UK-US Trade Deal Negotiating Objectives

Statement

My Lords, with permission, I will now repeat a Statement made in the other place by my right honourable friend the Secretary of State for International Trade. The Statement is as follows:

“Today my department is publishing a suite of documents that mark a crucial step in the process of beginning formal negotiations for a free trade agreement with our largest bilateral trading partner, the United States. These documents comprise the Government’s negotiating objectives, our response to the public consultation, and a scoping assessment to provide the House and the British people with analysis of the potential long-run economic impact of an FTA. These are available online and will be placed in the Libraries.

The UK stands at an historic moment, building its independent trade policy for the first time in almost half a century. This Government will seize this opportunity to be an independent, global champion with a simple message: free trade is good for all nations and will deliver benefits for businesses, households and consumers across the UK. We aim to have 80% of UK trade with countries covered by free trade agreements within three years, starting with the US, Japan, Australia and New Zealand. Seeking these agreements is part of our efforts to level up, deliver opportunity and unleash the potential of every part of our United Kingdom.

The USA is the world’s largest economy, our closest security and defence partner, and one of our oldest friends. We are the biggest investors in each other’s economies. An FTA represents a fantastic opportunity to strengthen and deepen our strong trade, investment and economic relationships, bringing us closer to the world’s economic powerhouse. In 2017, according to US statistics, 1.7 million people worked for US majority-owned companies operating in the UK, and 1.3 million for UK majority-owned companies based in the US. UK-US total trade was valued at £220.9 billion in the last year, representing 19.8% of all our exports. An ambitious FTA with the US could deliver a significant long-term boost for the economy. Compared with 2018, it could mean a £15.3 billion increase in bilateral trade and a £3.4 billion lift to the economy.

The negotiating objectives we are publishing today are underpinned by one of the biggest consultations ever undertaken with the UK public, businesses and wider society. It received the views of 158,720 respondents, all of which have fed into the Government’s broad approach to FTAs and specific negotiating objectives. We have scaled up our trade negotiator expertise and have a similar size of team to the US trade representative, including a wealth of experience from the private sector, trade law, Commonwealth nations and WTO experts, ready to deliver for the UK.

My department’s analysis shows that the US deal we are seeking benefits every region and nation of the UK, delivering improved access for businesses, more investment, better jobs and higher wages. For the Midlands, a UK-US FTA could reduce tariffs on cars and ceramics. For Scotland, it could lock in salmon and whisky trade and support new market access for beef. The north of England could see more exports of manufactured goods and new data agreements for its tech firms. The south-west can gain from eased customs procedures for beverages, luxury sports and marine equipment. The south-east could see benefits for its globally competitive professional business firms. London could see benefits through agreements on digital trade that will boost our world-leading tech firms. The east of England will see a boost to its food and life science industries. Wales stands to gain market access for its fantastic lamb, and reduced tariffs and red tape for its steel and ceramic sectors. Northern Ireland can benefit through liberalisation of tariffs in furniture and pharmaceuticals.

North, east, south and west, from agriculture to the creative industries, my department’s analysis finds that a US trade deal has the potential to deliver benefits throughout the UK economy, with more choice for consumers at lower prices and new opportunities for businesses, and to grow high-skills jobs. It has the potential to slash trade barriers and tariffs totalling some £493 million per year and could boost British workers’ wages by £1.8 billion.

Small and medium-sized businesses provide around three-fifths of jobs in the UK. They are increasingly international traders in their own right. In 2018, 97% of businesses exporting goods were SMEs, representing 28% of our total exports. Some 30,000 SMEs across the UK trade with the US already. So we will make it a priority in these negotiations to support UK SMEs to seize the opportunities of UK-US trade. We will do this by aiming to agree a dedicated SME chapter to facilitate co-operation on SME issues; to ensure that SMEs have easy access to information to take advantage of the new opportunities; to build on the successful UK-US SME dialogue to strengthen co-operation; and to ensure that throughout the agreement there are SME-friendly provisions covering both services and goods.

We are also looking to rewrite the rules of the game on digital trade to create a world-leading ecosystem that supports businesses of all sizes across the UK. This could include provisions that facilitate the free flow of data and prevent unjustified data localisation requirements, while ensuring that the UK’s high standards of personal data protection are maintained and that government continues to maintain its ability to protect users against online harm. We can ensure that customs duties are not imposed on electronic transmissions and create fantastic opportunities in areas such as blockchain, driverless cars and quantum technology.

In these trade talks, as in all our future trade talks, this Government will drive a hard bargain for the British people. The NHS, the price it pays for drugs and its services are not for sale. There will be no compromise on high environmental protection, animal welfare and food standards. Throughout these negotiations, the Government will continue to engage collaboratively with Parliament, the devolved Administrations and the public.

I can also assure the House that now the UK is free to negotiate outside the EU, we will be aiming to begin negotiations with the US as quickly as possible. The appetite is clear on both sides. We welcomed the US Government’s negotiating objectives, particularly on developing state-of-the-art provisions in financial services and digital trade. We welcome the enthusiasm in both the US Congress and the US Administration, as was made clear during my discussions last week with US Trade Representative Robert Lighthizer. We see in this not just an opportunity to deepen our bilateral trade and investment relationship, important though that is; it is about setting an example to the world of how two leading, open and mature economies can trade with one another.

As an independent trading nation, the UK will champion free trade and lower trade barriers at every opportunity. Striking free trade agreements will give our businesses the opportunities, certainty and security they need to prosper. The greatest opportunity to do this is with our closest ally and largest single trading partner, the United States. We have the mandate. We have the team. With the documents we are publishing today, we have the tools. With hard work, I believe we can get it done—so I commend this Statement to the House.”

My Lords, that concludes the Statement.

My Lords, I first apologise for not being present at the very start of proceedings on this Statement. Unfortunately, my printer got stuck and I had to wait until I was able to clear it with technical help. I therefore missed the opening sentence, but I had been given a copy of the Statement and had read it before.

We support an ambitious trade agreement that unlocks economic growth, creates new jobs and elevates rights and standards. I thank the Minister for repeating the Statement following the publication of today’s negotiating mandate for the Government’s flagship trade agreement with the USA. Of course, some 20% of our current trade is already with the USA. It is our second-biggest market and we have enjoyed decades of two-way trade with no underlying trade agreement. So, while I welcome the publication today, I wonder whether it was quite necessary to do it in the way it has been done and to carry the tone it does.

The Statement says that an “ambitious” free trade agreement with the US could result in

“a £15.3 billion increase in bilateral trade and a £3.4 billion lift to the economy.”

These are substantial figures. However, can the Minister confirm that this is over a 15-year period? These results will be slow to come and indeed, given the length of time, are not very substantial on their own. Can he also confirm that, at the end of that time, the British economy would be only 0.16% larger by 2035? This hardly compares well with the loss in trade of some 5% of GDP—some argue it could be worse—if we fail to complete an ambitious free trade agreement with the EU.

Secondly, the Secretary of State has said positive things about the NHS and the price of medicines, and that there will be no compromise on environmental protection, animal welfare and food standards. However, the Government have so far failed to enshrine this in primary legislation. There is an amendment to the Trade Bill that left your Lordships’ House in a previous Session that would do it. Why do they continue to prevaricate on this point?

My Lords, I too thank the Minister for repeating the Statement given in the other place. As the noble Lord, Lord Stevenson, said, we are building on substantial trade with the United States, which receives some 20% of our exports and is our largest international market after the European Union. To be clear, business achieved those substantial numbers while the United Kingdom was still in the European Union. Leaving the European Union is not a prerequisite for doing business with other countries and regimes.

That said, the process of negotiation is now under way, so what light does the Statement throw up? First, could the Minister acknowledge that, with respect to services, our largest sector, it is often the states rather than the federal Government which hold sway? So there are severe limitations on any FTA going forward, because it is difficult to cover the services sector, which is very important for the United Kingdom.

Data appears a number of times in the Statement and plays a big role in the supporting documents. The Government say they are going to

“rewrite the rules of the game on digital trade”.

First, can the Minister confirm that this will mean the UK moving away from GDPR, as clearly that is important? In the Statement, the Minister also talks about including provisions to

“facilitate the free flow of data and prevent unjustified data localisation requirements”.

It would be interesting to know, either today or in a Written Statement, what “unjustified data localisation requirements” this refers to? This is a real issue. For example, is the Minister happy that UK users of Google are having their data moved from the EU domain into the United States’ domain, where there is no accountability from the EU, which until very recently provided democratic accountability for UK users. Does the Minister think that, in moving the data, Google is expecting to make more money from people’s lives or less?

I thank both noble Lords for their points. I thank the noble Lord, Lord Stevenson, for his broad support for this Statement; perhaps the noble Lord, Lord Fox, did not quite fall into that category.

The first point the noble Lord, Lord Stevenson, raised was about the point I made concerning the total value of trade between the UK and the US, which will soar—as I had said—by £15.3 billion, adding £1.8 billion to wages across the country. It is true that is over a 15-year period, as he asked me.

The noble Lord spoke about environmental protection. I know this is an issue which is important for many of your Lordships in this House and has come up in previous debates. In all our trade agreements, we will not compromise on our high standards of food safety and animal welfare. The Government will stand firm in trade negotiations to ensure that any future trade deals live up to the values of farmers and consumers across the UK. The UK is proud of its world-leading food, health and animal welfare standards. I say again: we will not lower our standards as we negotiate new trade deals.

The noble Lord, Lord Stevenson, mentioned the ILO and the link to labour standards, and alluded to the conventions as part of the negotiations. He will know that we have very high labour standards in this country, and we want to uphold those. That will be a red line in our approach to these discussions, as it is with the EU.

The noble Lord also alluded to the US position and said that some of the information coming out was—to use his word—on the “aggressive” side. It is entirely to be expected that the US would lay out its stall. We have known its position, which is a very good thing, and will be taking what it has to say very seriously.

On scrutiny, primarily parliamentary scrutiny, this falls in line with what the Government wish to do to keep the nation in touch. The noble Lords, Lord Fox and Lord Stevenson, will know of the strategic trade advisory group, or STAG, and the expert trade advisory groups, or ETAGs. We are consulting these groups on a regular basis. The STAG’s principal purpose is for the Government to engage with stakeholders on trade policy matters. On parliamentary engagement, we have pledged to keep Parliament—both the Commons and this place—up to date as we see fit on the timing and how we are approaching the negotiations.

My Lords, I welcome the Government’s Statement and hope that these negotiations are successful, but is it not important to put the importance of trade agreements into perspective? What actually drives trade is the production of goods and services that other people want to buy. Trade agreements are of secondary importance, as illustrated by the relative growth in our trade with countries with whom we trade solely on WTO terms and have no free trade agreement with. The WTO and the single market were set up at the same time, when I was Secretary of State for Trade and Industry. Our exports of goods to WTO-only countries has grown by 87%, faster than those economies themselves have grown and six times faster than our exports to the EU, which have grown by barely 0.5% a year, which is slower than the growth of the economies of the EU.

My noble friend makes an excellent point. The opportunities for the UK are substantial. I say again that this is a landmark deal that will set the standard for world-leading trade agreements. Starting off with the US is a very good start. For example, it is very exciting that tariffs will likely be reduced for Bentleys from Crewe, Aston Martins from Warwickshire and Wales, UK cheese, which currently has a 17% tariff, and ceramics from Warwickshire, which have a 28% tariff. We hope that these tariffs will be reduced, as they should be, in the negotiations. Noble Lords might ask me, as the Minister, what we are going to get in return from America. That includes raisins and wine from California, and, as the Prime Minister said, Stetsons replacing salmon. There is a lot to be hopeful about in the negotiations.

My Lords, I have not had an opportunity to read this long document, but I congratulate the Minister in one respect: at least in this document, the Government have tried to produce a proper economic assessment of the potential of a free trade agreement with the United States. Is it not odd that, on the much more important free trade agreement with the EU—despite what the noble Lord, Lord Lilley, said, it still accounts for two and a half times more of our trade than the United States—no economic assessment was produced at all? How can he explain that?

Secondly, will the Minister acknowledge that, while any growth as a result of a UK-US deal would be welcome and important, it is trivial by comparison with the numbers at stake in our EU relationship?

Finally, will he acknowledge that, in the special case of President Trump, trade deals are extremely difficult to negotiate? He does not believe, like Britain and the European Union, in the concept of a rules-based multilateral order governing trade. He has been trying to weaken the WTO by not appointing judges to its highest arbitration panels. He believes that might is more important than right, and he judges trade by how much powerful America can grab—it is what academics would call “managed trade”, not free trade. We are putting far too much importance—we need realism—about getting anything substantial out of these negotiations.

I am much more optimistic than the noble Lord. I can perhaps reassure him that we are aware that some reforms are required for the WTO. We very much want to play our part in ensuring that those reforms are carried through.

The second thing to say is that the US deal is the first of several. The noble Lord will know that we have Japan, New Zealand and Australia to come, and of course the EU. There was a chance in the past few days, and yesterday, to question my noble friend Lord True on the EU deal. I do not want to be drawn in on that except to say that, in the US deal, we start from a very good platform because we are one nation negotiating with one other nation; with the EU, it is of course a bit more complicated, in that we are dealing with 27 countries —and the House will understand when I say that there are a few more complications than that. However, we are very confident that we will be able to negotiate both a US deal and an EU deal in parallel. I hope that helps to answer the noble Lord’s questions, but I doubt it.

My Lords, the Department for International Trade has obviously done an enormous amount of work on this issue, a large amount of it under my right honourable friend Dr Liam Fox, the former Secretary of State who was doing a very good job on all fronts. It is absolutely right, as your Lordships have observed, that the USA is far the largest single country market force at 20%; about half is services and is growing, and the other half is goods, which is shrinking. But most consumer market growth in the next 10 years will not be in America, or indeed in Europe—it will be in Asia, by far. That is the huge new area where we have to succeed. Asia will shortly make up half of the world’s GDP, if not more. That happens to be where we are weakest, so I urge my noble friend to remind his colleagues in the Department for International Trade that we should think carefully about our priorities and not spend too much time trying to perfect our excellent trade with America—that may now get more difficult, not easier—when we should really be concentrating all our resources on finding our way into the giant Asian markets, which will really determine our future and prosperity.

I agree with my noble friend that the Asian market is very important. I mentioned Japan earlier, which he will know is very much on the agenda. There is, of course, more to do in Asia, but I go back to the statistic that I gave earlier: we intend, over the next three years, to cover 80% of our trade deals. That, I would argue, is a very good start. It is right that we are starting not just with the EU but also with the US. It is on the basis that the US, clearly, is on our side: it wants to secure a deal as well.

My Lords, I must comment on the comparative tone of the two Statements we have had on the negotiations with the European Union and the United States. The announcement on the relations with the EU insisted several times that we expected the European Union to treat us as a sovereign equal. Can the Minister assure us that we will similarly expect the United States to treat us as a sovereign equal? The phrasing was, instead, that the United States is our closest ally, which I think is code for saying, “We expect them to be nice to us because they like us.” Is it not more likely that, in trade issues, the United States will be as transactional as the European Union is likely to be? I remember during a conference on transatlantic trade some years ago a Democratic Congressman saying to me, “People of my district are entirely in favour of free trade provided they do not have to accept any more imports”. That is the problem right there.

One of the biggest consultations on future trade relations for Britain was the balance of competences exercise during the coalition on the relations between the UK and the EU. The overwhelming sense from the returns, including those from the Scotch Whisky Association, whose director at that point was David Frost, was that the balance of competences between the EU and the UK suited our industry and our services very well. The Conservative part of the coalition, by and large, wished to ignore that consultation and carry on.

I also note that on digital regulation, we now

“have the opportunity to help shape global rules through ambitious digital trade provisions.”

That means we clearly expect to share in shaping US regulations in the way that we do not think we can in the EU. Can the noble Lord explain that contradiction?

There were several questions from the noble Lord, so I will not be able to answer all of them, but I say at the outset: the respect is there between the two countries—it always has been. We have very strong and close relations with the US for a whole range of reasons and there is no reason why that will not continue in terms of our negotiations. In fact, as I said earlier, talks in the working groups have been extremely constructive, and we very much hope they will continue in the same vein. Having said that, I have no doubt that the US will talk tough. We are prepared to talk tough and have said that we are prepared, if necessary, to walk away from negotiations if we feel that any of the issues that we are negotiating on do not fall in with the national interest.

My Lords, I think we risk being a little churlish. What we have here is what I recognise as a White Paper. We have a serious document with some serious economic analysis resulting in some serious consultation with a serious attempt to quantify the effects of the policy the Government chose to follow, broken down sectorially, geographically and in different categories of citizen, and there has been consultation with the devolved Administrations. In all these respects, this is admirable and in striking contrast with what we got last week about the negotiation with the European Union, which started today.

I think that one should give the Government credit for being honest about how small the likely scale of increase in trade would be if one managed the scenario that is sketched out here. If, optimistically, one achieved what is here, one would be gaining, after 15 years, a fraction of 1% of GDP, whereas, with the European Union, the Government’s own economic analysis shows that they would be some 5%, 7 % or 8% down in GDP. So this is small stuff.

I also agree with the noble Lord, Lord Lilley, that what matters is what the traders do. More than two-thirds of transatlantic trade in goods is intra-company trade, so it is issues such as taxation that matter as much as any of this here. I also find the optimism of this quite striking. I was always struck, when in America, that the land of the free is not the land of free trade: it is the land where might is right. Remember that the Jones Act is still on the statute book in the United States, that we are the small party—the demandeur—and that the United States is out to, “Make America Great Again”. It is out to bring home jobs; it is not out to support jobs in this country, even though we are a close ally.

It is an admirable document; I see no harm at all in the attempt the Government are making, but let us be realistic. The noble Lord, Lord Howell, is right: it is in Asia, not America, that there are the real prospects for expanding trade. In America, we will come up against fierce protectionism: America is the most protectionist economy of all our trading partners.

It is praise indeed that the noble Lord, Lord Kerr, has said that the document is admirable and I am pleased to have been able to listen to that very carefully. I take note of what the noble Lord says about the US and our prospects, but I do not agree. If we take, for instance, SMEs as one particular issue, there are 5.9 million small businesses, but relatively few export to the US. This new deal will provide a tremendous opportunity for SMEs to do business in the US. From the analysis we have done—the noble Lord will have probably read the document—we believe we have more to gain in the UK in terms of business with the US than the US has in return. I think it is exciting and I am not at all dismissing the point made by my noble friend Lord Howell and the noble Lord, Lord Kerr, about the importance of the Far East. The point is that, as we have left the EU, and as we go through this transition period, the opportunities are absolutely tremendous in terms of what we can do in global deals generally, but it makes sense for us to start with the US.