John Kerr – 2023 Speech on the Australia/New Zealand Trade Bill (Baron Kerr of Kinlochard)

The speech made by John Kerr, Baron Kerr of Kinlochard, in the House of Lords on 9 January 2023.

My Lords, I have made a new year’s resolution to try to be more congenial, so I need to start by saying that I warmly welcome the last three substantive points made by the noble Lord, Lord Frost. It has been a very long time since I have been able to say that I entirely agree with the noble Lord, Lord Frost. It is also a great pleasure to see the Minister back on the Front Bench, and I greatly appreciated the balanced and understated analysis he put forward. The noble Baroness, Lady Liddell, spoke of hyperbole. I heard no hyperbole; I heard no geese misclassified as swans. I believe that we will all benefit from such a calm, rational analysis. I think it would be as well that the Minister does not pay any early visits to the hill farmers of Scotland, Wales or Northern Ireland.

I have only two points to make on the substance of the Bill and two points on the agreement. On the Bill, I do not understand its rationale—I am like the noble Baroness, Lady Liddell. It is bizarre. The Procurement Bill—which has gone through this House and will have its Second Reading, I think, today in the other place—overtakes this: it confers on the Government powers to implement procurement provisions in trade agreements. So why do we need a separate and specific Bill, primary legislation, in respect of Australia and New Zealand? I really do not understand. It is not as if the Australian and New Zealand agreements were massive agreements urgently requiring to come into effect, or agreements with momentous procurement provisions. I am not against the Bill, but I did not hear from the Minister any convincing rationale for it. It may be helpful if he could go on record to explain why we are doing what we are doing.

I am a little more concerned about the substance of what the Bill says. It is a skeleton. That came as a surprise because the Explanatory Memorandum on the agreement with Australia told us that primary legislation on procurement would be required. The Bill, however, makes none of the apparently necessary changes to the current statute book and does not tell us what they are. Instead, it asks us at Clause 1 to delegate regulation-making power to an “appropriate authority”—not just power to make the changes required by the Australia and New Zealand agreement but power to make any changes that the appropriate authority deems appropriate. Clause 2 suggests that such appropriateness can be construed liberally. That all seems a little permissive to me. The wording of Clause 1 and, possibly, Clause 2 may need some careful consideration in Committee.

I also note that the regulations making the changes that the appropriate body thinks appropriate would be subject only to the negative procedure. I wonder whether choosing that, rather than the affirmative, procedure is necessary or appropriate. That, too, is a point the House may want to think about in Committee.

My third, more general point is that the Minister might find the House more relaxed about implementing legislation if the Government felt able to be more open—perhaps as open as the Australians and New Zealanders—about the process of negotiating trade agreements. As our EU Committee pointed out in 2019, the Constitutional Reform and Governance Act 2010, CRaG, which defines our role now, is

“poorly designed to facilitate parliamentary scrutiny”

of trade agreements. That did not matter much in 2010 because the EU was then our trade negotiator and the European Parliament was required by treaty to approve the mandate for trade negotiation, to be fully informed at all stages of the negotiation and to approve its eventual outcome. Because the European Parliament was fully in the picture, so were we. However, we now have none of its three means of scrutinising and controlling the process of treaty negotiation. Therefore, we can be taken by surprise, as the Scottish, Welsh and Northern Ireland hill farmers were, by the agricultural elements in the deals with Australia and New Zealand. Those concerns were not entirely justified—again, I am with the noble Lord, Lord Frost, on this—but greater openness would reduce the risk of such surprises and I hope that the Minister will look again at the International Agreements Committee’s proposals on how to mitigate the defects in CRaG and restore effective scrutiny of trade agreements. “Taking back control” did not have to mean slamming down the shutters.

My second-to-last point illustrates why I am one of those who strongly believe that we need a government strategic document setting out the trade policy strategy. Let me try to do that, this time, by giving examples of strategic issues which I am sure the Government and department are greatly concerned about, but about which we have been kept a little in the dark. First, and most urgently, I ask the Minister: where do we, and should we, stand in the debate touched off by the Washington agreement to invest nearly $750 billion in green energy under the Inflation Reduction Act? Over in Brussels, our EU friends still seem to be on their plan A, which is to seek to ensure that more non-US firms benefit from this enormous US investment. That is a rather unlikely outcome, particularly given the change in the composition of the House of Representatives. But if, as I expect, the European Union falls back on its plan B, which is to enact similar national preference provisions on energy investment, I would have thought that this would be rather detrimental to our interests. So, where do we stand in this debate, and what are we trying to do about it?

A second and equally strategic issue which could be addressed in a government trade strategy document is the trade policy consequence of our hardening attitude to China, given the increased belligerence towards Taiwan and our increased concern about supply chain resilience. I do not know what the agreement between the Foreign Office and the Department for International Trade is on the attitude we should take. I hope that there is an agreement, and I cannot see any reason why public debate should not be enhanced by the position being made known.

Thirdly, to what extent should our approach in trade relations with friendly third countries such as India take account of their compliance or non-compliance with our and our friends’ sanctions on Russia over the invasion of Ukraine? I do not think trade can be regarded just as a watertight compartment. As we try to negotiate a trade agreement with India, we need to know the Government’s view on how watertight that compartment is.

Fourthly, how does trade policy interact with environmental policy? To me, the surprise in the agreement with Australia was not the agricultural provisions—we clearly decided to give the Australians what they wanted, perhaps for good reason—but the weakness of the environmental provisions. We knew that the Australian Government were determined to protect their coal industry. We remember Alok Sharma’s tears at the COP in Glasgow; the Australians drove him into that corner. However, we knew that the then Australian Government were behind in the polls and likely to lose the imminent election, and that the incoming Government would take a much more constructive line on global warming. Since we were giving the Australians what they wanted on agriculture, why were we not trying to extract a price on environmental policy commitments? In addition, why the rush? Why were we not waiting for a Government whose views on global warming, like those of the New Zealand Government, were closer to ours—a Government like the one we have in Australia now? I do not know the answer to that question. Maybe Mr Lynton Crosby is part of the answer; I do not know. I think it would be easier for the Government to maintain a credible position in public debate if they set out the principles they see as governing the interaction between trade policy and environmental policy.

I have a final example of the sort of issue which should be covered in a trade strategy. By the way, I think that the trade strategy should be submitted for debate in Parliament on a regular basis. It should be renewed year on year and provide the basis for this kind of debate, but on a wider stage than just that of Australia and New Zealand. The elephant in the room for trade policy is how we can reduce the non-tariff barriers to trade with our biggest and closest market. If you look at the queue on the Dover road, you must think that this is a strategic issue with direct daily consequences to the detriment of British business.

One of my more poignant memories of 2019 is of the then Prime Minister proudly announcing that his trade and co-operation agreement contained not a single non-tariff barrier. I cannot remember any trade agreement that set up a non-tariff barrier. The purpose of trade agreements tends to be to take barriers down; on the other hand, leaving a customs union, a single market and an area of free trade and free movement is bound to erect barriers—it certainly did, and the treaty did nothing to mitigate them. However, there will be a review in a couple of years’ time and, in my view, mitigations are possible if trust can be restored.

So it is not too late—or, indeed, too early—to start thinking about a plan. I hope that the Government are thinking one up. I do not know whether this has been entrusted to the Department for International Trade; I fear that the matter may be being handled by the Foreign Office, which, in my view, would be unwise. The Government would do well to produce some inkling of what they think is the best way to reduce the barriers that have now made the channel so wide.

With that, I had better stop. If I do not, the House may think that I have forgotten my resolution to be congenial.