That the Grand Committee takes note of the Free Trade Agreement between the United Kingdom of Great Britain and Northern Ireland and the Republic of Turkey, laid before the House on 24 February.
Relevant documents: 8th Report from the International Agreements Committee (special attention drawn to the agreement)
My Lords, it is a pleasure to move this take-note Motion on the UK-Turkey trade agreement, and in so doing I thank the Members who will participate in today’s debate. I note the breadth of experience that they bring on trade issues. I am also grateful to the committee for its report. The International Agreements Committee is one of the most valuable in the House at the moment, and it is serving a great role in drawing to our attention issues that we should debate. It is my pleasure to move this debate in accordance with the committee’s recommendation that we take note of the agreement.
I am also grateful to the Minister for keeping to his word in emailing me and keeping me informed of developments in his department, and I am grateful to his office, and to the noble Lord, Lord Ashton, and the Government Whips’ Office for facilitating the debate in such good time. I am not used to that happening, and it will not go to my head—I reassure the Minister that I will not expect the Government to allow debate on any Motion within a week.
The agreement is now ratified. It was agreed on 29 December, so businesses did not have sight of it before it was operational two days later. This continuity agreement is unlike others in that it is temporary and the parties are committed to review it no later than two years after it enters into force—effectively 18 months from now—with the aim for an enhanced agreement covering services, agricultural goods, investment, subsidies, labour, sustainable development and climate. Given that the average time that it took the Government to make continuity agreements was over two years, it would be helpful to know what timescale they are working to for a full permanent agreement with Turkey.
The agreement also covers goods. Turkey is a relatively small but important trading partner with us. ONS data published on 13 April shows that, in 2020, we exported £4.8 billion of goods to Turkey, down from £5.4 billion in 2019, and imported £8.2 billion, down from £9 billion. In 2020, trading goods with Turkey represented 1.75% of all goods trade for the UK. As the Committee can see from the figures, we operate a considerable trade deficit with Turkey, so the motivation for the agreement was from Turkey and thus leverage was with us. We chose not to use that leverage.
Our trading relationship with Turkey is unique, owing to its membership since 1996 of a partial customs union with us, which reduced barriers to trade. That has now ended and those barriers have been re-erected. Therefore, downgrading to a lesser FTA arrangement has meant businesses now needing to adjust to higher import and export administration costs, more bureaucracy, slower port of entry and exit procedures, and complex rules of origin requirements.
This latter point, which the committee picked up specifically, is of great significance given the categories of imports and exports and the fact that the largest elements—vehicles, machinery and engineering—are all part of complex supply chains with EU manufacturers. The fact that we have only a temporary allowance on rules of origin, because of our failure to secure this in the TCA, will mean that there is a stage 2 level of greater burden coming with our trade with Turkey in the permanent relationships.
My Lords, I congratulate the noble Lord, Lord Purvis of Tweed, on obtaining this debate; I thank him for it because I speak as chair of the International Agreements Committee. In that capacity, I thank him also for the kind remarks he made about the committee’s work. We are very fortunate with the quality of our members, who are engaged and knowledgeable, and the quality of our staff. It is therefore important that these debates take place; I am glad that this is taking place, although three minutes is hardly adequate for other members of the committee to be able to respond to this debate.
Turkey is the United Kingdom’s 19th-largest trading partner, accounting for 1.3% of total UK trade. It represents a valuable market, especially for goods, and it was therefore important to conclude an agreement to preserve the maximum access for UK exporters and manufacturers. I accept that, because of Turkey’s close relationship and alignment with the EU, the rollover process was complex. I would have liked to be able to congratulate the Government wholeheartedly on delivering such a complex agreement in time, but there are deficiencies, to which the noble Lord, Lord Purvis, has already referred.
The committee reported the agreement for the special attention of the House because it considered it politically important, and because it is significantly different from the precursor EU-Turkey agreements so as to warrant debate.
Our pre-Brexit trading relationship with Turkey was governed in part by the EU-Turkey customs union. That had to be transformed into a free trade agreement —by definition and, unavoidably, that means less favourable trading terms than under a customs union. For example, there are now new rules of origin and paperwork requirements for traders. Fellow members of the committee will cover that issue and others in more detail. Although in converting the customs union to a free trade agreement the EU arrangements have been preserved as far as possible, areas that one would usually expect to see covered in a modern, comprehensive trade agreement have been excluded: services; trade in agricultural goods; investment; sustainable development. Again, colleagues will reflect on these omissions.
My Lords, I congratulate the noble Lord, Lord Purvis of Tweed, on bringing this important Motion before us. His argument that Turkey was the demandeur because we run a trade deficit with it strikes me as one that was answered by his countryman Adam Smith 245 years ago in that little phrase,
“Consumption is the sole end and purpose of all production”.
What is the benefit of having a trade surplus? It is not as though you can keep silos filled with extra stuff. Cheaper imports are a terrific way of raising living standards for all of us, especially for people on low incomes. Exports are the stuff you want to get rid of to pay for those cheaper imports. Understanding that point, now 245 years old, seems to me the way to get to a world where we are lifting restrictions and allowing people to prosper.
Equally, trade is a remarkably poor instrument of foreign policy. Let us all accept that there are at least questions to answer when it comes to human rights in Turkey. Any kind of generalised sanctions—and I would call refusing to have an FTA the weakest form of trade sanction—are almost always counterproductive. They create a siege mentality. They hurt the wrong people—ordinary folk in the other country and in your own—while driving support to the regime of which you disapprove. There are sanctions that you can take, but generalised trade sanctions almost always fail for the same reason that they kept Castro in power in Cuba: they create a sense of people needing to rally to the authorities.
Let me make a final point on Turkey’s relationship with the customs union, which, as noble Lords have said, came to an end with this FTA. It is important to understand quite how disadvantageous Turkey’s position within the customs union was. Turkey was obliged to follow all EU concessions in talks with third countries. When the EU did a trade deal with Japan or South Korea, Turkey was required to match all the concessions, but there was no reciprocal obligation on Japan or South Korea or whoever to make the concessions vis-à-vis Turkey that they were making vis- à-vis the EU.
2:51 pm
The Earl of Sandwich (CB) [V]
My Lords, the noble and learned Lord, Lord Goldsmith, the noble Lord, Lord Purvis, and the IAC itself have already pointed out flaws in this agreement: no assessment of the effects on business of a transition from the customs union; no subsidies chapter; and the need to review TBTs and rules of origin.
I shall focus briefly on the absence of human rights. Turkey has a historic role in Europe; some even still see her as a potential member of the EU following the long tradition begun by Atatürk. More recently, President Erdoğan’s repressive Government have made that impossible because of their flagrant abuse of human rights and imprisonment of opposition leaders, activists, journalists and others.
The TUC has called for a suspension of the trade deal and our own IAC has received written evidence from trade unions. According to Unite:
“Over 160,000 judges, teachers, police, and civil servants have been suspended or dismissed, together with about 77,000 formally arrested.”
These figures may be out of date because a lot of prisoners have been released due to the pandemic but the European Commission’s Turkey 2020 Reportcame down heavily on Ankara, saying that there had been “serious backsliding” on the rule of law and fundamental rights. It mentioned the “deterioration of democracy”, the exclusion of civil society and new problems with refugees. That report may have prompted the recent promises from President Erdoğan to write a new constitution, apparently turning over yet another new leaf. We on the committee were also concerned to hear that Turkey has withdrawn from the Council of Europe convention on violence against women, signed in Istanbul; this issue came up again in our debates on the Domestic Abuse Bill.
Despite all this, human rights and workers’ rights are unspecified in this agreement for some reason, which must be a bad mistake. Our committee report was too polite to insist on a more specific reference; we simply asked the Government to make greater use of the review clause to update the agreement and introduce a full section on human rights.
There seems to be no argument for treating Turkey any differently from other countries with which we have new trade deals—on this, I part company with the previous speaker—and I hope that the Minister will agree that this is a lacuna. Therefore, as the noble and learned Lord, Lord Goldsmith, said, we look forward to hearing exactly what the Government’s negotiating objectives are in the new agreement.
2:54 pm
Lord Morris of Aberavon (Lab) [V]
My Lords, it is good for the democratic process that the International Agreements Committee, of which I am a member, scrutinises treaties and that we should have a timely debate today, which I welcome.
I suggest that there are at least three templates that we should develop for the foreseeable future: first, that the Government publish their negotiating objectives quite clearly; secondly, that there should be explicit advice that the Government have raised human rights and workers’ rights, as already mentioned—as the noble Earl, Lord Sandwich, said, we urge the Government to use the review clause in the agreement to introduce human rights and workers’ rights provisions; thirdly, that in the absence of successfully achieving our negotiating objectives and where we have to fall back on WTO terms in all our treaties, it should be tabulated, and we should have a running score on what we are falling back on.
On the first issue, we were concerned at the lack of an explicit confirmation that the Government would publish their negotiating position. Since then, we have received information in the terms already referred to, and I am concerned about the words of the reply. I am not quite sure what to make of the assurance received that:
“The Government will be able to comment in due course on how the publication of negotiating objectives will be handled in the case of our existing FTA with Turkey.”
It sounds more like Mandarin than English to me. Perhaps the Minister will give me a translation.
Secondly, on human rights and workers’ rights provisions, we have made our position quite clear, as other noble Lords have done already. I fear that these issues are sometimes approached with a tick-box mentality, bowing to them, as I suspect one does, when world leaders meet but getting very little in return. The TUC expressed great concern last year that Turkey was ranked among the 10 worst countries for workers’ rights according to the International Trade Union Confederation. I need not go further than what we have heard in this debate; I certainly assert in the same way.
Over the past few months, we have developed a good relationship with the Government as regards the devolved Assemblies. I am anxious to ensure that that is pursued and followed up, because it is important not only that they are consulted but that we are informed when they have concerns. This is now coming through loud and clear. It is vital that Belfast, Cardiff and Edinburgh are all consulted as part of the economic development of this country. I am certainly hawkish on this matter, for which I make no apology, having been one of the architects of Welsh devolution. With those few words, I indicate my agreement with the committee’s report.
I call the next speaker, the noble Lord, Lord Kerr of Kinlochard. Lord Kerr? No? As the noble Lord, Lord Oates, has withdrawn, I shall call the next speaker, the noble Lord, Lord Lansley, and perhaps we can return to the noble Lord, Lord Kerr.
My Lords, I join in thanking the noble Lord, Lord Purvis of Tweed, for securing this debate and for the way in which he introduced it. I also thank our chair, the noble and learned Lord, Lord Goldsmith, for his introduction to the report, albeit necessarily brief.
I want to complement it by talking about just one issue, that of subsidies, which I hope will illustrate what we are keen to see happen in the year or two ahead. Obviously, the rollover agreement does not carry forward the EU state aid regime, since we are departing from that, but it puts nothing in its place. That is not entirely surprising, not least because the EU-Turkey report from October 2020 says at page 58:
“Legislation to implement the State Aid Law, originally scheduled to be passed by September 2011, has still not been adopted”,
adding that there is no state aid inventory in Turkey. It notes that the administrative mechanism for the state aid legislation has been abolished, and that government support for certain priority investments, including a national automobile factory, is going ahead under the 11th development plan, including 400 product groups in strategic sectors where, as the European Commission’s report says,
“The amount of state aid granted for this investment is not disclosed, contrary to the commitments under the EU-Turkey Customs Union.”
So putting in place a state aid or subsidies agreement with Turkey at present does not work for the EU and it would not work for us.
However, that does not mean that we should not clearly put it in our negotiating objectives. It would not suffice for us to leave it in a WTO subsidy format because, as we know, the WTO format leads only to complaints by countries and is essentially retrospective, and damage must first have been established before the point at which any subsidy can be challenged. By contrast, the UK-Japan agreement, in articles 12.5 and 12.6, has specific provisions about sharing of notifications and the ability for each party to seek further information and to engage in consultation. That, of course, can mean, if necessary—I hope it will not be necessary too often —a complaint at the WTO that a subsidy is contrary to its provisions or some mitigating measures being taken by agreement.
3:02 pm
Viscount Waverley (CB)
My Lords, it is a pleasure to follow the noble Lord, Lord Lansley, and to contribute to the debate of the noble Lord, Lord Purvis.
It has always seemed to me that the debate on Turkey is split into two intractable camps. I have noted carefully the remarks of those critical of Turkey but consider that the noble Lord, Lord Hannan, struck the right note. If one had to draw up a priority list of countries around the world with which we should ally for multiple strategic reasons, Turkey would without question be in the champions’ league. Having done the rounds in Ankara, it is clear to me that Turkey is a country that looks equally favourably towards the UK. Simply put, the UK needs Turkey for multiple reasons as we embark on a world journey, with Istanbul being one of the geostrategic hubs ranking alongside London, Dubai, Mumbai, Singapore or São Paulo.
Turkey commands influence beyond its frontiers. We always have regard to our values, but some detractors might cite one kind of challenge or another, some of which we have been hearing about this afternoon. However, this agreement allows interest from both sides to get this show on the road, from which values and understanding will emanate. Sir Dominick Chilcott, our ambassador in Ankara, sums it up well in his briefing. I hope he will forgive me for quoting it:
“What influence we will have will best be done through contact and dialogue. Boycotting Turkey or imposing sanctions is unlikely to be productive and risks alienating a country that is a NATO ally and an indispensable partner in the fight against terrorism, organised crime and illegal migration.”
For all the above reasons I am opening a regional hub for Eurasia for a global project covering 224 countries. The rapprochement between the UAE and Bahrain with Israel, combined with the President’s improved overtures towards Israel, make for a more harmonious region at large and is certainly helpful.
As to the question “Why Turkey?”, the country has a population of 83 million, a highly educated population at large and a huge pool of skilled and low-cost labour with production diversification potential. It is a central corridor of the silk road, with an exchange rates advantage. It has NATO’s second largest military and a burgeoning defence technology sector, and it has borders with many of our front-line issues—Syria, Iraq, Iran, Armenia, Azerbaijan, Georgia and the Balkans, with Russia and Ukraine across the Black Sea.
In conclusion, there can be no greater anticipation and mystique than, having traversed the continent, to be pulling into Istanbul station on the Orient Express, taking in the first sight of the Bosporus, visiting the Blue Mosque and Hagia Sophia, putting a toe-hold into Asia and being enchanted by the swirling dervishes after an excellent dinner. I wish this FTA well.
I wanted to raise three points and one more general one. First, British goods exporters are now at a disadvantage compared to their EU competitors because we are outside the 1996 EU-Turkey customs union and hence European rules of origin cumulation. I understand that; what I do not understand is why in this agreement, unlike the original 1963 EU-Turkey association agreement, there is nothing on services. The balance of trade in goods heavily favours Turkey, and that is likely to worsen. Could we not have got something in exchange on services? Could the Minister say whether we tried and, if so, why we failed?
Secondly, the agreement contains nothing on human rights, as other noble Lords have mentioned. During our debates on the Trade Bill, the Minister assured us that human rights would be at the heart of trade policy. President Erdoğan’s Turkey, flouting ECHR calls for the release of civil society leaders, is surely a paradigm case, or at least should be. So why the lacuna in the agreement? Did we try to fill it? If so, why did we cave in?
Thirdly, I predict that the Minister will remind us that an enhanced agreement is to be negotiated and the gaps in this one can be filled then—but is that plausible? Precedent is a powerful weapon in negotiation. Passes once sold are not easily recaptured. Moreover, have not we missed the moment of maximum leverage? Precisely because the balance is in the Turks’ favour, they will have been anxious that we should not revert to WTO terms, bringing in new UK tariffs on their goods. Our hand was stronger in 2020 than it will be when negotiations restart. How come we missed the boat?
That brings me to my more general point. When roll- over agreements do not duplicate previous arrangements, they seem on the whole to make them slightly worse. The Mexico agreement is another which leaves UK exporters less competitive than their EU rivals will be. Did the department, in its rush to prove that it can negotiate agreements, sacrifice quality for quantity and content for quantum? Did we put ourselves under time pressure, and are there lessons to be learned from that—for example, for our negotiation with Australia? Are not we again risking seeming overly eager? I look forward to the Minister’s replies.
20 of 44 shown
There is a great line in paragraph 2 of the Government’s parliamentary report:
“It is in no one’s interests to disrupt existing trade flows.”
I agree. This was also highlighted in paragraph 10 of the committee’s report, quoting from the parliamentary report:
“HM Government has worked closely with Turkey to ensure that customs processes are as simple, clear, and predictable as possible, and that any changes do not affect current trade flows.”
They demonstrably have. The ONS data released on 13 April has the latest figures showing the disruption. UK imports of goods from Turkey fell 27% from December 2020 to January 2021, down from 967 million to 714 million, and they fell further in February. Exports in the same period fell 8%, before picking up again in February, and this is on top of the year-on-year falls I cited earlier. For Turkey, we have a double- stage downgrading of free trade. The committee’s recommendation in paragraph 6 for wide consultation is very important.
The Government, in their response, said that they would consult stakeholders, but if it is simply stakeholders, that is limited. They also said that they would consult in a similar approach to the US proposed trade agreement. That had a wide consultation open to the public; I even went on to it and submitted a response. Will the Minister clarify what level of consultation there will be for the permanent trade agreement, with not just trade stakeholders to be included, but all those with an interest in the wider aspects? This is to be a comprehensive trade agreement, so as wide a consultation as possible will be necessary. I also fully endorse the recommendation in paragraph 16 of the report calling for a full impact assessment. We need to know which of the effects that we have witnessed are likely to be temporary effects, and which are systemic, because of the new barriers in perpetuity. That needs to inform differing policy responses.
The two major areas, as the committee pointed out, are short-term disruptions and long-term increased barriers. I am afraid that the Minister completely ignored that recommendation in his letter to the committee, so if he can respond to it today it would be helpful. Given the evidence that the committee received from manufacturers and those in supply chains, the Government owe the committee a response.
Given that businesses that have traded with the EU can access some form of support package and lending to tackle the Government’s new barriers with EU trade, these are the same kinds of barriers that businesses will now see for trade with Turkey, so will businesses be able to access those trade support areas too—for example, the SME Brexit Support Fund? That is contracted out to PricewaterhouseCoopers. I emailed three weeks ago, on its online inquiry form, asking for details of the fund, how PwC was being paid and how it was being administered. I have received no reply. I hope that businesses are faring better at getting a response from PwC than I have. I would be grateful if the Minister would write to me to say how much the Government are paying it for the administration of this fund.
Critically for this debate, are this scheme and the others open to businesses which trade with Turkey and which have new barriers as a direct result of the TCA with the EU? Also, there is continuing guidance now being issued to businesses exporting to the EU. Will there be the same guidance to businesses exporting to Turkey? For example, HMRC outlined, in an email to me and all others who have registered for its updates, on 1 April:
“When exporting goods from a roll-on roll-off port or any other listed locations, you, or the person submitting your customs declaration, must submit your declaration as ‘arrived’. The declaration must be submitted as ‘arrived’ in order to finalise the declaration process before your goods reach border locations, where customs controls are being staged in. If the declaration isn’t ‘arrived’,
customs
“will not recognise that the goods have left the country.”
I have to admit that I thought this was HMRC’s April fool’s joke but it seems as if, unbelievably, if we are exporting now to the EU, we have to declare that the goods have arrived before they have left the country. Can the Minister confirm that? Is the same approach being taken for goods exported to Turkey?
Another area where the Government need to provide more information is on rules of origin. The committee has picked this up and has done us a service for analysing it carefully. The system for pan-Euro-Mediterranean cumulation of origin allows for the application of diagonal cumulation between the EU, EFTA states, Turkey, the countries that signed the Barcelona declaration, the western Balkans and the Faroe Islands. That free trade measure has now been ended for UK trade. The committee is right in paragraph 22 to call for comprehensive and detailed guidance on any new arrangements, but what is the impact assessment on trade with the other countries with which we can no longer have diagonal cumulation with the EU?
I mentioned the trade deficit that we currently have with Turkey. We operate a wide trade deficit with many other countries too, and there will of course be some areas where a deficit is not a major worry, such as in certain areas where the UK does not or cannot produce. In other areas, however, it is a concern. The answer is not in protection measures, but in securing better terms for UK exporters to market access in those countries, often through them levelling up on standards. So far in the Japan agreement, worth £15 billion, the Government say that only £2 billion of that is widening UK market access to Japan, while £13 billion is for Japanese access. The Minister replied that it was good for the UK because it allows for cheaper imports; this is in line with what was repeated by Liz Truss on Sunday when she was asked to comment on the Australian trade deficit as well.
Free trade in the 21st century should be fair trade, too. When it comes to the UK negotiating FTAs, we should do it for the benefit of UK exporters and consumers. If not, what was the point of Brexit? So far, the agreements reached by this Government will see competitive trade advantage decline as deficits grow. As an example of this agreement’s lack of using leverage, we are abolishing in it the long-standing entry-price system, designed to prevent seasonal low-cost fruit and vegetables below an agreed floor price from flooding the UK market, rendering domestic soft fruit and vegetable producers uncompetitive. Given that we have sought to have higher standards of seasonal agricultural workers’ conditions than, say, Turkey, this is important. What was the response by the soft fruit producers in Scotland and across the UK to this? Also, the EPS allows for a competitive playing field to the least developed countries, which already benefited from preferential access. What was the Government’s modelling for the impact on this? The Government have failed in this and other areas in seeking reciprocity on competitiveness. On subsidy control and others, we see Turkey having an advantage, and are yet to see what the Government are signalling to the benefit of UK exporters.
Finally, on human rights, last week the noble Lord, Lord Ahmad, said that we had values-based trade. The Minister has repeatedly said that trade is not at the cost of human rights. The Government have promised draft human rights clauses on trade and human rights approaches. If any agreement requires this, it is the permanent Turkey agreement. If the Minister can respond to these points and others that will be raised in this debate, I will be most grateful.
Two key omissions that I want to focus on are human rights and workers’ rights. Although they did not feature in the underlying EU agreements, the Government had an opportunity to push for their inclusion when negotiating the new agreement and, as the noble Lord, Lord Purvis of Tweed, has said, the negotiating advantage lay with us—we had the leverage. Their absence, therefore, appears at odds with the Trade Secretary’s vision of “values-driven free trade”. In its latest World Report, Human Rights Watch provided a damning assessment of Turkey’s continued attacks on human rights and the rule of law. Thousands of people in Turkey face arrest or worse for daring to criticise the President or the Government, with terrorism widely used as a pretext to restrict the rights of Turkish citizens. The Joint Committee on Human Rights has also previously highlighted child labour, refugee labour and hostility towards trade union membership as issues of concern.
The Minister has previously said that
“trade does not have to come at the expense of human rights”.—[Official Report, 23/3/21; col. 752]
Well, I shall ask him the first of three questions. What reassurances can he give that these matters will be pursued in the negotiations for an expanded UK-Turkey agreement, which are due to begin within two years? We welcome plans for an expanded agreement and the Government’s commitment to undertake a public consultation to inform future proposals, but my second question is: can the Minister also confirm that the Government plan to publish their negotiating objectives for the expanded UK-Turkey agreement and that, should the International Agreements Committee call for a debate on these objectives, such a request would be met? Finally, what plans do the Government have to extend their commitments to facilitating parliamentary scrutiny of negotiating objectives to all agreements that are subject to renegotiation?
That position was negotiated transitionally. It was supposed to be a step to full membership. It was acceptable—indeed, it made very good sense—in those terms. However, it makes very little sense as a permanent situation for Turkey. We have huge opportunities to do what both Trade Ministers—our own and her Turkish counterpart—said when this deal was negotiated at the beginning of this year remains our ambition: to have a much deeper, more ambitious and more comprehensive commercial relationship with Turkey.
It seems pretty clear that Turkey’s EU ambitions are over; that is clear whether you talk to people in Brussels or in Ankara. I suspect that Turkey will therefore look to change the terms of its trade relationships with the European Union because, once they cease to be transitional, they become deeply unattractive. Britain should have no qualms about seeking the closest trading relationship possible with a country that for a long time guarded NATO’s flank against the horror of Bolshevism and to which we may one day look to guard our flank against religious extremism.
At the moment, I think that we as a committee and the All-Party Parliamentary Group for Trade and Export Promotion—its chair is to speak next; I am a vice-chair—are very interested in moving from continuity agreements to full free trade agreements and seeing what those objectives will look like for a free trade agreement in the future. In this particular instance, I am keen to see something like the Japan agreement reflected into our negotiating objectives with Turkey.
Turkey: Free Trade Agreement · Order Paper · Order Paper