Liam Byrne

I am grateful for the opportunity to speak in this debate. I want to start with huge thanks to my colleagues on the Business and Trade Committee for helping to inform the debate with a report that was agreed cross-party and that provided, if anything, a reasonably warm welcome for the Government’s work in securing this free trade agreement, but with a number of caveats, which I will touch on. Before I set out the Committee’s evaluation of the agreement, it is worth marking this moment. The Minister, who is not known for underselling such moments in the House, actually could have sold this one rather more. Although we do not know quite when he will get the Gulf co-operation deal, which is no doubt imminent, over the line, or the Swiss deal—presumably it is not too far off—this could well be the year when he crowns a number of free trade agreements signed since we left the European Union. They could, in effect, create a triple ocean system of alliances that basically brings UK free trade agreements to about 46 countries in all, home to 2.5 billion people and blessed with something like 60% of world output. That is quite an achievement. Pro-Europeans on the Government Benches will, of course, say that we can now look at the prize of what free trade agreements have brought compared with the losses entailed since we left the European Union. About £14 billion of GDP uplift is forecast as a result of the free trade agreements that we have signed. That is much less than the perhaps £140 billion hit to GDP that we have had since leaving the European Union. But I will not provoke you, Madam Deputy Speaker, by dwelling on that point for too long. None the less, this India free trade agreement is the keystone of that new architecture. It connects us to one of the world’s fastest growing economies and anchors us in the Indo-Pacific for decades to come. It is also worth saying that this is a significant moment for India, because this is not the only deal that India has signed, as the Minister said; it has also signed the EU deal, and it appears that there is a deal with the United States. India is on the cusp of the biggest transformation in its trade policy since independence. It is a country that has long been defined by its protectionism, but it now chooses to use its trade agreements as the anchors for ambitious domestic reform. If these agreements hold, as I hope they will, with the exception of agriculture, India is now moving from selective liberalisation to something approximating a near-open economy. That is a very significant moment in India’s long history, home as it is to about a sixth of humanity. These trade deals are not the traditional kind of “Swiss cheese deals” with lots of carve-outs, delays and exemptions. India is now set to almost fully liberalise its manufacturing sector within seven to 10 years. That is a step change by any historical standard. For the first time, India has agreed deals that will be policed by powerful external partners, not just the Minister—a powerful interlocutor in any trade negotiation—but by the combined might of the European Commission. For an Indian Government who have been protectionist by conviction for a long time, this represents an important reversal of deep nationalist instincts. As one of the world’s great homes of free trade, our nation should celebrate that. I hope that the Minister can use Delhi’s new-found philosophy in his conversations at the World Trade Organisation and elsewhere over the course of the year. Let us face it: we all need more allies for free trade in this world. If we are to build what the Finnish call “values-based multilateralism”, which is probably the best safeguard for peace in this world, India’s role in promoting free trade could be an important component. Another important dimension of that new posture relates to China. If India does indeed grow a low-cost manufacturing sector, the world will need to depend much less on China. All in all, it is important that the UK has played its role in securing that agreement. The Committee’s report confirms that the agreement secures substantial tariff liberalisation in what is a highly protected market. As the Minister said, Indian tariffs are reduced or eliminated —by our reckoning—on 92% of UK exports by value, with around 64% of tariff lines liberalised on day one. The Government modelling, such as it is—always a bit speculative; always some interesting assumptions; always a bit long term; and always a bit difficult to pressure-test—suggests that the deal will add nearly £5 billion a year to UK GDP by 2040, and raises UK-India trade by £25.5 billion. Those are the numbers that the Minister rehearsed in his opening speech tonight. The Committee’s analysis, however, presents more meaningful numbers for UK business. The £400 million-worth of tariff savings in year one is real revenue for UK businesses. That will flatter the bottom line, and, for businesses that are under pressure for reasons that we will set out in a report on Wednesday, it could provide much important cash flow. Those tariff savings could rise to about £3.2 billion over 10 years, as export volumes improve. There will be clear future gains for particular sectors. We think there could be a significant prize in the automotive industry, although there are implementation challenges, and clarity is required on how the quotas will work in practice. As the Minister said, and as we heard from other hon. Members, spirits exporters will do extremely well from this new bargain. They will see reductions in the extremely high tariffs of today. As the Minister belaboured, UK firms will for the first time secure access to India’s central Government procurement market. That is a very large number. Whether our firms can genuinely compete for those new contracts is something that the Committee plans to study carefully. When the deal was signed and first published, there was a lot of noise in the media about migration and mobility, and the Committee took a lot of evidence on that. We concluded that the agreement is not, in fact, a big migration deal, and nor does it materially change overall migration policy. As the Opposition spokesperson, the hon. Member for Arundel and South Downs (Andrew Griffith), pointed out well, it provides limited facilitation of mobility for skilled professionals linked to trade and services delivery. It could go much further in the future, but given where the Home Office positions itself on that policy at the moment, we accept that there will not be much progress in the near term. The other real advances reflect years of negotiation and should not be dismissed, but the Committee wishes to underline that there are very significant risks attached to this agreement. India is not a frictionless market; tariffs were never the only barrier. The regulatory system in India is complex, decentralised and highly discretionary. Many of the barriers—be they licensing requirements or certification documentation—are at the state level, and the state-level variation, and state-level stubbornness in bringing those barriers down, will require an awful lot of work in India by His Majesty’s Government. That is why the successes of this agreement depend less on what is written in the treaty text, and far more on whether firms can operationalise it in day-to-day, week-to-week business. I am glad that the Minister sought to take this bull by the horns in his opening remarks, because we are being asked to debate a treaty at a time when the Department for Business and Trade is seeking 40% reductions in export support staff. He went out of his way to stress that those headcount reductions would not be in India—I think that was the guarantee that he gave the House. That is important because those officials are responsible for helping firms to navigate the rules of origin, quota management, regulatory blockages and enforcement failures. They will also be required to staff a lot of the working groups that he and his counterpart will oversee. I worry that the reduction in export support staff in the United Kingdom will deny firms in Britain the knowledge and connections they might need to exploit the full possibilities of this new agreement.