12:27 Darren Jones (Labour)

The era of increasing globalisation that we have come to know over the past decades is coming to an end. We are now in an era of economic retrenchment, higher levels of state subsidy and new forms of partnership between the public and business, but how is the UK responding? Ministers are merely saying to competitor countries, “This is not how you’re supposed to play the game,” but they are not listening, and we are losing. There are several factors underpinning these changes: geopolitical competition between China and the United States; war in Europe and security tensions in Asia; the need for democratic nations to show their people that our system of government can deliver good jobs, good pay and prosperity; the net zero transition; and the technological arms race in both its military and civilian contexts.

I think everybody recognises that that is completely right, and my right hon. Friend recognises that with both the European Union and the United States, the bulk of our trade exists in this bit of the planet in which we find ourselves. Trade with Asia is welcome, but it will not be able to deliver larger economic opportunities for the UK than trading with our closest partners. Our arrangement with the CPTPP could cause conflicts in future trading negotiations with the European Union because of issues such as embedded carbon in the case of imported goods. Although we might want to do more trade with the European Union in line with our net zero targets, that might cause difficulty with imports from parts of Asia.

The hon. Gentleman has put his finger on an important issue, and this could be an informative debate on both sides. He has just mentioned one potential conflict between this country’s trade engagements and those of others, regarding our engagement with the European Union and with CPTPP, and different paces of change when dealing with net zero. As Chair of the Business, Energy and Industrial Strategy Committee, will he give the House a little more detail on his thoughts about what this country’s pace should be, and in particular his views on the carbon border tax?

I will do so briefly so that I do not test the patience of the Chair too much, given the number of pages I have left to read before the end of my speech. My initial observations are that it is in the UK’s interest to be a global leader on the net zero transition, both because that is the right thing to do and because it is a significant industrial opportunity, and that we should be partnering with the European Union to do so through our trade deal. In my view—I have not taken evidence on this; it is just my view—that would generate a larger rate of return for the British economy and British people than some of the other opportunities that have been presented.

Does my hon. Friend share my concern that in pursuance of net zero and the decarbonisation agenda, the automotive industry, for example, faces significant challenges in ensuring not only that we have a self-contained supply chain, but that we can engage with the European Union on our doorstep given restrictions on rules of origin? Will that present a difficulty, and is there an opportunity with the review of the trade and co-operation agreement to address that issue once and for all?

My hon. Friend is exactly right, and electric vehicles are a prime example. He and I were in Sweden last week on a Select Committee visit to look at how its electric vehicle battery manufacturing looks in comparison with the UK. If we are to continue to export cars to the European Union, we will have to hit the so-called rules of origin requirements where the components come from local or regional sources. Eventually they will have carbon embedded within them, in order to meet carbon border adjustment mechanisms and net zero targets. It is therefore crucial that the UK Government work with the private sector successfully to deliver that industrial policy outcome, or I fear we will see the near total decline of car manufacturing in the UK. While it is not for me as Chair of the Business, Energy and Industrial Strategy Committee to prejudge the conclusion of its inquiry into this issue, the contrast between what we saw in Europe last week, and what is happening in the UK, was stark.

This sorry story is not just about what is happening in the European Union; it is about what is happening in the United States, too. During our Committee visits last year, it quickly became clear that the US is doing what Europe is doing, but on steroids. The Inflation Reduction Act, which is really a green new deal for the United States, sets long-term, multi-decade, easy-to-access tax incentives, grants, loans and market-setting standards to not only drive the net zero agenda but reinvest in the industrial capacity of the United States. This $500 billion multi-decade initiative is acting like a magnet, pulling investment, jobs and businesses into the American economy. Access to those tax incentives, grants and state-level support is predicated on agreements to train and employ Americans in areas that have been crying out for investment for years. In some circumstances, it is even predicated on business owners investing in childcare to help optimise the economic activity of the American labour market, including women.

I hope that the Minister, when she responds, will be able to inform the House, on behalf of the Prime Minister, how this latest round of Conservative Ministers are going to clear up the mess of all the former ones over the past 13 years. The Minister and I know that the opportunities for the UK are there to be taken; that the British people have within them the drive, energy and potential; that our islands and our seas give us the potential not just to lead the net zero transition at home, but to export it abroad too; and that our greatest minds, entrepreneurs and universities mean we can ride the wave of the technological revolution in the interests of the British economy and the British people. We can achieve all those things, but only if Britain has a Government with the leadership, the ideas and the energy to start delivering. I look forward to the Minister’s response.

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12:57 Dan Carden (Labour)

Mexico’s appetite for cutting-edge financial tech products and services makes it a natural destination for UK-based fintech start-ups and more traditional financial investment. Mexico also offers significant opportunities for trade in clean technologies. It has had rapidly growing electric vehicle production and export in recent years, and I have no doubt that our growing trading relationship will make it an indispensable partner in our common fight against climate change.

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13:05 Richard Fuller (Conservative)

Nobody—certainly no Liberal Democrat —would pretend that wealth is created by the state. It is created by businesses, but what business leaders have said time and again is that the Government need to set a direction. Is it not true that this Government are currently giving no purposeful direction to business, particularly when it comes to the green economy and the transition to net zero?

The hon. Lady is right that businesses like certainty—that is absolutely true. Setting a direction, inasmuch as it creates certainty, is useful; more than that, it is a strong part of the foundations. If we go on to talk about climate change in this debate, it may be that questions about national and international strategies and about what our response should be to issues among British businesses, businesses in other countries and multinationals will drive us apart again.

Let me move on to the second area about which the hon. Gentleman spoke: the Inflation Reduction Act and the associated EU measures. As he well knows, that Act represents a $370 billion commitment of US federal funds, or their equivalent in tax credits. It followed the Infrastructure Investment and Jobs Act of 2021, which meant $1 trillion of investment, not only in infrastructure but in green energy. By purchasing power parity, the US economy is approximately six times the size of the UK’s. An equivalent response, which is what the hon. Gentleman says we need, would essentially require writing a cheque for £40 billion, £50 billion or £60 billion. If industrial strategy is not about expenditure, what are we supposed to be doing to compete, other than putting in that amount of money? There seems to be a part missing.

Let me return to the question of money, and the current issues involving the so-called Inflation Reduction Act and the EU. A significant proportion of the funds spent by other countries are being spent on what I would term competitive discovery, which means looking at possible solutions when we do not yet have the solution to a problem. I would place that at the higher end of the risk investment spectrum, and would therefore approach it with caution. It is like dotcom for the green era—not in all sectors, and not all the money is being used for that purpose, but a considerable amount of what we need to do if we are to achieve net zero will require money to be spent on the discovery of solutions.

In addition to my concern about taxpayers’ money, behind the big funding race between the EU and the US to put amounts of money at risk in a casino of green discovery is an open question about the trajectory of unit costs for the materials that will be required by those sectors that will assist us to achieve net zero. When others are rushing to do something, it is a natural human urge to rush to do it too. We can all remember the shortages of toilet paper at the start of covid, which was a shortage for no apparent reason. Because everyone else was buying loo paper, we all thought we should buy it. As we know, that created a surge in unit cost, which abated and—although I have not checked recently—the cost is now back down to a normal market price. As goes toilet paper—perhaps I should not use that phrase—so goes the unit cost for other items. A significant cost will be experienced by early adopters. My question is whether we would be better off participating in that surge in unit costs in an era of technological discovery, or keeping our money in our pocket until the unit costs come down once the successful discoveries have been made.

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13:39 Wera Hobhouse (Liberal Democrat)

People are not only threatened by other countries. Climate change is the biggest risk to people worldwide, and it will only exacerbate the world’s insecurity. Climate change is a threat multiplier. A 27 cm rise in sea levels is now inevitable, and it will be devastating for the 150 million people who live less than 1 metre above sea level. Some 1.2 billion people are set to be displaced due to climate change by 2050. If people are concerned about migration and immigration now, they have not seen anything yet.

Conflict will worsen as resources disappear. Research has shown that every 1°C increase in temperature increases the chance of a riot or civil war by 11.3%. NASA has said that climate change is making droughts more frequent, more severe and more pervasive. This means less fresh water is available to each country, causing major problems in the middle east and Africa. Observers have warned that conflict over the Grand Ethiopian Renaissance dam could erupt into a water war.

We need global responses to global threats, so international co-operation is vital. We cannot fight the climate crisis by isolating ourselves from the world. The UK must be a leader and use all available avenues to strengthen global commitments. Trade deals are a crucial avenue to push countries to adopt better environmental standards. Unfortunately, this Government failed to guarantee British standards on environmental protection in the recent trade deals they negotiated.

It has been reported that the Government have already bowed to Malaysian demands to lower tariffs on palm oil in the CPTPP negotiations. That is terrible for the climate because palm oil-related deforestation and conversion of carbon-rich peat soils is throwing millions of tonnes of greenhouse gases into the atmosphere. The trade deals we negotiate have an impact on the climate emergency.

Prioritising the climate emergency would also improve the UK’s global standing. If the UK is to be a significant actor in the world, it must show far more ambition in its green policies. Putin’s war has shown how long-term dependence on fossil fuels can empower hostile regimes. Russia has used Europe’s dependence on its natural gas as a weapon. If the UK had moved harder, faster and earlier towards renewables, Putin would not have had that leverage and our constituents would not be paying the price for his war.

China is currently the biggest investor in renewable energy, accounting for just under half of global energy transition investment. We are already seeing the effects on energy supply chains. Cumulative growth in Chinese wind power between 2021 and 2022 was more than three times greater than in the US and more than seven times greater than in Europe. China’s share of manufacturing for solar power already exceeds 80%. If we want to be a global competitor, we have to get our act together.

There is no investment in renewables, and the Government have slashed their contracts for difference auction budget for renewables by 28%. These are not the actions of a Government who understand the peril we are in. I hope they finally realise that there will be no coming back and no next time if we miss the 1.5°C target to avert climate catastrophe. The Government must show climate leadership in their investment and their dealings with other countries. Our actions now will determine the future of both the UK and the planet.

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13:47 Richard Thomson (Gordon) (SNP)

In contrast to the UK Government, the Scottish Government do have a published written trade strategy. It sets out five principles that underpin the Scottish Government’s trade decisions and relationship, which are based around pillars of inclusive growth; wellbeing; sustainability; net zero; and good governance. It positions trade within a framework of a wider economic, social and environmental context and considers the strategic role of trade in contributing to those wider governmental ambitions. The Scottish Government are using all the powers and influence available to them to make tangible progress on delivering on that in support of Scotland’s national strategy for economic transformation. Where powers are currently reserved to Westminster, the Scottish Government are seeking to engage as best as they can with the UK Government to act in a way that acknowledges the interests of Scotland and supports our economy and our people, and the planet.

Food security is a matter of key concern, and we have seen its impacts in the bare supermarket shelves, the shortages of certain vegetables and the rotten meat scandal. Clearly, climate change and conflict pay an enormous part in disrupting supply chains, but there is no doubt that leaving the EU has not helped either. It has left us at the end of those strained supply chains and hampered our domestic food production and our ability to acquire food on the open market. So, sadly, we are hit the first and the hardest when those supply chains break.

The issue of food security has not suddenly crept up on us and we could look at many other areas of the economy too. One key lesson we should have taken from the pandemic is surely that no matter how much we can be ideologically committed to free trade and open markets, there is a fallacy in assuming that this country will always be able to buy whatever is needed at any point on the open market and, consequently, that it is possible or desirable to run down domestic production. Our approach to trade in food should reflect our need to be self-sufficient where that is possible, and it should reflect our values. Food should be produced in ways that keep us and the animals in the food system healthy and safe; it should seek to reduce our global environmental footprint; and it should support high-standards producers at home and abroad who are pioneering the farming and land stewardship methods that will get us to net zero.

Scotland has the potential to be a green energy powerhouse, creating up to 385,000 jobs, boosting our economy by up to £34 billion a year by 2050, permanently lowering energy bills and embedding energy security by being a reliable energy partner from the resources around our shores and on our landmass. The Government’s own net zero tsar has written about the former Department for International Trade in his most recent report. He notes that

“Promoting environmental goods and services should be a top priority for the Government…In order to maximise the potential of free trade agreements to make a positive difference for the net zero transition to remove the barriers to trade in climate change products and services, the Government should be establishing a minimum threshold for the environmental provisions which all new FTAs should adhere to.”

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14:03 Gareth Thomas (Labour)

We had a very interesting contribution from my hon. Friend the Member for Oldham East and Saddleworth (Debbie Abrahams). My hon. Friend the Member for Liverpool, Walton (Dan Carden) spoke in particular about the significance of trade with Mexico and Latin America—a matter that no one else had focused on until that point. We were lucky to have the hon. Member for North East Bedfordshire (Richard Fuller) in the Chamber. The whole House will have cherished his contribution as there was no other Conservative Member available. We were 30 minutes into his speech when he made a particularly interesting point on the trade and geopolitical significance of Africa, which I want to return to, if I can, later in my speech. The hon. Member for Bath (Wera Hobhouse) underlined the fundamental importance of considering the climate emergency for our trade and geopolitical agenda, and she was absolutely right to do so.

As my hon. Friend the Member for West Ham (Ms Brown) reminds me, the International Monetary Fund says that in just eight years’ time, fully half of all the young people entering the labour market globally will be in Africa. The continent still faces huge challenges, notably on the climate crisis, poverty and conflict, but the establishment of the African continental free trade area is an indicator of increasing African self-confidence, and new partnerships to support mutual growth and development are surely in Britain’s long-term interest.

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14:13 Nus Ghani (Conservative)

Only trade can create jobs, drive growth and deliver the long-term prosperity that communities across the UK and around the world need to flourish. Only trade has the power to lift millions more people out of poverty in developing nations, helping to build a more secure and prosperous future for us all. Only trade can drive forward co-operation in the battle against climate change, by building networks of green innovation worldwide.

As we move towards cleaner, more affordable sources for power, Britain is once again leading the charge and we have a head-start on our global competitors. More than 40% of our energy came from renewable sources last year, and we are ramping up our investment in the sector, directing record sums into new projects, research and innovation. We know that the US Inflation Reduction Act is a significant intervention in the global race for green energy, and we are not attempting to enter any kind of distortive subsidy race with our greatest ally—as my hon. Friend the Member for North East Bedfordshire said, we need to make sure that we always get good value for taxpayers’ money—but although that drive to net zero in the United States should be welcomed, it is, of course, incredibly disruptive. One cannot throw a stone into the water and not expect any ripples, and IRA is a massive stone that has caused ripples worldwide, particularly in Europe. It is incredibly important that we stick to our net zero ambitions and ensure that we have resilience in our supply chains.

We are trying to do everything that we can to ensure that businesses in the UK have a competitive advantage while leveraging billions more in private capital to drive growth—and not just in green energy. We want to grow our nuclear energy capacity, too, through the development of small modular reactors, while investing in our key growth industries—from advanced manufacturing to life sciences and artificial intelligence—forging a British economy that is fit to face the challenges of a fast-changing world. [ Interruption. ] I am being rushed along, so I will briefly respond to some of the points raised by hon. Members.

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