know well in relation to the National Health Service, but important to a wide range of innovative businesses—not only in health, but in life sciences, IT, fintech and beyond. We need that co-operation and innovation. The innovation chapter in this agreement might be the most effective one that we use in the future, but we will not see the detail of it in October. What we need, as with many of these free trade agreements, is something that meets the criteria now, but is the substantial starting point of an economic partnership that grows in the months and years ahead.
As we might guess, bonded labour is particularly prominent in the agricultural sector, where 64% of the population work. This is especially linked to caste and caste structures, which are deeply entrenched in rural areas. The reality is that landlords are of high caste, small landowners are of lower castes, and the landless and bonded labourers are almost exclusively Dalits. Bonded labour is also present in the brickmaking and mining industries. Women also suffer in multiple ways: patriarchal systems confine women to certain types of occupations such as domestic work, silk farming, carpet making and weaving. Young girls are commonly recruited to work in spinning mills in India in return for the cost of their marriage or a dowry payment. The parents often wait several years before receiving the money, which is usually less than initially agreed upon.
All this is illegal. Forced and bonded labour are contemporary forms of slavery, and as such are prohibited under international law—law from the United Nations and many conventions from the ILO. I could cite many of them, but I will not do so because of time. The point is that the law is in place and has been strongly reiterated in recent years, particularly in relation to bonded labour. India itself has signed up to all but two of the ILO protocols and conventions, but the practice still goes on. Lack of implementation of the legislative frameworks, failure of the authorities to observe the laws and the impunity of perpetrators are the most common obstacles to eliminating forced and bonded labour in India.
This is where the British Government and British importers have a key role to play. They can take steps to ensure that any goods that are imported were not produced as a result of bonded labour or any other form of slavery. This can make a difference, as we see with child labour. The report Sowing Hope examined child labour and wages in cotton and vegetable seed production in India. It demonstrated that children under 14 years old account for more than 18% of the workforce in the cotton seed farms surveyed. More than 50% of the child labourers in the sector are Dalits or Adivasis, and the majority of child labourers do not attend school.
Although still too high, the total amount of child labourers has in fact declined since 2015 due to initiatives by companies and NGOs. The report finds that wages across the sector are still far from the minimum wage, a figure that has not significantly improved, and that Dalits are still treated far worse than others, but in the 613 sample farms surveyed there was a direct correlation between the decline of child labour in companies that have implemented special programmes to address this issue, compared to those that have not yet tackled the problem. That shows that companies can have a real effect, so I strongly agree with the scrutiny report and its recommendation in paragraph 92 that
“The Government should either seek to strengthen labour protections informally, through co-operation mechanisms established in the trade deal, or formally, by requiring minimum levels of protection. It should discuss options with stakeholders, including development organisations and trade unions.”
I urge the British Government to insist in the final form of this trade deal that all companies importing goods from India or exporting to Indian markets sign up to the forced labour protocol of the ILO. Companies should also be obliged to map and disclose suppliers, sub-suppliers and business partners in their whole value chains. This trade deal provides a good opportunity not just to increase trade, but to ensure that the agreements that are made play their role in eliminating the horrible practice of bonded labour. The Government have a key role in ensuring that companies do this.
Some say that the brakes need to be applied to these negotiations. They do so by voicing concerns that some sectors may get left behind or that, through speed, our standards may become weakened. However, I see things very differently. International trade is moving at an unprecedented pace, and all the time we ask to stall, all the hours that are left dwindling, provide only an opportunity for others to come knocking at India’s door and for our overall negotiating position to become weakened. I challenge those who call on the Government for such a delay to show some faith in the natural forces of the market and to look at the Government’s recent successful track record in delivering free trade deals at a considerable pace and for the benefit of the UK.
It must be remembered that, in working with India, we are not starting from scratch. We are working with an old friend whom we know well, and it knows us. The UK has a long, complex and important relationship with India. Our already established economic links are significant—£23 billion in 2019—and through the Commonwealth the UK and India are already strategically aligned and share a common set of values and ambitions that can only be strengthened through proper trade. The Government should be commended for capitalising on the Commonwealth advantage in securing free trade deals with several Commonwealth countries, including Australia and New Zealand, and it would be great if India became the next.
Our cultural links with India provide a perfect backdrop for the forging of a new and ambitious future. Some 1.5 million British nationals are of Indian origin. With half a million jobs in each other’s economies already supported, the Government’s objectives not only look sound but are the way to move forward in future. The success of the Indian diaspora in the UK has laid that foundation for better business-to-business and Government-to-business relations. I hope that the Government can explore this as a way in which we can grow our business.
The geopolitical situation we currently face could not be more trying. Both India and the UK are now in the process of recovery from the twin shocks of Covid and the crisis in Ukraine. We have seen aggression and protectionism from certain states reaching levels that we can now feel at home. With this comes an absolute need for our businesses to be given the freedom to diversify into alternative markets. That is why we should encourage this negotiation to move at pace.
In their statement, the Government have made it abundantly clear that they are entirely committed to upholding the UK’s high environmental, labour, food safety and animal welfare standards. However, on the environment, would my noble friend the Minister agree that an FTA with India would provide an exceptional opportunity for the advancement of the UK’s leading renewables sector and that British firms currently innovating in this sector stand a great chance of playing a big role in the decarbonisation of the Indian economy? Further to this, I would be grateful if he could outline what actions the Government are taking to ensure that reducing tariffs on our green exports is an integral part of FTA negotiations, especially given that India has now committed to sourcing 50% of its energy from renewables.
We also have a proud history of standing up for and advancing human rights, particularly for women. The fact is that India has considerably weaker labour laws than the UK—a point made by the noble and right reverend Lord, Lord Harries. There are documented cases of widespread discrimination against women in India, which must not be ignored. It is vital that our trade deals are never seen to undermine the UK’s international commitment to gender equality. I therefore want clarity in these negotiations on what mechanisms the Government are seeking to deploy to strengthen labour protections, either formally through the agreement or informally, which is probably more likely.
In turning to the important area of digital trade, it is worth noting that digital and data services will underpin the success of the FTA secured. With this in mind, the UK must ensure that an adequate data protection regime is in place. Again, I would be grateful if we could get an update on that. I fully understand that there is no data legislation as such in India, although it is currently being put back through Parliament. I suspect that this whole section will be removed from the negotiations, but it is important that we ensure that we have some mechanism for coming back to it at a later point.
Public procurement is an area where we are, I hope, negotiating hard. Historically, there has been a reluctance from India to include public procurement in its FTAs but, in evaluating the growth of the Indian economy and seeing the exceptional demand for its infrastructure, it would be a huge loss if UK business did not have an opportunity to gain market access under the FTA. Again, it would be great if we could have some update on that.
This issue has already been raised but, through the UK Bribery Act 2010 and other legislation, the UK has a strong and tested anti-corruption framework. It is worrying, however, that some UK SMEs have either been put off trading or stopped trading altogether with India due to corruption concerns. I would be interested to know how we are going to deal with that.
The UK’s financial and professional services rely on the recognition and transferability of professional qualifications. This is most pressing in the legal sector, which, if we get this right, could stand to benefit significantly from the FTA. In pursuing the FTA negotiations, I would like Her Majesty’s Government to strive to achieve recognition of UK professional qualifications, particularly our legal qualifications, when UK professionals seek to enter India’s regulated professions. This step has the ability to increase drastically both the UK’s legal services exports to and legal services imports from India, so it is of value to both sides.
It is clear that the recognition of academic qualifications is just one part of the jigsaw puzzle. If the UK legal sector is really to reap the benefits of this FTA, we need to see a relaxation of visa restrictions on both sides, particularly for legal graduates and professionals. If the Government are successful in easing the cross-border movement of legal professionals, there will be an enormous benefit to be gained by lawyers both here and in India. We know that India wants market access to the UK’s legal sector, but we also know that it is protectionist about its own. AI and cybersecurity are other areas that are important in these negotiations.
In voting to leave the European Union, as we have now done, the British public were told that this would be our opportunity to set a course on a new era of international free trade. The Government have a clear mandate to use the UK’s recently regained sovereignty to seek and secure such free trade agreements. I wish our new Prime Minister and her team godspeed in delivering this one.