In this speech Lord Bilimoria discusses the UK’s trade with the Commonwealth and the wider world as well as its trade with the EU and the effect of Brexit upon UK trade. He also notes the effects of trade agreements between the EU and other countries and the importance that this has to the UK’s wider trade as well as the importance of the EU relative to the other potential trading partners.
Exports: Africa and the Commonwealth
27 November 2017
Question for short debate asked by Lord Popat:
To ask Her Majesty’s Government what progress they are making in increasing the export of goods and services to Africa and the Commonwealth.
My Lords, the EU as a bloc is the UK’s largest trading partner by far. In 2016, it accounted for 43% of UK exports of goods and services and 54% of imports. Among individual countries, the United States is of course by far the biggest trading partner, with 18% of the total, and Germany comes second, with £49 billion. Ten of the UK’s top 25 export markets in 2016 were European Union member states, as were 13 of the top 25 countries from which the UK imports. Trade with China is growing, as it is with India, while the Commonwealth accounts for just 10% of the UK’s trade.
The elephant in the room in this whole debate is Brexit, which causes huge uncertainty. There is absolutely no expectation that there will be ready-to-sign deals on the table by March 2019. The devil is in the detail, and we are in dreamland if we think that it is going to happen. I thank the noble Lord, Lord Popat, for initiating the debate and congratulate him on the wonderful work that he does as our envoy. Look at what he has achieved in Uganda, leading the delegation just now and securing $2 billion-worth of deals and $350 million for the new airport. I also welcome the noble Baroness, Lady Fairhead, whom I have known for many years, and wish her all the very best in her extremely important role for our country.
Comments have been made that we have ignored the Commonwealth in the past and will now be able to go and trade with it in the future. Well, the only Commonwealth country to enjoy a free trade agreement with the EU so far is South Africa. However, there are other free trade agreements between the EU and 32 Commonwealth countries waiting to be adopted. Various claims have been made about partners in the Commonwealth. The continent of Africa is home to the largest number of Commonwealth members, so the noble Lord, Lord Popat, is right to initiate this debate. There are all sorts of deals and special relationships between the EU and the African, Caribbean and Pacific group of states, the ACP. There are deals known as economic partnership agreements, or EPAs, while there are others that make use of unilateral duty-free access to the EU market under a scheme called Everything but Arms.
All this is the reality, as opposed to any British allegiance to Commonwealth countries. On leaving the EU, the UK will cease to be party to EU trade agreements, and third countries will lose this access to the UK. Trade with the UK accounts for only a small proportion of total African goods exports. Let us guess the figure—3.6%. We have negotiations coming up that will require 500 to 750 experienced negotiators. Could the Minister tell me how many negotiators have been employed so far?
What is certain is that, following Brexit—this is a point that is missed—we will lose our influence in the world, and that will be important. The weakening of the pound affects countries that export to us. Everyone says that it is great for British exports, but what about African countries exporting to us? India is the most effective Commonwealth country, and it is potentially forgoing close to $1.4 billion out of its exports and remittances received from the UK. The UK is the fifth-largest economy in the world, so this could have a huge impact on us.
Most Commonwealth nations are also members of several trading blocs involving non-Commonwealth countries, and they are all looking for greater deals with the big countries: the USA, Japan and the big bloc, the EU. If you were to ask India what is more important to it, the EU/India free trade agreement or a potential free-trade agreement with the UK—let us get real, the EU is far more important to India. Commonwealth countries include existing European Union countries, so that makes the situation even more complicated. As we have heard, the Commonwealth makes up a very small part of UK trade: 9% of total UK exports go to Commonwealth countries compared with 44% to EU countries, while 53% of the UK’s imports come from the EU but only 8% from the Commonwealth.
So we have to put this all in context. Some of the major trading partners in the Commonwealth, specifically Australia, Canada and India, are among the largest economies in the world, while a number of Asian and African countries are fast growing—so there is potential. India is of course a great country, but then the UK exported much more to Germany alone—£48.5 billion-worth in 2015—than to Australia, Canada, India, Malaysia, New Zealand and Singapore combined. South Africa is the UK’s biggest trading partner among the African Commonwealth countries but overall exports to Africa remain strikingly low. This is the reality of it all. Africa accounted for 5.1% of global GDP compared with 2.4% for the UK—UK GDP is half that of the whole continent.
Looking ahead, the export potential for Commonwealth countries is there and we could increase it. UK trade is heavily focused on these few countries—Australia, Canada, India, Singapore and South Africa —which accounted for 70% of UK exports to Commonwealth countries. With regard to trade, as I said, two Commonwealth countries being members of the EU further complicates the whole issue.
I turn to our great Trade Minister, the noble Baroness’s boss, Liam Fox. Last year he caused an absolute furore when he said:
“This country is not the free-trading nation that it once was. We have become too lazy and too fat on our successes in previous generations. What is the point of us reshaping global trade, what is the point of us going out and looking for new markets for the United Kingdom, if we don’t have the exporters to fill those markets? … We’ve got to change the culture in our country. People have got to stop thinking about exporting as an opportunity and start thinking about it as a duty—companies who could be contributing to our national prosperity but choose not to because it might be too difficult or too time-consuming, or because they can’t play golf on a Friday afternoon”.
My friend Richard Reed, a co-founder of Innocent Drinks and one of the most successful entrepreneurs in this country, said:
“It’s absolutely disgusting … He’s a representative of this country and he turns around and slags us off, calls us fat and lazy. He’s never done a day’s business in his life … How dare you talk down the country that you damaged?”.
“He’s a terrible, terrible voice for British business”.
Even Nicholas Soames, of his own party, said Fox needed to “keep quiet”. Chuka Umunna described the comments as a “complete disgrace”, while Vince Cable said that business was,
“handicapped by Brexit not golf clubs”.
The British Government have repeatedly promised to get immigration down to the tens of thousands, and recently the Indian high commissioner, Mr Sinha, said that a free-trade deal between the UK and India might be possible by 2030 because we need to talk about the movement of people. He said:
“I’m not talking about unfettered access or unrestricted travel, I’m talking about movement of professionals, movement of doctors, technicians, engineers. I think both sides will benefit”.
This is the key. Boris Johnson was told in no uncertain terms when he went to India that the UK would have to change its immigration rules and its attitude to students, who are still categorised as immigrants, and to their not being allowed to work after they study.
Last week Liam Fox repeated himself by saying he cannot do these free trade deals because British businesses do not want to export. How dare he insult us as businesses? Does he realise how hard it is to start and build a business and raise finance for it? I have exported for 25 years, and it is tough—but I want to export more. Who is he to say I am not exporting enough?
I conclude by saying that the UK has amazing soft power, but that is no good without the hard power. If we have defence cuts coming along, that will hamper our ability to export and trade. The work of DfID is so important. The GREAT campaign has been great: it has been a wonderful benefit to our country.
I sum up with this. Liam Fox and the Brexiteers say, “Let’s go out and go global”. The Canada-EU free trade deal has just taken eight years. What proportion is EU to Canada trade? Ten per cent. What proportion is the EU’s trade to us? Fifty per cent. If you add to that 17% for the 50 countries who have free trade agreements with the EU, and Japan, which is just signing a free trade agreement with the EU, and you have 70% of our trade with and through the EU. Would you want to jeopardise that by leaving the EU to go after 30%? India has nine free trade agreements, not one with a western country.
It is madness. We have a partner in this world. This is a debate about Africa, and I conclude with the famous African saying, If you want to go fast, go alone; if you want to go far, go together.