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UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 208

House of COMMONS

MINUTES OF EVIDENCE

TAKEN BEFORE

BUSINESS, ENTERPRISE AND REGULATORY REFORM COMMITTEE

 

 

RECENT DEVELOPMENTS IN TRADE

 

 

Tuesday 8 January 2008

LORD JONES OF BIRMINGHAM and GARETH THOMAS MP

Evidence heard in Public Questions 1 - 61

 

 

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Oral Evidence

Taken before the Business, Enterprise and Regulatory Reform Committee

on Tuesday 8 January 2008

Members present

Peter Luff, in the Chair

Mr Adrian Bailey

Mr Brian Binley

Miss Julie Kirkbride

Anne Moffat

Mr Mike Weir

Mr Anthony Wright

________________

Witnesses: Lord Jones of Birmingham, a Member of the House of Lords, Minister for Trade and Investment, BERR/FCO, and Mr Gareth Thomas MP, Minister for Trade and Consumer Affairs (BERR), Minister for Trade and Development (DFID), gave evidence.

Q1 Chairman: Gentlemen, welcome to this first evidence session of the Committee of the New Year. It is actually a game of two halves - not a rugby or football game but an evidence session of two halves - starting with some general questions about trade issues in general, machinery of government questions, Doha Round, those kinds of issues, WTO, and then moving to a second session, after about an hour, on trade relations with India following up the Committee's report of last year; so we will change gear roughly halfway through the evidence session. When I ask witnesses to introduce themselves for the purpose of the record, I normally am doing it literally for the purpose of the record - I already know - but as I ask you two gentlemen to introduce yourselves I would like you to explain exactly what it is you do, because I think I understand it but I am just still a wee bit confused. Exactly what do you both do?

Lord Jones of Birmingham: Good morning. Thank you very much for giving us some time. When the Chancellor became the Prime Minister he asked me to become Minister of State for Trade and Investment and concentrate solely on the promotion of trade for the United Kingdom around the world - that, by the way, includes companies which people might think are headquartered in other countries but have significant bases in Britain and how they use Britain as a platform to trade round the world; so it is not just what my mum would call a British company, it is also companies that create a lot of wealth and employment in Britain although their headquarters are somewhere else - and to also get round the world and get into the world's media about how Britain is the location of choice for inward investment and to chair the government department called UK Trade and Investment, which has two sponsoring departments: one is the Department for Business Enterprise and Regulatory Reform and the other is the Foreign and Commonwealth Office; and I have a desk in the Foreign and Commonwealth Office and I moved my desk out of BERR and into Kingsgate House where UKTI is. Unlike other former trade ministers, who did damn good jobs but could not concentrate on it completely because they had other briefs as well, or, indeed, had a constituency to nourish or whatever, my job is solely and exclusively in government to drive forward this great trading nation and this great place to do business and to separate out from the trade policy of the country all of the issues that come out of that which for the first time was split, and Gareth on my left will no doubt talk about that and his role. Could I just end by saying that I also am on the Government front bench in the House of Lords, I take my responsibilities in the House of Lords very seriously, and when I am in London, like I did yesterday - I led the debate on the second reading of the Employment Bill - if I am here and I am a minister in one of those two departments and can do my bit on the Government front bench, I will.

Q2 Chairman: But since Lord Drayson's departure you must lead for all government policy issues in the Lords relating to BERR.

Lord Jones of Birmingham: Yes, because there is not another peer minister there.

Q3 Chairman: But not for the Foreign Office.

Lord Jones of Birmingham: But not for the Foreign Office. My colleague Lord Malloch-Brown will do that, and did so yesterday, but the difference to how it has been done before my appointment is (1) getting two people to specialise in two different aspects of trade and (2) from my point of view, actually to ensure that I set myself a target of one long-haul visit a month, one short-haul visit a month and one regional visit round the UK a month. Six months in at the end of the last year I have done six of each, and you cannot do that if you have other responsibilities, but when I am in London I also do, and take it very, very seriously, the House of Lords---

Q4 Chairman: So your job is in two departments, BERR and FCO. Gareth, you have got a foot in two---

Lord Jones of Birmingham: Could I just add one thing, Chairman, because this is brand new? I also have a link into Ministry of Defence, because from April DESO is coming across, the deal has been done, the negotiation has been completed and I have a responsibility for DESO as well (the new DESO, if you like), and whilst MoD is not a sponsoring department for me and whilst I do not have a desk there, I do have a working relationship with Baroness Taylor and also with the Secretary of State for Defence and especially with some of the guys and girls in uniform, who are the best salesmen we have got for this fabulous sector called defence manufacturing.

Q5 Chairman: That is helpful and that is a whole subject we could explore at some length as well. Gareth, could you explain to me: you said you have a foot in both departments and a job of blending the policy together. I think that is your role.

Mr Thomas: Again, just to supplement what Digby set out, the Prime Minister has created two Ministers for Trade, one, as Digby explained, doing the promotion side and the other concentrating on the trade policy side, which is effectively the negotiations that Britain has an interest in, be it the world trade talks, the Doha Round that is underway at the moment, be it the Economic Partnership Agreement discussions that have been going on for some time and reached a particular climax just before Christmas and also the suggested changes to the trade defence instruments that the Commission has available to it. I think the other perhaps structural point to make is that I do not think, until now, there has been any sort of specific Cabinet Committee looking at trade issues. So Gordon has set that up, which Douglas Alexander chairs and which both Digby and I can attend, along with colleagues from a range of other government departments, and that is designed to set the broad framework for government policy on trade issues.

Q6 Chairman: So the lead minister in government for trade policy questions is you?

Mr Thomas: Yes.

Q7 Chairman: But you get authority for your position from that Cabinet sub-committee, as it were?

Mr Thomas: Sure, and through the work with both secretaries of state.

Q8 Chairman: So what is the precise role of the Secretary of State? You say both secretaries of state. Presumably the Foreign Secretary also has a view, quite often, in these matters, but Douglas Alexander and John Hutton are the two key characters here. What is the division of responsibility between you and them, because it looks quite messy from the outside, that is all?

Mr Thomas: Sure. I can understand that concern. I should just say, it is not just the FCO that has an interest, it will be the Treasury that has an interest, of course it will be Defra that has an interest, and that is one of the reasons why I think the Cabinet Sub-committee, is so important, in that it brings all those interests together. Essentially the sort of day-to-day divide at secretary of state level is with Douglas chairing the Cabinet Committee and, therefore, having that role to make sure all our trade policy concerns are properly discussed. He will concentrate specifically on those trade policy issues that have a strong development dimension, and John Hutton will concentrate on those trade policy issues that have less of a direct development dimension. There have always been discussions on trade that have involved many different departments. Before this set up, along with the Secretary of State for Industry, the Secretary of State for International Development still had an interest in trade issues and there is a lot of liaison across government as to who is talking to who and at what time and a sharing of agendas, and in a sense I should say that also happens with the two of us. On occasion I have raised issues in meetings that I have had that are directly to do with trade promotion aspects, and Digby, similarly, has raised issues around trade policy questions again.

Lord Jones of Birmingham: None of this is in isolation, is it? Members of the Committee, you know this, but a lot of people take it for granted: we are a very open market; we are a very open, commercial society; but not all countries are. I could be in front of a trade minister of another country, I could be in front of a central bank governor, I could be in front of a television camera in another country banging the drum for Britain. Of course, I am wanting our financial services community, for instance, to invest more, say - India is a very good example - and they will turn round and say, "That is fine, but why will not the European Union deal with agricultural protection?"

Q9 Chairman: Exactly. I do not see how we can have a minister for trade promotion because policy questions are always, particularly trade substation questions, are very important. In the Indian market it is always about policy questions and the key to better promotion.

Lord Jones of Birmingham: Actually, it does not happen like that in practice. In practice the job is very much about really driving and banging the initiative and giving it time and energy round the would. You know, policy is a last refuge of a protectionist, and when it comes up we can work together on it, but, as you know from my CBI days and also because I am a passionate free trader, I got intimately involved in the Doha Development Agenda, for instance, when I was at the CBI. I actually understand trade protectionism and I understand the countries and why they do it and sometimes why they should not; so I never approach it in isolation; I actually understand it. What I would not do is cut across the specialist minister who is paid by the taxpayer to do it - I am not adding value if I do that; he is - but what I would do is not suddenly go in a meeting with, say, Kamal Nath in India, I would not go, "Oh, sorry, that is not my bag." It would be a bit of mix into that.

Q10 Chairman: Why is the Cabinet Committee being chaired by the Secretary of State for International Development rather than the Secretary of State for Trade and Industry? What is the reason for that decision?

Mr Thomas: I think the Prime Minister wanted to set up a Cabinet committee. As I say, it is a committee that we have not had, certainly not in my time in government, and he wanted to bring all the interests around the table. I think he recognised the importance of trade to development, the particular fact that we have got the Doha Development Round under way at the moment, that Economic Partnership Agreement discussions are key, but that does not mean that the Secretary of State for Business and Enterprise does not have an absolutely fundamental and pivotal role, he does, and he has been very active in all sorts of areas, including on trade defence, including in terms of discussions around the Doha Round.

Q11 Chairman: Before we conclude the Doha Round, when that happy day dawns, would you expect the Secretary of State for Business and Enterprise to take the chairmanship of that committee?

Mr Thomas: What the Prime Minister decides to do in the long-term is, in a way, above my grade. I think the set-up works well. I do not think there have been any problems with the way the Committee is operated today. I think most government departments that I have had contact with appreciate the fact that they are sat around the table and appreciate the way the Secretary of State for International Development chairs those meetings.

Lord Jones of Birmingham: Can I just add something. I have found in the six months I have been doing this that we are seen in the world as this free-trading nation that is a force for good by using trade as a way of raising living standards and sustainability in many countries, and I know this is unfashionable in newspapers, but business round the world is a fabulous agent for getting better education, better healthcare, better transport. A kid of 16 who has got those three things on his side is probably a little more likely to be able to solve his problems. That gives an intimate link between these two initiatives actually.

Q12 Chairman: I agree with that.

Mr Thomas: Mr Luff, I think the one obvious other point to perhaps draw your attention to, or draw the Committee's attention to is the background of the Secretary of State for International Development. He was a previous Minister for Trade and so in that sense has considerable background in both the development dimension of trade negotiations and, indeed, the British business dimension too.

Q13 Chairman: It seems to me you work very hard, you in your job, because you have got a lot of your old DFID responsibilities, you have got trade policy responsibilities, which are hugely important, and you have got a whole stack of the old DTI responsibilities - consumer affairs, competition policy and so on - very big questions - while Digby just goes round the world banging the drum. It seems a bit of an unfair share of responsibilities, does it not?

Lord Jones of Birmingham: Want to swap?

Mr Thomas: I think that is a slightly unfair characterisation of the situation. Many of the specific country responsibilities that I had before the change in my role in July are being done by other ministers in the Department for International Development. The competition responsibilities that I have, as you rightly point out, within the Department for Business and Enterprise, complement, I think, the trade policy questions quite strongly. So, whilst I appreciate your description of me having to work extremely hard, and I do, and I relish the challenges that each day brings, I think actually it is a set-up that works very well. What I do not have to do, which previous trade ministers had to do, is the trade promotion side, because Digby is able to.

Q14 Chairman: As you know from a committee report we produced recently to which you responded but I have not had your response yet, we were in favour of ministers travelling more to promote; so there is a lot of sympathy there.

Lord Jones of Birmingham: Also, I understand now why the business community and, indeed, those who work in the business community, those employed in the business community, were always frustrated by ministers who were trying to do both jobs, who were cancelling at the last minute, who did not go, who went home early, all because they were trying to do all the other things that you have talked about.

Q15 Chairman: Our recent European report put this in it, you have responded to it; I have not had your response yet.

Lord Jones of Birmingham: You in 2006 said: "How about sorting this out?", not only to the Government, but, more importantly, I have got the privilege of actually trying to make it work.

Q16 Chairman: But what does concern me is as you go round the world you will find a lot of things out that the rest of the ministerial teams need to know about.

Lord Jones of Birmingham: Spot on.

Q17 Chairman: You have only attended the Cabinet Committee once, I think, so far. I would like to see you there more regularly.

Lord Jones of Birmingham: Two answers to that. Yes, you are right. I should make an effort to get to them, you are right, but if you look at why I did not, it is usually because I am sitting banging the drum for Britain in another country; I have not been sitting at my desk in Whitehall. The other thing is, just because I do not actually physically go to an hour's meeting because I am in Dubai, or Mumbai, or Washington does not mean that I or my officials are not on the phone to him or his officials or, indeed, to the Prime Minister, or the Chancellor, or any of the other secretaries of state where the issue I have learnt in another country has a direct relevance. Behind the scenes, just because you do not read it in the newspaper these days does not mean I am not doing it.

Q18 Chairman: I am being rather self-indulgent. I must hand on to my colleagues. Just one last factual question from me to either of you really, probably more to you, Gareth. How often does the committee meet? What decisions has it made? What sort of things does it do?

Mr Thomas: I think the committee has met three times since July, when it was established. There is another meeting shortly. We have discussed progress in the Doha Round, we have discussed progress in term of the Economic Partnership Agreement discussions and we have also discussed very briefly the Commission's Green Paper on Trade Defence Instruments and what our response to that should be and, as a result of those discussions, our lobbying strategy has been amended, changed, reactivated, et cetera, nuanced to reflect those discussions.

Chairman: Thank you. I will move on. Brian Binley.

Q19 Mr Binley: Thank you very much. My Lord, promotion of the UK round the world sounds like "super salesman Digby". Is that a fair description? Would are revel in that, or would you think that was slightly insulting?

Lord Jones of Birmingham: Someone as shy, quiet and backward in coming forward like me would fight shy of the description of which you speak - not! People are kind enough to say that that is part of the job and people are kind enough to say it seems to be being done. Do I revel in it? I hope that is an arrogance I have not got. Do I identify with it and work on it and make sure that I can sell brand Britain around the world and use business as its wider value? It is not just about putting profits into shareholders, it is about Britain's values. Our values that, I can tell you, notwithstanding all the problems we have, we are still seen round the world as good partners with good values and a sense of fairness. We still are. When a British company or a British based company that happens to have an overseas headquarters is into a country, from America to Bangladesh, the Union Jack is there, and it means that the enhancement of the brand of everything that we stand for can come through the conduit of an inward investment or an overseas trade in either direction. If by concentrating and giving it time and using the skill you very kindly said I might have we can enhance brand Britain, I not only revel in it, actually that is a job I am privileged to do, frankly.

Q20 Mr Binley: Digby, I can think of few better men.

Lord Jones of Birmingham: You are very kind.

Q21 Mr Binley: Having said that, I would hate to think you were illegal.

Lord Jones of Birmingham: I am sorry?

Q22 Mr Binley: I would hate to think you were illegal, because you talked about values and legality is an important matter. The Observer did suggest that you had failed to comply with regulations which required you to declare outside earnings. I think that was in December. Have you now complied?

Lord Jones of Birmingham: Yes.

Q23 Mr Binley: You are now legal, are you?

Lord Jones of Birmingham: Not only that, but actually I gave up absolutely everything I do money-earning-wise (not some of my charity stuff but money-earning-wise) on the day I became minister. I filled in the form to the House of Lords, which is that to which you refer, a week later; so I was a tad surprised in early December when I got a letter saying: "Why have we not had your form?" Of course, I take responsibility for it personally, it is my signature on the bottom of it, but I did do it.

Q24 Mr Binley: So you are legal.

Lord Jones of Birmingham: I was legal from July. It is just that somebody somewhere did not file it, but I will take responsibility for that because that is what ministers do.

Q25 Mr Binley: That is really good news. Can I stay with the newspapers; they are part of the light world we live in, and you found that out in an even bigger way that perhaps you might have thought. In September The Financial Times suggested that you were still struggling to persuade some departmental officials to adopt new ways of thinking. In other words, you were as frustrated about the slowness of government, as most businessmen who come into this place are, quite frankly, and I identify with that. Can I ask what sort of new ways of thinking you had in mind and can I supplement that by saying: what changes do you think you have made in that respect?

Lord Jones of Birmingham: The Prime Minister made a decision in late June, upon his appointment, (a) to split our jobs and (b) to say, for the first time, let us do trade and investment to the exclusion of other responsibilities. The easy bit is for him to say it and for me to say I would love to do it. The second easy bit is for me to get going. For instance, I am the first minister in charge of UKTI physically to go and sit with them every day in their office; I am the first one to try and brand UKTI as a minister, not in with the whole of the Foreign Office and everything else, because it is being done differently. The easy bit is to say sit here and say that. The difficult bit is to then, not in UKTI - they not only buy it, they are fabulous and they support it all the way down the line - but in other parts of government it is new, it is different, it is change. It means that if there is a choice between cancel a delegation to Russia or do something else that a previous minister in this job would have done, I will go to Russia because Russia is a huge investor in Britain, because British companies trading with Russia is important. It offends them when you cancel at the last minute, although for very valid reasons if you are an MP or if you have other responsibilities. For the organ of government, the engine of Whitehall and Westminster to get used to that change is (a) difficult, (b) frustrating for both sides and we are learning from each other, and (c) yes, it is difficult when I am used to, "When do you want it"? Yesterday", finding that things take a little longer sometimes. Have I learnt that over six months? Yes. Are they learning to do it a little more perhaps with a sense of urgency? Yes. Somewhere in the middle it is getting on quite fine. In fact, I have to say I am thoroughly enjoying it.

Q26 Mr Binley: I am delighted. As a salesman all my life, I understand what you mean about offending because the last thing you want to do is offend a potential customer. I am not sure government fully understands that and I am at one with you. Can I finally go on to talk about your travels? You have told us of your travels. Give us some idea of where you have been and how you have raised those policy matters, how they have related to the actual job of promoting Britain around the world, and, finally, can I ask in that respect, it would be helpful to keep us informed if we had a bulletin perhaps, I do not know, every four months or something of that kind, just to give us a handle on what I think is very important work.

Lord Jones of Birmingham: The latter point first. I would love to do that. If every quarter I dropped the Chairman a line and I copied it out to the members and I basically said, "This is where I have been" - long-haul, short-haul, regional - "these are the companies I saw, this is what I was doing, these were the issues I have raised", that is a relevant point. I would love to do that actually; so the answer to that is, yes. The first point, one of the things that is very important is to not get carried away with one of the fashions of the time, or one of the important markets at the time, to the exclusion of others. An example would be: was it important I went to India and to China in my first six months? You bet it was. But, for instance, when Bo Xilai was trade minister in China (and I knew him in my CBI days) he congratulated me on this appointment and he said, "Do yourself a favour. Of course, come to Beijing and Shanghai but please do not concentrate on that. Loads of people from all over the world, ministers, come to Beijing and Shanghai. Go to the cities that do not often see people. That is where Britain can maximise its time." It was excellent advice. Not only did we please the Trade Minister of China, an enormous partner in the twenty-first century, but we can get more bang for the buck from the taxpayer of my time. For instance, on my visit to China I went to Wuhan, a small city, only eight billion people, and Hubei Province, 60 million people, the size of the UK. You have got British companies, environmental engineering companies, cleaning up the lake, dealing with pollution, stuff that is added value and quality innovation, Britain is doing its best now. To get there was a good use of my time. Loads of ministers, rightly, will go to your Beijings and your Shanghais. Secondly, it is important to understand that last year roughly 1,500 different items of inward investment into Britain, second in the world, after America, number one in Europe by a mile. Of those 1,500, about 600 came from one country: America. If we, therefore, ignore America on the basis that everyone is going east (and, by the way, lots of important things are going east), we are very foolish. So I have been to Arizona on one visit and I went to New York and Philadelphia on another visit to basically say thank you. I went to Johnson & Johnson in Philadelphia, a huge pharmaceutical company.

Q27 Chairman: I do not want to cut you off, but we have a full itinerary.

Lord Jones of Birmingham: For instance, on a short-haul we actually export more to Germany than we export to India, China, Russia and Japan put together. So if we ignore Germany, if we take it for granted - it is in the European Union, we understand them, do we not - then I think we are being very foolish, we are being very complacent and we are very wrong. If you were a minister who had lots of other things on and a constituency here and other obligations there, you would ignore Germany because you have not got time. I have the time, so I went to Düsseldorf, met some inward investors and said, "Thanks very much for coming and risking your dosh in Britain."

Q28 Mr Binley: A very quick question. The last time you were here the Chairman asked if you would consider doing the same job, bearing in mind you are not involved with policy, with a future Conservative Government. Has six months in government changed your mind: because you intimated you might not?

Lord Jones of Birmingham: I actually did not say yes or no. The words I replied, if you look at the record, were "no comment". Six months on, I hope I am doing my bit for my country. I am certainly, I hope, adding some value. The answer to you is: no comment.

Mr Thomas: Mr Binley, if it helps, I certainly would not do my job.

Q29 Mr Binley: Gareth, I was never in any doubt about that particular point!

Mr Thomas: I do not think there is an early prospect of that.

Chairman: The partisan note that has been introduced into these proceedings unnerves me slightly. I will let Julie Kirkbride in briefly before bringing in Tony Wright.

Q30 Miss Kirkbride: We will part with the question of whether or not you would do the same job under a Conservative Government, the question is whether you could afford to continue doing the job under any government?

Lord Jones of Birmingham: I do think it is very, very important that ministers (and, may I say, it is not my bag but members of Parliament) do set an example if we are saying to policemen---

Q31 Chairman: No, we will end that there. We are getting off the subject.

Lord Jones of Birmingham: We can afford to do it. The answer is it is not about whether you earn the money, it is about whether you want to make a difference to your country, but what you have got to do when you are looking at the money (and I have learnt this in six months) is stop bleating about it, because, frankly, an extra 2% or 3% is not the issue. The issue is you are either doing it for your country or you are not.

Chairman: I think you have deliberately misread Julie's question.

Miss Kirkbride: It is not my question.

Chairman: It is not your question, you know that, but we will move on to Tony Wright.

Q32 Mr Wright: Another question of value for money. In a written answer recently there was an evaluation of UKTI trade services which found £65 million expenditure generated £1.13 billion benefits or £17 benefit for each £1 of spend. With those huge returns that we see, why do you think that the UKTI's budget has been kept level under the 2007 Comprehensive Spending Review?

Lord Jones of Birmingham: Every department had to, and rightly, make cuts, and we have to, all of us in every department in government, try and maximise the money we get from the taxpayer. I think the CSR settlement for UKTI was fair, I am pleased actually to see that it was a settlement that does enable me to do the job differently. I got involved in it personally to make sure we could get some resource behind it and if we can deliver those figures, which I am proud of (and nothing down to me, down to the fabulous people who work in my department), if we can do that with the money, I do not think we need a bigger settlement to deliver more. As with most departments, I hope, it is not the amount you get, it is how you use it, and if we can be efficient and productive in how we do it - prioritise, choose, maximise - then I think we can not only deliver that again but deliver better. Could I do with more money? We all could, could we not, but it is not on the table. The nation's finances are not going to say to departments: have loads more. My job is to make sure that Andrew Khan and his people actually deliver even better things than that with the dosh we have got.

Q33 Mr Wright: Surely if we were getting that return, £17 for every £1 of investment, although it is not a cut per se, it would be pure folly to look at it on that basis. Surely we would be investing more to get more value for the investment. Sixty-five million pounds is not really an awful lot of money for the size of the department that we run in UKTI.

Lord Jones of Birmingham: It is not an awful lot of money for what we do, and one of the jobs, I hope, is that UKTI will be seen in government, seen by the media, seen by people as important to this nation as Treasury, or Foreign Office, DFID, MoD and everywhere else, and it is time it came out from under its bush and really did get up in the headlines for the fabulous contribution it makes to the coffers of the nation. If we were given more would we deliver more? You get we would. Do I work in the realms of reality and do I understand that that is not on? Of course I do, and therefore the job is to deliver more with what we have got by better application of resource, although you are right, if we did have more, of course we would deliver more.

Q34 Mr Wright: So are you confident then, even with the CSR settlement, that you are going to be able to deliver more through UKTI in the coming 12 months?

Lord Jones of Birmingham: Yes.

Q35 Mr Wright: One of the other aspects of this is the question of the UK embassies abroad. There is going to be a cut in those areas, and there has been some suggestion that perhaps we could share some friendly embassies in that situation. How do you consider that is going to affect the trade support?

Lord Jones of Birmingham: The final decision in any event is (a) not there yet and (b) is not for me. I can have an influence, I can make an input, and I have, but it is not my decision; so I will not actually second-guess the Foreign Secretary. What I would say is that the British business community, one of the first ports of call, especially in emerging markets, one of the friends at court you have is UKTI, especially if you are a small business in emerging industries, emerging sectors, such as creative industries or environmental engineering where a lot of fabulous ideas come out of small business. UKTI on the ground linked into an embassy that has the infrastructure and the heritage (and, let us get proud about this, the Union Jack, we are Brits and we should be proud of it), that presence round the world is key. Also key is the way that presence is emblematically transmitted into that community: a quality-looking embassy, a residence in which you are proud to entertain to make sure that on the ground you are seen as having influence. Sadly, perception is reality in a lot of this and, therefore, to ensure that do we need embassies round the world? Yes. Do we need them virtually everywhere? Yes. We are Britain. We are the fifth biggest economy on earth with a fabulous set of values.

Mr Thomas: If I may, there is one other thing I would add to Tony's question. Digby has quite rightly talked about UKTI and the role of embassies. In a sense the trade policy which focuses on the long-term policy questions is also engaged (and I apologise for confusing the House in the first discussion) in the long-term promotion of opportunities for British business by trying to open up markets through the Doha Round and discussions through regional trade agreements, through all sorts of other discussions that take place around competition policy within the European Union. So there are approximately 70 staff who work on trade policy issues who are, in a sense, seeking to open up opportunities for British business which UKTI and the FCO posts can then exploit at a later date.

Lord Jones of Birmingham: Let me just add, if you take an example, Graham Fry in Tokyo, or William Irvine in Beijing, you will find they are spending and their staff are spending, not UKTI, at ambassador level up to 40% of their time regularly, a third of their time, on what David Miliband would call commercial diplomacy, on the whole presence of Britain from a commercial point of view. Is that essential? That is so essential to this nation it is not true. Do we need that presence around the world? Yes, I personally want to see it everywhere.

Q36 Mr Wright: You did mention briefly that you had been putting your view forward in terms of the various embassies that are coming forward for possible closure. Is that taken on board generally by the Secretary of State?

Lord Jones of Birmingham: Well, I can miss sixpeneth, and I do, very much in private, and I can put forward, and so would my people, on a case by case basis the merits and the not merits, but I do sympathise with the decisions or, rather, the judgments that have to be made. For instance, as we apply our resource there are some countries in the world which, although they are important, are not as important as others, and so you have to make some judgments. By the way, it is not a British issue; the French have to do this and the Germans and the Americans.

Chairman: I think we need to move on from this subject.

Q37 Mr Wright: Very briefly, I think you did mention your new responsibilities for DESO. Gareth, in terms of the changes that have been effected with the transfer of DESO to UKTI, is that going to make any difference to your particular role?

Mr Thomas: I do not think it is going to make a direct and immediate difference. I think it will impact on Digby, as he alluded to in an earlier answer.

Lord Jones of Birmingham: I just see it as a fabulous opportunity. Defence manufacturing is so important. We are good at it, hundreds of thousands of jobs depend on it, huge amounts of corporation tax, and if this nation does not get behind its defence manufacturing sector, we will rue the day. If I have got the chance to champion that by DESO or some DESO coming into UKTI, I relish the opportunity.

Chairman: I think the general view in the defence world is it was not broken; it did not require fixing, though it is something we might look at again in the future because it has caused a lot of concern to defence contractors, the changes they did not ask for, and happened out of the blue, but never mind. Let us move to more questions that Gareth Thomas will want to address with Mike Weir.

Q38 Mr Weir: It seems the end of this year is now the informal target date for concluding Doha. That is some four years behind schedule. Is there any reason to believe it will happen this time?

Mr Thomas: I was in Geneva just before Christmas at the end of November and it was clear that there has been some movement in the agriculture negotiations which are absolutely key to getting some momentum into the Doha process. We are expecting to see revised texts that form the basis for negotiations from the agriculture group and from the NAMA group in either late January or early February. If those texts are accepted as a basis for continuing negotiation by all the key players, then there is no reason why there could not then be a ministerial meeting at Hong Kong or Cancun to try to close down agreement on the headlines of a Doha deal. So, whilst the delays and the length of time it has taken are frustrating, there does appear to be movement. The chair of the negotiating group is very clear on that, as were a number of other key players, and I think we have to allow those and support those discussions continuing. You may be aware, Mr Weir, that our own Prime Minister has been heavily involved in talking to key players, both within the US and within Brazil and India and other players within the European Union to try to encourage the flexibility that is needed to close down a deal. We are not that far away. The difference in the positions of key players is not huge, but it is going to require people on all sides to show that additional bit of flexibility.

Q39 Mr Weir: You mentioned the United States, but, as I understand it a US presidential trade promotion authority is needed to avoid Congress unpicking a final deal. There has been a lot of concern about this portion of it. In fact, Brazil and India have called for a "road map" towards TPA. Do you think greater clarity on this is needed before any deal can be finalised and is the current election process in America likely to delay the others?

Mr Thomas: Trade promotion authority is not stopping the Americans continuing to take part in discussions, and TPA can be renewed or extended at any point by Congress. I suppose my own sense is that the American presidential elections, as, I suppose, any elections do, do not provide the most conducive backdrop for negotiations to take place, but, as I say, the Americans are continuing to take part in those discussions. They are very active participants in Geneva and we will have to see how things pan out. There are a number of different scenarios in which TPA could be achieved and a number of different scenarios in which the negotiations could be included, albeit, perhaps, that a new president may have to take the deal through Congress. I do not think TPA as such is a critical issue; it is going to be flexibility from the different countries' capitals which are going to be key.

Q40 Mr Weir: There is a huge difference between continuing negotiations and agreeing a deal. Given you are talking about a deadline at the end of this year, the American presidential elections are going on until the early part of November. Is the reality that you are not going to get a deal until a new president is sworn in in the early part of next year and they take a decision on whatever the negotiating position taken in the Doha Round is?

Mr Thomas: I am not going to accept that scenario because the temptation that your scenario presents is that we can all sit back and wait for the next 12 months, that I can concentrate on consumer affairs and perhaps just come in in the mornings.

Q41 Mr Weir: I am trying to get the reality of the situation. I am not suggesting you do that at all. Everyone supports the Doha agreement providing it is a clean agreement, but given that four years have passed, you have talked a lot about negotiations and possibilities and ifs and buts if this is agreed, but it does not seem to me there is a road map to reach an agreement by the end of this year. The International Development Committee suggested it will be completed and put out of its misery. Do you agree with that situation?

Mr Thomas: No, I do not agree with that at all. I think you have to look at how previous trade rounds have gone, and previous trade rounds have been very lengthy. The Uruguay Round, for example, was very lengthy. There have been some regional trade agreement discussion that have taken a considerable period of time to conclude as well. Trade negotiations are, by definition, highly complex and do take a considerable length of time to resolve, and with something of the complexity of the Doha deal we should not have been surprised, and I suspect members of the Committee are not surprised, that the deal has taken longer than perhaps some pundits initially suggested it might. I come back to my opening comment in response to your question. We are seeing progress, we believe, in the talks in Geneva and that is why we think it is important that we continue to give strong support to Peter Mandelson, who is obviously negotiating for the European Union, but also why it is important that we continue to have discussions at Prime Ministerial level with Prime Minister's counterparts in the US, in Brazil, India and across the European Union to try to unlock that last flexibility that is necessary to close a deal on the headlines.

Q42 Mr Weir: Do you believe it will be concluded by the end of this year?

Mr Thomas: I hope so.

Q43 Anne Moffat: On India and the EU, will the new trade negotiations between the EU and India distract them from a multi-lateral deal?

Mr Thomas: I do not think so, is my view. The Indians are engaging very heavily in the discussions in Geneva. Equally, they were very keen that we kicked off negotiations on a regional trade agreement back in June. There have been, I think, now two or three rounds of discussions between the EU and India. India is very keen for an ambitious regional trade agreement. They have said the agreement will be concluded by the end of 2008. We are very much up for a very ambitious agreement between the EU, and India and if it takes a bit more time than the next 12 months to conclude such an ambitious agreement, then we think we should take that time, but our sense is that Kamal Nath, who is the Indian Trade Minister, and his officials, and even government more generally, are up both for completing the Doha Round and completing the RTA discussions with the EU.

Q44 Anne Moffat: Do you think it might encourage other countries to do the same thing?

Mr Thomas: Again, I hope so. The EU has got a series of regional trade agreement discussions under way. The one that looks most promising at the moment is with South Korea, but also there are negotiations that being kicked off with the ASEAN block of countries. I suspect we may need to see the EU negotiating individually with specific ASEAN countries rather than with the whole block, for all sorts of reasons, but I think you are right in saying that other countries see the benefit of the EU's market and want to open up their own markets to the expertise that the EU can offer through our businesses and will want to get involved in all sorts of discussions. I wonder if I can add one more thing, Mr Luff. I think, beyond just direct discussions on regional trade agreements, there are also discussions that you can have about some of the non-regulatory barriers that you see in-country - sito-sanitary standards, differences in understanding about how particular products should be allowed to happen or not - and one of the things that we have welcomed is the Commission's willingness to try to focus on some of those issues alongside wanting to open up new regional trade agreement discussions.

Q45 Chairman: Is there not a risk that what will happen is, as other countries see the EU entering into bilateral and regional deals, those other countries will decide to enter into their own bilateral regional deals with third regional countries' areas, so reducing their capacity to negotiate with the WTO for a multi-lateral deal. So, as the EU drives towards its own regional bilateral agenda, it actually undermines the whole Doha process? I think that was your question, Anne, but I do not think it is the answer you got. You asked a question about the EU's relationship with other countries. I think that was what you wanted to ask.

Mr Thomas: I think we have to be very clear and are very clear in our discussions within Europe in trying to shape the mandate for Commissioner Mandelson that any regional trade agreement negotiations that we get involved in must supplement and---

Q46 Chairman: I think again you are avoiding the question.

Mr Thomas: I am not, I am going to come to your specific question.  ----must supplement and support the Doha process. Do I think individual countries are going to stop negotiating Doha in the round because of all these RTAs? No, I do not think they are. I think all the key countries, all the key players and the key blocks of countries within the WTO process are very clear that they want to see a completion for the Doha Round, a completion of these talks, but it would be, I think, a huge mistake for the EU to stop trying to negotiate regional trade agreements because all sorts of other of our competitors are already negotiating regional trade agreements. We have got to absolutely make sure that RTAs that we negotiate can support and supplement and do not undermine the Doha Round, and that is what we seek to make sure happens.

Q47 Anne Moffat: Thank you Gareth. Unfortunately my next question is a negative one. If Doha fails what can we do to mitigate the fallout? Do we have a Plan B?

Mr Thomas: I do not think Doha is going to fail. I do think we are going to get a completion to the round. I cannot give the Committee a specific timescale, much as I would like to do so, but, as I have said, we are seeing the progress, and I do not get a sense---

Q48 Chairman: I thought it was 2008. I thought we had a timescale.

Mr Thomas: I would like it to be completed by the end of the year. I cannot tell you when it is going to be completed within this year. The sooner the better, I am sure, for everybody's benefit, but all the key players within the negotiations have been clear that they want to the Doha Round to be concluded, so I think to focus on a Plan B at this stage would be an admission of defeat and I see no reason why we should admit defeat.

Q49 Mr Bailey: Can we continue the theme of the EU trade policy on the Global Europe
Trade Strategy which seems to have remarkably little information on the BERR website. How do you think it has developed since it was launched in 2006?

Mr Thomas: I will obviously have to look at the BERR website, but I think there will be a series of different ways in which the EU has progressed its trade strategy since 2006. The first is by, as we were just discussing, launching a series of new regional trade agreement negotiations - South Korea, India, ASEAN - trying to inject new life into some of those regional trade agreement negotiations that have been ongoing for sometime, such as with the Mercosur block of countries the Euro-Med block of countries and, indeed, also with the Gulf Co-operative Council. The second element I should perhaps flag up, Mr Bailey, is there has been a renewed attempt by the Commission and Member States to co-ordinate much more closely our work on looking at some of the barriers to trade in particular countries. Just as we always face a challenge in making sure that Whitehall departments are working closely together, so the Commission has acknowledged that Member States need to work much more closely with each other and with the Commission to look at what the barriers are in key countries. A series of working groups have been set up in Brussels looking at key focused countries (and they are the obvious ones - the Chinas, the Indias the Russias the Brazils, et cetera) looking at what are the key concerns for European Union businesses within those countries and what are the key blockages to trade that they are facing. For example, Mr Bailey, working groups have been set up to look at issues around vaccines in Japan and textiles and clothing in various Asian markets, sito-sanitary issues in China, looking at some of the detail behind those blockages to trade, looking at what we can do in country with the regulatory authorities in those countries to unblock some of those barriers. They are not always deliberately in place, sometimes it is a lack of understanding as to what is required. Sometimes they are deliberate, and then you obviously need to confront those directly in face-to-face negotiations. The third element in terms of the EU strategy is there has been a Green Paper published on trade defence instruments, what we do about anti-dumping. Those discussions have been underway for some time. We are expecting the College of Commissioners to give their response to the different submissions that Member States have put in. So there have been a series of ways in which the EU Trade Strategy has been taken forward.

Q50 Mr Bailey: I can see the benefits of some of the measures that you have outlined. What would your response be to the point made by War on Want which says the EU's trade strategy explicitly favours the interests of European exporters over the development means of the global south? Obviously I have no problem with, shall we say, meeting the needs of EU business exporters; it is the second issue. If in the long-term these needs were prejudicial to the development of other countries, how do you see the policy developing? Is that a fair accusation?

Mr Thomas: I am not sure I would characterise it in that way in just one sentence. There are, quite clearly, a number of ways in which the world trading system does need to be changed to help developing countries, and that is one of the key reasons why this current round of trade talks was specifically given a development dimension. Equally, we needed to make sure that we are focusing on the needs of EU businesses, particularly our own UK businesses, and we are, but I think you can open up the EU's market to developing countries, and that is in the interests of British consumers and European consumers and British consumers and businesses just as it is in the interests of developing countries to have their access into the EU's markets. I do not think it is an either/or. I do not think if you are helping British business you are damaging the interests of the south. I will give you one example to illustrate that from my, I suppose, previous responsibilities. In many African countries there is often a shortage of finance to help businesses set up, to help existing businesses expand; so if we can encourage our financial service industries to expand more into African nations and developing nations, we in a sense meet the needs of those industries for more finance for their businesses to expand and lift people out of poverty through employment. Equally, at the same time we are helping our own domestic businesses generate more jobs here in the UK too potentially.

Q51 Mr Bailey: Can I quickly say: do you think there is potential in the context of this strategy for opening up the European market to developing countries?

Mr Thomas: I think absolutely there is. That is a key element of the EU's position in the Doha round of talks; it was a key part of the discussions during the Economic Partnership Agreements too where we saw the EU putting forward a willingness to offer full duty and quota-free access to its markets for even those countries that are not the poorest countries, the least developed countries, and for some countries like Botswana they are very significant.

Chairman: We are moving into some of the other areas someone else wants to ask about. Mike Weir wants to ask some questions that directly relate to that in a minute. Can I bring in Julie Kirkbride?

Q52 Miss Kirkbride: Minister, from what you have said I assume you support the European Union's new approach to free trade agreements. Can you highlight any that the British Government is particularly interested in, what it is that we want to get out of them and what you think the chances of success are?

Mr Thomas: India and extensive services, liberalisation. We want better opportunities for British legal businesses, retail businesses, financial services businesses. That is one particularly important example.

Q53 Miss Kirkbride: Any others. Any chances of getting that?

Mr Thomas: I think the chances of getting that in India are quite high. India has said that it wants an ambitious agreement, one that does allow its markets to be opened up. In return it wants to see the EU's markets more opened up to its products. I do not think that is a challenge---

Q54 Miss Kirkbride: Which products?

Mr Thomas: Again, some of its services, the market software industry, telecoms, again, some of its legal firms want to be able to do business in a range of EU countries where they cannot operate at the moment. As I say, I do not think what India wants is a particular challenge for the UK, I think it is going to be more of a challenge for some of our EU partners, but I do think there is a significant chance of opening up India's services markets on the basis of the comments we have heard from Indian ministers and their officials to date. Equally, I would not want to suggest to you that the negotiation is going to be easy. Kamal Nath is a formidable negotiator. His officials are very clear as to what they want and what they are willing to concede on. Thus far the discussions are going okay, they are proceeding. We want to concentrate on the quality of what is agreed. That is why we have been careful to say it would be great if we could conclude this agreement by the end of this year, but we think we should focus on getting a good outcome to those negotiations and if that means we roll over into 2009 a little then we should be willing to do that.

Q55 Miss Kirkbride: If there was a Doha settlement, would any of these individual deals have to be reappraised or unpicked or is that something that has to be specifically borne in mind in whatever is done in the meantime?

Mr Thomas: It has to be borne in mind. The Commission has a very good idea of what the dynamic is around particular parts of the Doha negotiations and they are obviously able to factor that into the stance they take in particular regional trade agreements. I think it is something we have to keep abreast of and keep understanding the links between the two, but I do not think it is a significant problem.

Q56 Mr Weir: We have received vocal submissions criticising the recent rush to reach WTO-compatible agreements by the end of last year and, in particular, that the ACP countries have been put under a great deal of pressure to sign up to EPAs to ensure their exports were not disrupted. Would you agree it was a bit of a mess?

Mr Thomas: I think it was a less smooth process than everybody would have liked, Mr Weir.

Q57 Chairman: That is a yes!

Mr Thomas: I think mess is too strong a description of what happened. There were very intensive discussions amongst ourselves (?) as to what we should offer up and they were not easy discussions. Equally, many of the African, Caribbean and Pacific countries had to look at what they wanted to get. For the Caribbean in particular, they wanted to fully realise the benefits of regional integration that the Economic Partnership Agreement offered and that involved some very hard discussions between different countries in the Caribbean. These were extremely complex agreements that have been being negotiated for seven years. I think the suggestion that there was a sudden rush is an unfair characterisation. There was a real deadline because of the waiver in terms of the Cotonou Agreement which had underpinned trade relations between the EU and the ACP up-to-date. That waiver was coming to an end as of 31 December this year. So we did need to get those countries that do not have access to every other thing but arms agreement onto a new agreement otherwise there could have been substantial tariff rises for some of those countries in terms of selling their goods into the European Union.

Q58 Mr Weir: It seems Doha has a very moveable end date, but this other agreement you mentioned did not. Is there any reason why negotiations could not have continued on these? Christian Aid has been quite vociferous in saying the UK Government has gone back on earlier support given in 2005 by taking up the EU position. What do you say to that?

Mr Thomas: I think Christian Aid is wrong. We have supported the European Commissioner in these negotiations, but we have also been pressing the European Commissioner in a series of ways to show additional flexibility. We have engaged very strongly in support of trying to get substantial changes to the rules of origin package and then sought to protect that from other Member States who wanted to weaken what we were going to be offering developing countries. A number of countries wanted to add further exemptions to the full duty free and quota free offer that was being made to non-LDCs and again we pushed very hard for the existing offer to be maintained. I think to suggest that we simply rolled over and just allowed discussions to carry on and did not engage is a travesty of what actually happened. I believe in general terms market opening is going to be good for all of these countries. What is very clear is that the vast bulk of the trade negotiators and ministers that I spoke to about how EPA discussions were proceeding were very keen to conclude EPAs because they could see the benefits to their own country never mind the need to comply with the WTO deadline. You have said Doha is a moving feast. Could not the EPA discussions have been a moving feast? One of the things we were always pushing for was for the Commission's mandate for the discussions to really change. When the Commission started off they had a mandate that included discussions about goods, about services and about the so-called Singapore issues. We were saying by the end of this year concentrate on getting a good W8 agreement that is WTO compatible. The Commission came round to our position and stopped talking to the vast bulk of ACP countries about services and the Singapore issues because they recognised the stance that we had taken was right, that you just needed to concentrate on those issues which were key to providing huge tariff rises and in recognition of the capacity constraints that many ACP countries had.

Q59 Mr Weir: You mentioned that most countries wanted an EPA and that is true, but there is a difference between wanting an EPA at any cost and wanting an EPA on reasonable terms. You have talked about the interim EPAs. What is the UK's approach going to be for the more comprehensive EPAs that have been promised to take the place of these interim ones?

Mr Thomas: The first thing we have got to do is to look at the agreements that have been concluded, see whether there are any problems with the interim agreements and then work out how we are going to proceed with different groups of countries and different individual countries on the range of other issues. What is clear is that many countries do want to have a negotiation with the EU on services, on investment, on competition and on procurement and we should be willing to go down that route. One of the reasons why the Department for International Development has given funding to support different groups of countries and negotiated with the European Union is because they asked for our support financially. They recognised that it was in their interests to conclude agreements in these areas because it will help to make the conditions for business to develop in their countries much better than they are at the moment and it might help to attract foreign direct investment into their countries and attract jobs. We need to review how these interim EPAs are going to fall. We need to sit down with individual countries and work out what we want to prioritise for discussions and agree a timescale to take them forward. Some of the people who have engaged with me about EPAs would have been against anything that could have been characterised as an EPA. Economic Partnership Agreements took on a sort of mythology which I do not think they deserved. I think they will offer significant development benefits, particularly to the non-LDCs which you are now going to see being able to supply into the EU market, if they can get buyers, an unrestricted amount of goods. For some countries there are huge opportunities as a result of these agreements.

Q60 Mr Weir: You have talked about the process from now and you have talked about agreeing a timescale. Do you have in mind a timescale for bringing this to a conclusion? Is it going to run parallel to Doha? Is it now a completely different process? Is it dependent on what happens at Doha?

Mr Thomas: It does not depend on what happens at Doha, although that is obviously part of the backdrop. I do not have a fixed timescale in mind. President Barroso did give a commitment at the EU-Africa summit that there would be a high level review discussion with each of the six regions in the first part of this year. We are obviously concentrating on looking at those discussions and what happens. As to when there will be agreement concluded on services, on investment conditions, et cetera, I do not have a fixed timescale. We will talk to our partners in those countries and see what support, if any, they want to take forward those discussions. I think that meeting in late January or February, whenever it happens, with each of those six regions will be key to us understanding what particular timescales those developing countries in the ACP have.

Q61 Mr Weir: You mentioned looking at how the interim EPAs are working. Given you have more or less accepted there is a rush to sign before the end of the year, if those interim EPAs show up particular problems for particular countries, is there a process for amending them quickly to deal with these problems outside this lengthy negotiation for full EPAs?

Mr Thomas: If there are problems with interim EPAs then I would expect to hear about those problems quickly. I think the high level review meetings that I have said the Commission have given a commitment that they will organise provide the first opportunity to have those discussions, but I have no doubt that some of the ministers that I met, who were extremely able and capable negotiators for their countries, if there were problems, they will raise them with us and, indeed, with Commissioner Mandelson and other Member States too.

Chairman: We do have to move on. This is a really important area. This is the beginning of our Committee's re-engagement with the trade issues. We do not want to duplicate the House of Lords Committee's inquiry. We are going to Brussels in three weeks' time. We will come back and do some more questions at a later date because we realise the importance of it. Thank you for the answers you have given us so far. I did want to bring Digby Jones in on this as well and I am afraid I cannot because of time, but thank you for those answers.