|
UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 367-iii House of COMMONS MINUTES OF EVIDENCE TAKEN BEFORE BUSINESS AND ENTERPRISE COMMITTEE
TURKEY: TRADE AND EU ACCESSION
Monday 28 April 2008 LORD JONES OF BIRMINGHAM, MR PETER DODD and MR NICK McINNES Evidence heard in Public Questions 193 - 305
USE OF THE TRANSCRIPT
Oral Evidence Taken before the Business and Enterprise Committee on Monday 28 April 2008 Members present Peter Luff, in the Chair Mr Adrian Bailey Roger Berry Mr Brian Binley Miss Julie Kirkbride Mr Lindsay Hoyle Mr Mike Weir ________________ Witnesses: Lord Jones of Birmingham, a Member of the House of Lords, Minister for Trade Promotion and Investment, Mr Peter Dodd, Head of International Economics, and Mr Nick McInnes, Director, UKTI, Department for Business, Enterprise and Regulatory Reform, gave evidence. Q193 Chairman: Welcome once again. I apologise but we always seem to get this big room. However, you fill up any room you are in, metaphorically speaking, so that is all right! Lord Jones of Birmingham: Flatterer! Q194 Chairman: As I always do, can I begin by asking you to introduce yourself and your colleagues for the record. Lord Jones of Birmingham: I am Digby, Lord Jones of Birmingham, Minister of State for Trade and Investment. Mr McInnes: Nick McInnes, I am Director within the International Group of UK Trade and Investment. Mr Dodd: Peter Dodd, I am the Director of International Economics in the Department for Business. Q195 Chairman: All three of you are familiar to this Committee for various reasons. I begin by putting on the record publicly our gratitude to UKTI staff at the Embassy and Consulate General in Istanbul and Ankara for the excellent way in which we were looked after during our visit to Turkey which was an extremely productive and engaging visit of which we were very appreciative. I begin with a public apology to you, my Lord, not only for beating your team in the Premiership a few weeks ago and also for the rather gloating text I sent you from the ground, but also for not being able to be with you when you come to the ground for a charity fund-raising visit in a few weeks' time. The Committee will be abroad then again (we are almost doing as much globe-trotting as you) but I hope you raise a lot of money for your chosen charitable cause. Lord Jones of Birmingham: Thank you. It will be ten years to the day since I finished John O'Groats to Lands' End on a bike, so I thought we would do your club to mine for a day, rather than 14 days, to raise a few bob. Q196 Chairman: That is the mutual self-congratulation over and done with but thank you very much. We will begin by asking a few general questions. The focus of this Committee's inquiry is of course the economic consequences, particularly for the UK, of Turkish membership of the EU, and that is the context, but obviously this rears across into politics from time to time as well. This question, though, is perhaps more economic than political (but has political consequences) and it is to ask you what your judgment is of the extent to which Turkey itself needs the EU accession process to maintain the progress in its own domestic reform programme now that the IMF programme is drawing to a conclusion? Lord Jones of Birmingham: The whole British drive for Turkish membership is multifarious from an economic and trade point of view. Of course Brits enjoy wider markets full of people who are getting richer every day to whom we can sell our goods and services and from whom we can attract inward investment, so the economic rationale for why Britain wants Turkey in Europe is very similar to the other way round which is that, be it from Germany or France or Italy or Britain or anywhere else, Turkey would clearly benefit enormously economically from a trade and investment point of view, creating employment and increasing the rate of growth of their economy. Also they would benefit enormously because of the current problems and situation with their infrastructure in their public realm from the money that would be invested in the country by the European Union Structural Funds, so that drive has for many years now sustained the drive of economic reform in Turkey. Over the last couple of years we have noticed this, and actually I am quite pleased, because I visited Turkey twice when I was Director-General of the CBI and the second time I went they were mentioning this to me, which there was a shift in emphasis from, "We have got to do this if we want to be in the European Union" more to, "We have got to do this because it is a very good thing because economic reform is going to make for a more stable and wealthy Turkey, period." I have seen that shift so I think that that is good to see as well and I think that is the biggest change of all. Q197 Chairman: But all is not going terribly smoothly just at present in Turkey. We will turn in a few minutes to the economic problems facing Turkey, which my colleague Brian Binley will ask you about, but can I look a little bit more specifically at the politics. There has been quite a lot of concern expressed about the constitutional court case with the AKP, the ruling party. People describe it as Turkey "shooting itself in the foot" once again. People have said that that case could actually freeze a lot of political progress that is needed in the country over the next months and perhaps longer. How much impact do you think the case is going to have on Turkey's economic development and reform process? Lord Jones of Birmingham: In a formal process of trying to meet with the acquis and trying to get membership moving along, it does nothing to help, and indeed it feeds the prejudices and the views of the opponents to Turkey joining the European Union. In terms of economic reform, I do not think it has any effect. In terms of British businesses' attitude towards Turkey on trade and investment I have heard not one company say to me that it would make a difference. Q198 Chairman: But the Government's view of the court action is that it is unsatisfactory and illustrates a problem in Turkey's constitutional arrangements and is contrary to the kind of provisions that we have in the Council of Europe and the European Union itself. Lord Jones of Birmingham: Yes it is a distraction, is it not, it takes the eye off the ball, and it means that people in Turkey are not concentrating on the things that members of the European Union wish they were, but I do not see it in any way as fatal, I do not see it as anything other than delaying, and I do repeat I think it certainly feeds into the prejudices of some members of the European Union who do not want Turkey inside. Chairman: Looking at economic questions, Brian Binley? Mr Binley: I hope you will give me just a little leeway. I am delighted to see Lord Jones with us again because his background is very solidly a background of great record in terms of British business, and that is my sector and it is the area that we are both very proud of, quite frankly, and we have met on a number of occasions and made that point in our different ways. You will have seen the report published in the Telegraph of the British Chambers of Commerce survey which really underlined the fact that there is very little confidence in the Government in terms of acting on behalf of the business sector, and from my perspective hardly any more with regard to the Opposition, and that concerns me enormously. Part of your role was not only to promote British business abroad but to promote it within the Government, in truth, Digby. I just wonder whether you feel it has been such hard work hitting your head against a brick wall on the basis of having so little effect (and I have been here longer and had much less effect, I might tell you!) Q199 Chairman: I am giving leeway on subject but not length of questions. That was far too long a question. I want you to get you away by 4 o'clock for your train so we must all be more economical with our questions and our answers. Lord Jones of Birmingham: Can I just ask you was that a question to which you are expecting a reply in relation to the United Kingdom or Turkey? Mr Binley: Yes, from both of our perspectives in view of the fact we are massive supporters of business and business seems to have little regard for government, quite frankly. Q200 Chairman: You have made your point. Lord Jones of Birmingham: In terms of the UK, as you know, I get a long haul, a short haul and a regional visit in every single month. I came back from Rumania and Bulgaria last week and I am going up to Liverpool tonight. On that part of the question, I have to say the support I have received from the UK Government in me doing this job differently and getting me enabled to get round the world and bang the drum and attract inward investment and also promote British values in the wider sense has been incredible because it has been a change and a lot of people, the media especially, do not like change. I have to say I have had no problem whatsoever from inside government on this. From the point of view generally of you saying has this Government gone away from supporting business and do I find that frustrating, I have not seen this Government do anything from my point of view which has in any way harmed UKTI. In fact, if anything, we had a very good settlement in the Comprehensive Spending Review, better than a lot of other departments did. We have had more people. Number 10 itself has been very supportive of my drive in Britain for what UKTI does and also of course in terms of the Department of Business, Enterprise and Regulatory Reform and what it is trying to do. From a wider point of view, do I find they have been supportive in the way that I am trying to do this job? I have had 100% support from the Prime Minister which is why I am 100% supportive of him. What we agreed we would do last July he has kept his word and I have kept mine. Q201 Mr Binley: Forgive me, but you have raised the Prime Minister and you will know what The Times said about your ability to stay with this Government up to the next election and through it. I believe that you being there is a very important factor. Can you clarify whether what The Times said was true or not? Lord Jones of Birmingham: I was incredibly surprised to see what I said given the front page headline in The Times that day. It was old news and I had been saying it publicly ever since I got the job, and there was nothing new in it whatsoever and there was nothing that in any way was a change of anything at all. I had always said that I would have a finite position. I had always said that I would go before the next election. That was when I had started the job, it was not anything I had changed my mind or anything else. At the same time I had always prided myself, and I still do, on my ability to take this job away from the factionalism of party politics, and I have found that very popular with the business community. I have to say the Prime Minister's decision to allow me to do this job in a non-party political way is one of the great things he has done to show support of the business community. That was always how we agreed to do it and I have to say he has kept his word and I have kept mine. I was just amazed, it must have been a slow news day or they had prejudices of their own they wished to fulfil, but to say I had said it in a private meeting (and that implied that for some reason it was secret), no. It was in April and even they said it was a lunch in January. Get real, this was not sensational news, this was not front-page news. I have to say if the person who had rung up The Times and told them all about it had been true to his word in terms of telling the whole content of what I have said, I actually said what I have just told you, which is that the Prime Minister has been very supportive of the way I am doing this job, and I am 100% behind the Prime Minister in what he is doing at the moment. Q202 Mr Binley: But are you going to be here after the next election if the Government gets returned? Lord Jones of Birmingham: I do not know. At the end of the day whether I am here in the morning is down to the Prime Minister; he can hire you and sack you, and I suppose the same would apply then. Mr Binley: Digby, at our age, whether either of us is here is a question, quite frankly! Can I move on to the question of Turkey. You would want to get back to that, Chairman. Chairman: I would. Lord Jones likes talking Turkey. Q203 Mr Binley: I know he does and he likes talking Turkish delight as well, I am sure that is the case. There is a view amongst some in Turkey that it has shot itself in the foot and you have already referred to that. Indeed, some commentators have highlighted Turkey as a high risk amongst the current world economic turbulence. Can Turkey weather the storm of the global credit crunch? If so, does that show that the country has arrived as a market choice and how do you consider Turkey compares with India, China and the other BRIC countries in that respect? Lord Jones of Birmingham: From the point of view firstly, if you take a snapshot today of where it has come from and where it is going to, it has made huge progress over the past few years, it has reduced inflation to single digit levels, it has reduced its fiscal deficit, it has certainly cleaned up its banking system, which was crisis-ridden every year, and it has had a very successful IMF programme. It is showing all the signs of putting in place the shock-absorbing capability to deal with global economic crises that start from things outside their control. So do I think they are in shape to weather the storm? Yes. Will it be difficult? Of course it will. By the way, it will be difficult for every economy, China as well. Have I confidence that they will be in a position to weather the storm? Yes, better than most. Will it be difficult? Yes. Looking forward, it will only continue to be in a position to deal with further problems successfully if it continues with its economic reform and if it continues with opening up and being a place where it is easier to do business than it is today and more welcoming to inward investment than it is today. It is on its way and that is good to see, and Britain is very supportive of it, but it is not a perfect picture. In terms of comparative to other economies, I think the jury is out on several of these economies, and by the way, the jury is out on several of the economies of the developed world as well as the emerging markets. America is entering a period when she is going to have company at the top table. Her omnipotence economically over the last six decades is basically over. That does not mean she is falling off the top; it just means people are going to join her. China obviously comes to mind and could be there. I want the European Union to be there as a group which can wield serious economic clout at the top table. The current economic issues facing the economies of the world, developed and developing, will force some fall-out, will force change, and will change the pecking order as we go through into the second decade of the 21st century. Q204 Chairman: Can I just push you on that because I saw a hugely pessimistic quote from one expert saying: "I wouldn't want to keep any money in the Turkey lira and the puzzle is how long it has stayed so high for so long. There are huge imbalances in the economy. The current account deficit is nearly 8% of GDP, and the chief prosecutor is trying to shut down the government" and Standard and Poor's rating is BB-. It is not quite India, is it? Lord Jones of Birmingham: No, and apart from that, how was the play Mrs Lincoln? I could paint a picture that is pretty bad for an awful lot of economies at the moment. All of that is probably factually accurate but for a moment I thought you were describing one or two economies of the developed world. Of course current account deficits often are products of swift and immediate inward investment and a private sector catching up and capacity catching up, so that is a snapshot, but I would tend to say you ought to ask me that question and I should give you a considered answer in about a year or two's time. Q205 Miss Kirkbride: Minister, forgive me, I will have to leave early from your session but I did want to come along and see you a little bit. I am off to campaign for Boris and I wonder as the Minister for Business Investment whether you have any advice to offer Londoners? Lord Jones of Birmingham: I will tell you one thing I have got advice to offer on Thursday, and I learned this going round the world, at the moment London is the capital of the world. I do not say that with any degree of arrogance, it is just factual, that wherever I go in the world people look to London as the current capital, financially yes, if you want raise your money, insure your risk, get your advice, borrow your dosh, you come to London, so financially for sure, but also creative industries and also with the Olympic Games coming up and everything else, and I would just say to any Londoner, have a bit of confidence, understand the place you are in the world at the moment and think accordingly when you vote on Thursday. Past that I am not saying a word to you today. Q206 Miss Kirkbride: So no advice on who should be the leader of the greatest capital city in the world? Lord Jones of Birmingham: I knew that is what you were asking me and the answer is I keep that to myself. Q207 Miss Kirkbride: How disappointing and so rare that you disappoint us! I am absolutely gutted but let us come back to the EU. You will be aware that France and Germany and other European countries are hostile to the idea of Turkey joining the EU. How damaging do you think this is to their prospects of coming in and what impact do you think it is having on Turkey? Do you think there is anything that the UK can do to help the cause along a bit more? Lord Jones of Birmingham: I think not only is that an extremely responsible question but I wish that that issue was elevated more in our public domain, and more often, because we have got to keep this issue on the front foot, and I am really glad that you have raised it. Let us first distinguish between France's attitude and Germany's. Chancellor Merkel basically has expressed her opposition to Turkey coming in but is not hostile and has said she will respect the decision that was taken previously, so hers is a more "I wouldn't do it but we are where we are" attitude. President Sarkozy is definitely hostile and has definitely said no. Indeed, there is an argument that it was one of the promises and pledges he made on his manifesto for getting elected so I would say there is a distinction between France and Germany on this. The second issue is that is directly against where Britain is. We have a track record - and I was in Rumania last week and I said it there and I will repeat it now - where we are the only major economy in the European Union that from beginning to end never waivered in our support of the accession states coming in, the first ten, then the next two, and we are in favour of Turkey, and all the way through we are the one nation that has always been supportive. I find as I get round those countries that it has borne us in extremely good stead when it comes to trade and investment and therefore I believe it is in Britain's best interests from a trade and investment point of view, as I have described already, but I do believe it is in the European Union's best interests geopolitically, location-wise, reaching out and trying to deal with a 21st century that has fundamentally changed. The 21st century belongs to Asia and how the European Union deals with that in all respects is going to define whether our children and their children in the next 100 years are successful in so many ways or not - security-wise, economically, culturally - and we have to as the European Union become more competitive. We have got to put our turnover over a wider market to increase our productivity, increase our home market, have a more mobile workforce and have all the transport infrastructure abilities that, say, the Americans get from being big and putting their people across that turnover, so in that respect I think that France's attitude is wrong. I think if we keep Turkey out, our children and their children will rue the day economically because their size will give us clout, their getting wealthy will give us clout, they will be a skilled workforce, but also from the point of view of security, because it is important that one of the great enduring commercial geographic supply lines of the world, which is the Bosphorus, is in the hands of a friendly nation, a nation that looks West, sees Europe as their natural home and is on the page of democratic capitalism, and that is what Turkey offers Europe. They also are a secular nation and in a century that belongs to Asia and in a world that is embracing different religions more than ever before, the way to kill prejudice, the way to stop evil men on both sides of the argument from influencing and having their way is to embrace those who are moderate in the different religions of the world. Turkey represents that and therefore while my job is to promote the economic connection between the European Union and Turkey, if France's opposition means that we put up a wall against a friendly, member of NATO, secular nation then we will be paying the price for a long, long time. Q208 Miss Kirkbride: Do you know whether the issue of France's objections was raised privately with President Sarkozy when he came to London recently? Lord Jones of Birmingham: I do know and it was not. Q209 Miss Kirkbride: It was not? That is rather a disappointing opportunity missed, is it not? Lord Jones of Birmingham: People can ask away all they like; it is whether they know they are going to get an answer or not. Q210 Miss Kirkbride: Do you think Turkey will soldier on and hope that the political landscape changes in Europe? Lord Jones of Birmingham: Yes I do actually. I think that the economic reforms that are needed for Turkey to meet the provisions and criteria of the acquis will have a double good effect. One is they will get themselves into better shape to join and, at the same time, it all goes in the right direction for economic reform which leads to a more successful economy and a self-fulfilling prophecy. So do I think they will carry on? Yes, a little bit more in hope than expectation, as we speak, but I am very hopeful that as the world changes so quickly and as the European Union sees especially in the next decade of the 21st century, this changing world with America still at the top but having company with so many different nations in the world growing in their clout, I do hope that France will see that a stronger European Union is one with Turkey in it. Q211 Miss Kirkbride: What about the other vexed issue of Europe at the moment, that of Cyprus and the resolution of issues there certainly with regard to Turkey, where do you stand on that? Lord Jones of Birmingham: I can see why - and rightly too - it is important that we have Cyprus resolved; that is obvious. I am quite hopeful now that the Turks and Cypriots seem to be talking more than ever before and I am hopeful of a speedy resolution. Should that get in the way? Yes it should; I think it does need to be resolved, for many reasons, not just in Brussels but for the people. Do I think it will get in the way at the end of the day? No, I do not. Q212 Miss Kirkbride: Do you think the issue is more for Turkey or more for the Greeks in Cyprus? Lord Jones of Birmingham: When you say 'the issue', is that your shorthand for who gives in? Q213 Miss Kirkbride: The stumbling blocks. Lord Jones of Birmingham: I am not going to start commenting on who should be giving way; I do not do that side of life. Q214 Mr Hoyle: You do not do politics! Lord Jones of Birmingham: Quite. It is a prescription I can recommend to many people actually. Q215 Miss Kirkbride: A second disappointment. Lord Jones of Birmingham: I do see, with respect, why it is an issue not just for lawmakers bus also for people who live every day out there and have to deal with it. I am just very confident that it will come to fruition and have a successful resolution; I do not think it will be speedy but in time. Q216 Chairman: In time to facilitate the accession talks? Lord Jones of Birmingham: Spot on but I do not mean next week. Q217 Mr Binley: Could we push you a little further on this, Digby, because we recently visited the Commission and we were given the impression that, crudely, one chapter had been closed and another two were hopeful of being closed shortly. Anyway, a lot of chapters had not been closed, that is the fact of the matter, and a number of them had not been opened, and the impression I got was that there was not a great deal of urgency, a great deal of concern. They said all the right words but they did not find underneath that there was a great wish to hurry this process along. I may be wrong and you may have a different view. When do you think that we might be talking about for the accession of Turkey in real terms? Lord Jones of Birmingham: Firstly, can I just finish off on one other point on Cyprus which is that in June there are fully-fledged UN-based negotiations starting so that is one more step on the road which I am quite pleased about. Have I noticed in the last year/18 months a distinct slowdown or maybe just not as quickly going forward in trying to comply with the acquis and indeed just with negotiations? Yes I have and I think that your comment that it is going off the boil is fairly said. It is brought about by two or three reasons. I think the lawsuit with the ruling party has been a diversion. If you were trying to get into a club and you saw one of the major voters in that club say they cannot stand you, what would you do? Q218 Mr Binley: Join another club. Lord Jones of Birmingham: Exactly, which would be very worrying, or you would at least think, "I will go and do a few more things while they make up their minds." If I were democratically elected in Turkey, does it resonate in the same way when France is sitting there saying what they have said? Of course it does not, that is human nature. Have I seen it going off the boil over the last couple of years? Yes. To answer your third question then about where does that put it in terms of the timing of accession, I personally am so much in favour of Turkey coming in, I would like to see it get back on the front foot, keep going, keep the faith in Turkey's terms and get to a point where it is all done. Do I think that will happen in short order? No. Britain's role in this is to keep it at the front. That is why when the Chairman rang me up and said would you come and do this, I jumped at the chance because we have got to get this issue back on the front foot and back on the radar screen in Brussels and indeed in the newspapers and in Ankara as well. So we are talking years, are we not? I hope we are not talking decades. I would sincerely hope inside the next decade but we are talking years, and it is very important, for instance, if you see President Sarkozy saying, "I promised this in my election promises," well, I think there will be another Presidential election in France before Turkey get in, and on that basis there is a role for Britain and there is a role for others to start trying to influence public opinion in France during this time. It is a very long haul but it does not mean for a minute that we should take our foot off the gas, it really does not. Q219 Mr Hoyle: You have mentioned France and a change of Government there but what about Austria, Germany, Holland, Greece, how do we persuade the rest? I think we are in the minority. I know Greece is conciliatory at the moment but the reality is when it came to a vote we have got to just hope that they do hold the line. If we look at the Dutch, look at Austria and look at Germany there is no great will to support Turkey. What do you think we could do with those countries? Lord Jones of Birmingham: I think that point is very well made in terms of we must hope that even a country whose policy it is to support holds the line if it ever came to a vote, and Greece is a classic example, I think you are right. I had a lesson on this when I was at the CBI when I visited Vienna and I did a Q&A session with a load of small business people, and I had a businessman stand up and say, "You are so supportive of Turkey coming in," "Yes I am." "We turned them back at the gates of this city in 1683 (or whatever the date was) and they are not coming back now." This guy said it in public to me in a business session. I tried to loosen it up by saying, "I would like a written apology from the Italian Government for what the Romans did to us," and I got absolutely nowhere. Chairman: What did the Romans do? Mr Hoyle: The rule of law --- Mr Weir: At least they did not get to us! Q220 Chairman: Can I ask you just one question on timing before we move on to Mike Weir's questions: does the Government have a view of how long any transitional arrangements for freedom of movement of labour might be in any accession? Lord Jones of Birmingham: No, not yet. Q221 Chairman: But there would be a period? Lord Jones of Birmingham: There would have to be. Actually, Chairman, quite apart from the whole immigration and the Bulgarian and Romanian issue - forget that for this purpose - we are talking about the most populous nation in an enlarged European Union. Q222 Chairman: And a very young one. Lord Jones of Birmingham: And 50% of the population is under 28 years old today and they are 70 million today and they will be past Germany's 80 million by 2012, so it would not be about a view on immigration in terms of Bulgaria which has only got seven million, it would just be the sheer size of the place. When I saw that prejudice in Vienna it taught me a lesson about the fact that I can concentrate on the Frances of this world, as you have just said, or Greece, but there will be quite a few small countries that for different historical reasons have serious prejudice about all this, and what do we do about it? The answer is you just keep your foot on the gas and you keep the door open and you keep going. There is another reason for doing this, you know. I hope all of us are here today with an interest in the trade investment and the economic consequences of all of this understand that there is a much bigger reason which is that of course I believe that business can make a serious difference to people's lives around the world, especially in developing nations, if we are allowed access and we behave responsibly, but if you are going to get the young of Muslim countries (and, remember this: as the developed world countries get older the Muslim countries in their demographics are getting younger) and if we have a prayer of reaching out to them with the benefits of democratic capitalism, with the benefits of freedom of speech and freedom of worship and freedom of assembly, and the values we hold dear, if we have a prayer of getting anywhere near this, then the world will see and watch how the European Union deals with Turkey. Of course I will say to you that means let them in, but even if it was not let in, the grounds have got to be because of proper rational thought and not because of prejudice, and that businessman in Vienna was exhibiting prejudice here because it is in his best interests for economic reasons to have them in when they are just down the road. In fact, Austria will benefit far more than Britain because of its proximity, and it was prejudice and I think, whether it is Holland or France or Austria or Greece, if we show it from a prejudicial point of view then we will reap a whirlwind in decades to come. Q223 Chairman: I would just caution the young people watching this evidence that if they have got their foot on the gas they should then close the door! Lord Jones of Birmingham: And no naked flames! Chairman: Mike Weir? Q224 Mr Weir: We seem to have gone from the Romans to the invasion of the Turks at the gates of Vienna. The Romans never got to Scotland --- Lord Jones of Birmingham: What about the Antonine Wall? Q225 Mr Weir: We will get there! Lord Jones of Birmingham: 142 AD; it was Antonine and he was north of Glasgow in 142 AD. Q226 Chairman: I am anxious you should catch your train! Lord Jones of Birmingham: I am sorry, Chairman. Q227 Mr Weir: Going back a step from the accession, the Customs Union exists at the moment and obviously it has helped promote UK-Turkey trade but we have heard there is a great many issues in the implementation of the Customs Union. How much greater could the trade be if these issues were overcome? Lord Jones of Birmingham: The issues in the Customs Union? Q228 Mr Weir: Yes. Lord Jones of Birmingham: Significantly. The first thing about the Customs Union to say is that it has been a success in two ways: it has knocked down tariff walls and it has increased trade and activity already. It was signed in 1995 and went into operation in 1996. We are 12 years on and there has been a significant increase. There is another way of course where it has talked about where and how Turkey trades with other nations outside the European Union. That is one aspect of the Customs Union and it has been a useful way in which the trading relationship between Turkey and third parties and the European Union can be regularised, and I think that has had an effect. There have been significant problems with it. It does not deal with services, it does not deal with base agricultural products (not added-value agricultural products but base ones) and that is a big thing especially with services in Britain, and France would argue of course it is a big thing for their agriculture, so there are certain areas that are outside the Customs Union which it would be nice to see inside, to be fair, and that would change things significantly for Britain with services. Secondly, there are special things where Turkey has basically not implemented aspects of it. The problem we have currently with spirits is a good example. How much would that change? It would do two things: a) it would increase the volume significantly; and b) it would put up a very big sign of the fact that both sides are serious more then they are just playing at it. Q229 Mr Weir: Do you think that the difficulties with the Customs Union are linked to the lack of progress, if you like, in the accession negotiations? Do you think if there was more progress and the EU was seen to be pushing further forward the accession negotiations that some of the difficulties of the Customs Union might be more easily overcome? Lord Jones of Birmingham: I think that is an excellent point and the answer is yes. Q230 Mr Weir: You mentioned also that the Customs Union deals with how Turkey deals with third parties. One of the concerns expressed by Turkey is that it is forced to adopt the EU's tariff levels with third countries even though it has no formal role in negotiating them and that seems to be matter of some concern. As Turkey's economy expands, the implications of the problem grow, so is there any prospect of Turkey being able to participate in these negotiations prior to joining the EU? Lord Jones of Birmingham: Prior to joining? I was going to say no but I would guess that if we were on the short strokes of joining I cannot see any reason why they would not be allowed to then. Q231 Mr Weir: But that would mean that it is not until they are on the point of joining? Lord Jones of Birmingham: Two or three years before, yes. Q232 Mr Weir: You have already said that it could be many years in implication before they join, so this situation is not likely to be resolved in the near future? Lord Jones of Birmingham: I agree. Q233 Mr Weir: Has it the potential to derail relations between the EU and Turkey? Lord Jones of Birmingham: No. Q234 Mr Weir: You do not think so? Lord Jones of Birmingham: No, it is in Turkey's interests that she continues to reap the benefits of the Customs Union and it is in Turkey's interests that she keeps her bat at the crease in terms of negotiation on joining the European Union. I just think that if the European Union were to accelerate the negotiations for membership there would be a bit more moral high ground when we then ask Turkey to comply with certain aspects of the Customs Union. Q235 Mr Weir: The CBI said to us that there is movement on change in the Turkish trade laws and in fact they thought there could be a more level playing field for foreign businesses operating in Turkey compared to domestic ones. Do you know anything about this? Can you tell me any more about it? Lord Jones of Birmingham: I have been told what the CBI has said. I do think that that is not the only issue. We need a legal system in Turkey that is certainly more speedy, certainly more easily understood, and certainly more dependable on consistency. I think that is as big a problem. If the CBI were talking about that when they were talking about trade, then I am with them. Trade is one issue but it is not the one that everybody should concentrate on; there are one or two others as well. Q236 Mr Weir: Is the implication of what you are saying about consistency that there is a problem irrespective of what the law is in Turkey about it being implemented on the ground in a consistent manner? Lord Jones of Birmingham: If you talk to a business about getting wrapped up in a contractual dispute involving the courts in Turkey, the first word they will say is 'slow'; the second word they will say is 'inconsistent', so the answer to you is, yes, there is a problem. This is one of the issues you always have if a country ever gets to this stage. I am sure that people will say, "I did not have a problem here," so what you have got is perception. You might have reality but you have certainly got perception. Either way it is damaging to a country. Q237 Mr Weir: According to the CBI the new bill in the Turkish Parliament encompasses a scrapping of double taxation for foreign investors, more transparency and justice as regards competition, as well as strict adherence to European Union regulations on auditing and clearer means of launching companies and a clearer definition of legal status and holdings I get the impression from you that irrespective of what that says it may not work that way on the ground in Turkey. Is that fair comment? Lord Jones of Birmingham: Turkey has made enormous strides in the last few years and she continues to and that is good news. Firstly, does it take longer to implement and get it working than when they pass the laws? Yes, and business of course deals with it day-to-day on the street. Secondly, even some of the things when they are done and they are working, does it throw up a perception that it is not the place to go because it does not work? Yes. Is it unfair on Turkey? Probably yes, but they are the ones who created it in the first place by needing to change. There is one thing I find when I talk to Turkish businessmen - and I do a lot - and that is we must be very careful (I do not mean we Britain, I mean we the European Union of sitting there saying, "You put this, this, this and this right and you can come into our club," and at the same time, as we all arrogantly say things like that, they are too polite to say what they should say which is, "And of course you are perfect, aren't you?" whether it is Rumania and Bulgaria who have a long, long way to go to start complying with everything that Brussels asks them to do, frankly, we all know it and there are certain very, very major developed members of the European Union who still think that compliance is a voluntary event, and far be it for me to tell you who they may be. Q238 Mr Weir: I think we can all guess! Lord Jones of Birmingham: Even we - and we are better behaved than most - are not perfect and we still need to do better as well. It worries me sometimes that we all sit there in our ivory castle as members of the European Union saying, "You do all this," in our arrogant way, and Turkey sometimes could turn round and say, "Actually, have we got a mile to go, yes we have, but you have got a fair few yards to go as well." Q239 Mr Weir: Given your previous comments about the Customs Union, is it also the case that the paper changes might become more real if there was real progress towards actual accession to the EU? Lord Jones of Birmingham: Absolutely right. Q240 Roger Berry: What are UKTI's sector priorities in Turkey in the new financial year and have they changed at all from last year? Lord Jones of Birmingham: We have shifted the emphasis on a couple and I will come back to that. There will be what I would sometimes call the 'usual suspects', which is supporting one or two champions in sectors. Vodafone comes to mind and HSBC comes to mind, mobile telephony and banking, where they are doing really well and we are there to help all we can, and other banks and ICT companies as well. However, there are a couple where we have shifted the emphasis and shifted the sector effort more in the last year. Environmental technology comes to mind. All round the world at the moment we are seen as one of the leading nations for providing technological solutions to climate change, to issues of pollution, to energy conservation, and it is a reputation that has been hard won by universities, by businesses and by the Government stimulating and helping that, putting taxpayers' money into things which are getting a meaningful return, and that is good to see. UKTI is pushing that around the world at the moment and Turkey is no stranger to that. Linked to that is water management and the whole issue of stopping wastage of water and also how you handle the stuff coming into the tap and how you handle the stuff going out of the house or the factory, so there is water as well. One that I feel particularly both pleased to champion and also keen that we get seen as a proper sector the whole world of education and training, the stimulation of our growth in universities around the world. We have four universities in the top ten in the world - UCL, Imperial --- Q241 Chairman: We want to ask about education at some length later. Lord Jones of Birmingham: --- and Oxford and Cambridge. Those four are in the top ten. Only America has got more in the top 50 than us. It is a really good emblematic British success and linked to that is then training and professional qualifications. The world wants to see our professional qualifications on their CVs and then also linking in with businesses, training people on the ground in technical subjects. We can sell that into Turkey as she grows and develops hugely and that is a sector where we have shifted our emphasis in the last 12 months. Q242 Roger Berry: You were quite bullish about UKTI resources overall in your earlier remarks. What is your view about the current level of UKTI resources in place for Turkey given that it is a priority market and so on? Lord Jones of Birmingham: Last year we increased the number of people on the ground from 15 to 20 and that is significant. We designated it one of our emerging markets. We have really put the money where the mouth is in terms of not just saying it is important to us but have put more people in to stimulate it. I am going in September for a visit and I will take a business delegation with me. I would point out that I will be the first Trade Minister from this country to go to Turkey for at least 15 years, so that spans two party political governments so it is not a party political point. If you have got at ministerial level increased clout and representation, at resource level more people, and we have specifically strategically designated it one of the markets where we are putting more effort in, then the businesses of Britain respond, you see. A lot of the businesses of course deal in other markets as well and know us quite well and know how we can help them in this one. A good example would be airports; another example would be ports; and PPPs in which we are acknowledged as the world's best. How you get that working in Turkey is not your normal "Let's go in and help them sell widgets." There is another sector where I intend to beef it up in this 12 months where you say has it changed from the last 12 months: from 1 April I took over as minister in charge of defence and security sales, and I am delighted and thrilled that I have got the chance to champion one of Britain's great manufacturing sectors. Defence equipment manufacture is something of which Britain should be enormously proud. It employs hundreds of thousands of people; it generates an enormous amount of corporation tax which pays for a lot of schools and hospitals --- Q243 Chairman: I think we are getting a bit beyond Turkey. Lord Jones of Birmingham: No we are not and I will tell you why: because we do not anywhere near punch our weight in selling defence equipment to Turkey by a mile. We sold about 40 million quids' worth last year and that should be increased substantially. One of the jobs I want to do is to make sure that UKTI/DSO, gets into Turkey and does the business there more than it does today. Q244 Roger Berry: I might have some views about what Turkey does with some of the military equipment but we will not go into that, although Azerbaijan springs to mind! Lord Jones of Birmingham: One of the things I would say is I would rather see a country with our set of values, a country with our degree of transparency and governance as better placed to sell some of this stuff than some other countries. If anybody ever says to me if we ever stop selling this stuff, for some reason the French and the Americans and the Chinese and everybody else will stop; I say, "Get real." Q245 Roger Berry: I was not suggesting that. I am just well aware of the Government's attitude on end use controls and there are end use issues in relation to arms exports to Turkey. Lord Jones of Birmingham: That is a good point and I accept that. Q246 Roger Berry: Turkey is obviously one of the High Growth Markets Programme target countries. You have given a very positive picture of the priority given to Turkey. Where does it rank amongst those priority markets? Lord Jones of Birmingham: In terms of 17 emerging markets, we do not sit down and go, "Who's going to be number one this week? Where did India rank last week? Does Turkey come in at tenth or 14th?" You do not even get a bonus point for scoring four tries. We intentionally do not rank it because we do not want competition for resources within the 17. One thing I would say is that it a big untapped market for this country and it needs more time in the sun than it has had in the past. Putting 15 up to 20 in its resource capability is evidence of our intention. Q247 Roger Berry: Some degree of ranking must be necessary to determine resource allocation. You have got to make some decisions about which of these markets get how much money. There has to be some system of prioritising where UKTI resources go and I was just curious to know whether Turkey was high amongst the 17 or whether Turkey was low. They cannot all be the same. Lord Jones of Birmingham: We do not willy-nilly next week decide let's put a few people into Mexico and take a few out of India, we do not do that. Q248 Roger Berry: That is why there must be priorities. Lord Jones of Birmingham: I am not hiding it from you; we genuinely do not rank in amongst the 17. I promise you we do not. Do we look strategically at how we spend the money and where we spend it? Yes, of course we do. Q249 Roger Berry: Okay. As I understand it, we have got a new High Growth Market Programme adviser who is intended to attract UK medium-sized corporations to Turkey. Has he or she delivered results thus far? Lord Jones of Birmingham: It is a very early appointment so the answer is at the moment I have not made a judgment yet so I cannot tell you. Q250 Roger Berry: Okay. What has the network of regional Turkey champions and regional roadshows delivered? Lord Jones of Birmingham: I am, as you may imagine and knowing where I come from, very pleased that we are getting UKTI out on the road round the regions of England and the three Celtic nations more than has happened in the past. I do not mean presence, they have been there forever, but in terms of getting specific roadshows, and for that programme again it is early days. I cannot tell you we produce this or that, but it is just a delight to see that we are putting more emphasis into stimulating small businesses. I mentioned Vodafone and HSBC and I could have mentioned Ove Arup, I could have mentioned loads of companies, and it is easier with them, it is a different job to be done. You hit the nail on the head when you talked about SMEs. How do you get an SME in Manchester or Birmingham or Newcastle or Cardiff to want to bet their ranch in Istanbul? It is just extremely difficult. I understand why because would you do it, would I do it? There is a human equation in a way that does not happen in a big business. To get them to put their toe in the water needs more then UKTI, it needs more than the local chamber of commerce. I think it often needs involvement in the supply chain, to be honest, it needs a bit of help from their mates down the road. There are a lot of different impacts to get a small business to do it but one way at least we can make them aware is have a UKTI roadshow sitting in their town. Q251 Roger Berry: Finally, Chairman, may I be devil's advocate, the whole SME argument is based on this notion that SMEs are disadvantaged more than large companies and they need the extra support but they will grow and become major companies and so forth --- Lord Jones of Birmingham: I do not agree with all of that. Q252 Roger Berry: Let me ask the question and not ramble: do you not think sometimes that the resources put into promoting SME activity specifically geared towards a country like Turkey might be money better spent on backing larger companies that can make substantial economic benefits much more quickly and much more easily, like some of the defence manufacturers you were referring to earlier? Lord Jones of Birmingham: Sure, when you say backing - and I feel very strongly about this and it is also in the stated aims and objectives of UKTI - we do not back any company if backing means we give them money. If you mean build capacity for them and knock down doors and give them publicity and bang the drum, of course we do. If that is what you meant by backing, then I am with you, for two reasons, the temptation is what you say which is that you do that job for a few big'uns and you let the rest fend for themselves. The upside of that is that it is easier because you are dealing with fewer people and you are dealing with more sophisticated overseas traders and investors and it is easier because the people you are dealing with tend to do it themselves more anyway. The downside of it is you would not achieve employment growth in Britain in the same way - by a mile you would not. But seriously, the great employment growth in a developed economy, and certainly in this economy, comes from small business, not large business, and, secondly, you will not achieve the wish for smaller businesses given that you have got the employment growth and the need to employ skilled people and you therefore will not drive the skills equation in the country. The way to get a small business to do better in Britain and to succeed in employing more people is to expose them constantly to overseas competition, and the way to do that is to get them to trade with places like Turkey. To do that you hope what they then do is employ more people but you hope they see the need to train their people to do it. The real training equation in this country to make it fit for purpose in the 21st century is to get the employer (and, by the way, the employer might be the public sector as well) to understand the need for training people. In that, UKTI's capacity-building should be directed just as much at small businesses. By the way, it cannot just be us. I would say with respect to you guys with your constituencies, it cannot just be you either, and I am sure you every day support small business, of course you do, it has got to be all the different component parts of an economic society because unlike the big boys the small guys need help from everybody. Chairman: It is not entirely surprising that at the mention of small businesses, Mr Binley has jumped up and down. Roger Berry: I did say I was being devil's advocate, Brian! Chairman: I think the Minister has already anticipated your supplementary but I will let you have it nonetheless. Mr Binley: I am sure he has and I hope he has because he will know that running small and medium-sized business is a very lonely business. You just have not got the support and all of the strength around you and that means two Ps are very important - piggybacking and partnership - and that is where success will come from, piggybacking on the back of large industries. 400 small companies support the Airbus --- Chairman: This is a discussion on Turkey more than economic issues. Mr Binley: One more point - piggybacking is important but so equally is getting people on the other side of the water, wherever that may be, to work with people, hold their hand and give them comfort, and I wonder what UKTI is doing about those two Ps? Q253 Chairman: In relation to Turkey, please. Lord Jones of Birmingham: One thing I found frustrating at the CBI about small business, and I have found it in this position as well, is the very reason as to why they succeed is because they are, and rightly so, intensely focused, and they have got to focus because if they do not focus on their business in 30 seconds they fail. The trouble with focus is that it does not allow room for all the other stuff and it is a problem that anybody wanting to reach out to small business has, from government, to an RDA, to a trade union, to the CBI. It is more difficult to get a small business to give you time and effort and energy than it is a big business. Moving on to the specific with Turkey in terms of what are we doing to stand by their side. Why we need to is because if you can get a small business to understand that it is as important to focus on the Turkish market as it is to focus on their customer down the road, you have to, firstly - in the proper use of the word, not a patronising use of the word - educate them. In other words, they have got to understand a wider market. We are 60 million people on a lump of granite in the North Atlantic and the market out there, especially in a globalised economy, is enormous. If a small business can see, especially with all the communication aids that exist today, that Turkey, especially if Turkey was in the European Union, could be as much its home market as five miles down the road, if you can get a small business to understand that and educate them to that point, then hold their hand when they put their toe in the water, be there from the embassy through their local bank, through their advisers, through us making sure they get access, making sure they get a fair deal, making sure they are not jumped on from a great height as they make one or two mistakes, as they surely will, welcome to life, then UKTI will have done its job. It starts with getting them to understand what their home market is in a different century. It is very difficult for the small business but it is absolutely essential. Q254 Mr Bailey: Certainly from the experience I have talking to small businessmen in West Bromwich everything you said is absolutely correct, but can I focus for a moment on the Turkish British Business Council. We had a meeting with them earlier when we went to Turkey. On the surface it is ironic that British/Turkey trade is at a lower level than trade between Turkey and France and Turkey and Germany, who politically are far less sympathetic to Turkey and the TBBC said it wants to double trade. How realistic is that? Lord Jones of Birmingham: Firstly, and it is a source of acute frustration for me but it happens in most developing economies, Turkish Airlines buy an Airbus. That has got wings made in North Wales, it has got undercarriages made in Gloucester, it has got aero engines made in Derby and some avionics made in Bristol, but it is booked as an export from France to Turkey. We have fabulous trade figures between Britain and France because of that but not British/Turkish figures and yet half of the aircraft that is flying around, for which Turkey have traded with the European Union, is made in Britain. One of the real frustrations I have is that Airbus, every one of them, is a huge big item, Turkish Airlines buy one, it does the monthly figures, it is big stuff and we do not get that. Secondly, America sells Turkey an F-16 Fighter and you have got a sizeable percentage of that Fighter made in America that has got British gear made in Britain on it, yet that is booked as an export to America, not as an export to Turkey. The figures frustrate me. I am not hiding behind them. Could they be better, of course they could. Could we get this awareness up, yes, we should. There is a lot of stuff we do, especially clever stuff, which goes into Turkey via another country. I notice with interest the number one export nation into Turkey is Holland. I had a look at that thinking is that right and of course it is because what they are booked as is where is the headquarters of the company that is making the sale and they go through Holland for tax reasons. You have got stuff made in another country in the European Union through Holland and back into Turkey because the exporter gets a tax break. They are no more made in Holland than you or me but those are the figures. I ask you to look at the figures with a degree of circumspection but the overall emphasis, you are quite right, it could be better than it is today. We, with the Turkish British Business Council, have put a quarter of a million pounds of your money in the last two or three years in building it up, getting it help. Last year we even paid £5,000 towards secretarial support, so we are with them. We are helping them in an overall capacity. Is it realistic that they will double their trade figure in the next couple of years? I would say yes. I have to say, I want them to go for it, I do not want them to limit their expectation or their aspiration. Q255 Mr Bailey: I do want to raise a point apropos what you just said, but just on the funding issue, could you clarify this because you anticipated my next question which said the TBBC just received £5,000 of government funding, you say that is for secretarial support. Lord Jones of Birmingham: We gave them £11,000 last year, £5,000 of the £11,000 was for secretarial costs and £240, 000 in the last two years. Q256 Mr Bailey: Previously it was nearly a quarter of a million. I believe India gets something like a million and we are not knocking the million that India gets, but in the circumstances do you think that should be improved? Lord Jones of Birmingham: The facile answer to you is of course it should, but everybody should be improved and if I improve that figure, I am going to have to cut it off somewhere else unless someone gives me more money in the round, which they will not do and, by the way, nor should they do. The answer to success in our Department is how we use our skill and judgment to maximise return on the money we have, not give us more money. The facile argument is give us more money, of course, but it is more about how we apply the resource we have. We make a judgment and say, "Well, that's what India is, that's what Turkey is and no we haven't ranked them". Q257 Mr Bailey: Is there any prospect of the UKTI match-funding the TBBC member contribution? Lord Jones of Birmingham: No. Q258 Mr Bailey: That is a straight answer! My colleague raised some matters in the context of support for SMEs. I am interested because you are a forceful advocate for industry as a whole but for the West Midlands in particular and as a West Midlands MP I go around and mention Turkey and I get a look of incomprehension from the SMEs I talk to. What would you be saying to the SMEs in the Black Country to try and broaden their horizon? Lord Jones of Birmingham: Interestingly, I was talking to a company in your constituency this morning, Hadley Industries, in a wonderful named street in West Bromwich called Downing Street, which I thought was quite funny. I am pleased to hear you say a degree of miscomprehension, not hostility. Q259 Mr Bailey: No, Lord Jones of Birmingham: It is one borne of innocent ignorance more than anything else. Let alone what would I say, I do say "You have got one of the biggest, getting wealthier by the day markets on your doorstep and what is more they like you, and what is more you are part of a country that says, 'We want you in our club more than the others, now go and put the ball in the net'", and UKTI should be there to help them put that ball in the net. The first thing we have got to do is get them out there to see it, kick the tyres, feel it and understand it. I often say to them, "Your customer base ---" in other words, the bigger companies that they supply, "--- find out if they deal with Turkey. You will find one or two of them do and then if you want me to help, because one of the reasons I have been asked to do this job is I know a lot of people in business, and you want me to ring up one of those bigger companies and say, 'Can you put him on your back as you stomp in next time and let them learn'", that is what I often say. I think this is the way to do this because you cannot ask a small business to risk the money on day one. Also, you cannot ask them to spend an awful lot of time which they would consider a waste, but you can ask them to link in with the people they know and trust and therefore have their best interest at heart. I hope they know that I have. I am sure their customers have. I often say to them it is a market which, unlike any other in Central Europe, which is where the other accession states have come from into the European Union for instance, is populous and they are young and they are going to want the value-added goods and services that you provide and we, UKTI, should be there to help them. Can I say one other thing about this, given that your question was specific about the West Midlands, which is they are also secular Islam, in the West Midlands we have got the biggest propensity of Muslims in Britain per capita of the West Midlands' population. It would do racial integration and religious integration in Britain no harm at all if a few businesses that employed a lot of Muslims in Britain were seen to be trading even more with a Muslim country on good quality equal terms. I would say that if I was in the North West, I would say it if I was in Yorkshire and Humberside, anywhere where you have got big Muslim populations. I want them to know that we trade with people in the world because of the potential for making money, not because of the colour of their skin or the God they worship. Q260 Chairman: I would add to that the West Midlands has the strength in the automotive sector, which is one of the emerging strongest growing sectors in Turkey, of course, as well. Lord Jones of Birmingham: That is for sure. Q261 Chairman: This Committee always looks at trading with different countries and always will lament the lack of British engagement and we always want it to be a higher priority in businesses' mind and government's mind and not everywhere can be a priority, but what you have just said is that Turkey should be one of the higher priorities in British businesses' minds because, as you put it, there is an open goal there because there is a lot of political goodwill towards this country and Turkey because of the position taken towards their membership. Is it not a bit odd to have cut the TBBC funding so heavily? Lord Jones of Birmingham: Business funds the TBBC. Q262 Chairman: You were making a higher contribution. Lord Jones of Birmingham: I am sorry, you mean cut our funding to the TBBC? Q263 Chairman: Yes. Lord Jones of Birmingham: You say it is odd, Andy Cahn and I have priorities. We have to make judgments, we have to be judged on those judgments and we made a decision. You say, "Isn't it a bit odd", we have increased the salary bill which looks after Turkey by 25%, I mean, give us a break. Q264 Chairman: We welcome what you are doing with UKTI. We are a little bit confused with what you said about the TBBC funding because you made a claim to a figure earlier on which is different from ours. Could we have a note of Government funding for TBBC over the last five years, just to clarify that. Lord Jones of Birmingham: I have been corrected for the record, which I think is right, we did not give £240,000 over the last two years to the TBBC. I said we did, we did not, we spent it on the Turkey trade effort in the round. Q265 Chairman: That is what I thought. Lord Jones of Birmingham: I would like to make that correction. Q266 Chairman: That is helpful. Last year's UKTI strategy for Turkey, which has just run out says, "We shall aim to strengthen institutional weaknesses in key networks, eg the TBBC". I would love a copy of the 2008/09 UKTI which must now be available. If we could have a copy of that, it would be really helpful. Lord Jones of Birmingham: Sure, I will get you that. By the way, Chairman, when you or somebody said it is a little odd that our trade effort there is less than what Germany do and yet we are more in favour of them joining the European Union, one of the things we must remember is there is an enormous historical link with Germany - historical in terms of 30 years not 300 years - because of all the guest workers who came in for the German automotive manufacturing miracle of the 1960s through to the 1990s. There are a lot of second generation Turks who have a familiarity relationship with Germany which they do not possess with Britain. Q267 Chairman: I understand that. Intergovernmental forum, can you explain to us a little more what this is all about? When will it be launched? Is it going to be for the first time when you go to Turkey in September? Lord Jones of Birmingham: Yes and yes. Q268 Chairman: Thank you very much. Describe it a little. Lord Jones of Birmingham: We have kick-started it again. It was announced last year and then it did not get off the ground, mainly due to inactivity at the Turkish end but it did not. I wrote to the Foreign Minister of Turkey earlier in the year and Andrew Cahn went to Turkey in February and we have had a response and it is going to be formally launched at the first meeting when I go in September. Q269 Chairman: Obviously your commitment to it is considerable. Lord Jones of Birmingham: Yes. Q270 Chairman: You think the Turkish commitment is now there as well? Lord Jones of Birmingham: I do, and if you had asked me that six months ago, it is not something I could have said yes to. Q271 Chairman: There are quite a lot of specific issues affecting British companies in Turkey, is that not so? Lord Jones of Birmingham: I want to do one thing well with that initiative in September, get it launched properly, get one or two things that we agree both sides have got to do in, say, 12 months, what gets measured gets done, so get a couple of things done and done well rather than say, "Let's go and do 20 things", and find we have done nothing. One or two are those trade obstacles to which you refer. We have still got this big issue with spirits. There was a little bit of progress. There was the double-header of the two consents they needed, that has now come down to one, great stuff, and the other one they have just got to say, "We've done this", so they do not need to ask for consent, they can just report. There is still one that is needed, and are we any further in getting them to progress that and not have all the delays, no, we are not. That is big for Britain, remember, because we have some big drinks companies, especially up in Scotland. Q272 Chairman: Scotch whisky is always the big issue in trading relations in all this. The IGF sounds remarkably like a sort of mini JETCO to me, like we have with India, Brazil and China. Ministers have not got completely free diaries. There is a limit to the number of high level engagements they can have. What is the difference between an IGF and a JETCO? Is there enough ministerial time to make it work? Lord Jones of Birmingham: JETCOs have been going quite a while now, so this is not hope, this is reality. You and I might look at it, Chairman, as at ministerial level and the big meeting that happens every year or every six months, there is an awful lot of JETCO which goes on in all different strands of relationships between two countries on an economic basis, that will not happen with the inter-governmental one with Turkey. This is going to be just one moving forward at one level. I am not saying in three or four years' time it will not spread its tentacles down into other areas of economic activity. It is not a mini JETCO because it has the same origins at the top, but what JETCO then does is it spreads its tentacles throughout. Chairman: We shall adjourn for the division. The Committee suspended from 3.42pm to 4.02pm for a division in the House of Lords Q273 Mr Hoyle: Obviously, as you have informed us, it is 15 years since we have had a trade minister out in Turkey, so it is good news you are going and you want to make a big impact. You mentioned defence and I think the defence budget is about £40 billion a year and you are absolutely right, we have not even touched the surface there. I wondered, you mentioned about the American F-16, there is not that much on the F-16 for us but there is a lot more on Typhoon or Hawk. Does that mean you might land in a Typhoon or Hawk as a good way to start your tour! Lord Jones of Birmingham: If there was an offer to land in a Typhoon in Turkey in September I would jump at the chance or a Hawk Trainer for that matter. The plane that the Typhoon should go up against is the F-35, not the F-16. Q274 Mr Hoyle: But they are building F-16 under the licence at the moment. Lord Jones of Birmingham: Also, you find that America will sell the F-16 as an interim stopgap before the 35 comes on line. The Typhoon is going up against the hope of a 35, but there is more British kit on a 35 than a 16, that is for sure. Q275 Mr Hoyle: We have still got to hope that you might be landing in a Typhoon or Hawk? Lord Jones of Birmingham: Put it this way, if you would like to use your influence and I can use mine and I got on the back seat of a Typhoon to land in September, count me in! Q276 Mr Hoyle: That is excellent news. The only thing I might say is you may have to get on to BAE about reopening an office because I think that is the other downside. Here we have a huge budget being spent and yet absolutely no office being occupied by BAE out there, so maybe that is something you ought to take out as part of your trade delegation. Lord Jones of Birmingham: Tomorrow morning I will get on that case because I did not know that. I will try and sort that out. Q277 Mr Hoyle: That is good. Lord Jones of Birmingham: We should say that will not just be about aircraft. Q278 Mr Hoyle: No, it is about all the things that BAE represent. Lord Jones of Birmingham: That will be about ships BAE do as well. Q279 Mr Hoyle: Absolutely, maybe Thales as well, so there are huge opportunities and I know you will be flying the flag, may it continue. Since your Department submitted their evidence, have you seen any progress in addressing any of the plethoras of barriers to trade investment in Turkey? Which issue will you personally raise as the one that you perceive as the continuing barrier? Lord Jones of Birmingham: The factual answer to you is we have seen a little bit of progress in the spirits one that I mentioned just now, but I am scratching at the surface. Q280 Mr Hoyle: That is what you keep telling us, but my understanding is there is such frustration that Diageo may walk away, is that true? Lord Jones of Birmingham: I guess we have been listening to the same input, but my understanding is exactly the same as yours. As always with trade barriers, we look at it, "Would that be good for Diageo, the people Diageo employ in Britain, the tax Diageo pays in Britain?", of course is it good for the Turkish people? The wealth that Diageo creates in Turkey, the tax Diageo pays in Turkey, it is a two-way street trade, always. The answer to your question is, no, we have not seen much progress. Are we trying very hard, yes. As some of you know, when I got this job I called together representatives of all government departments and said, "If trade really works in a nation, it needs engagement across the piece and, secondly, we have to get brand Britain understood across the piece". That means if an education minister goes to, for example, Turkey, I want to know about it. If an environment minister goes to Turkey, I want to know about it and obviously prime ministers, chancellors and foreign secretaries also. What we can do is have a concerted effort in trying to get these barriers knocked down by everybody. I will not have it that some department says, "Oh well, my minister does X, that's nothing to do with trade". Everything that a democratically elected capitalist government does is about trade and enhancing Britain's brand across the world, trade can dip into that reservoir of goodwill all the time. We try very hard to get a bit more of a cohesive approach to visits, to the intelligence gathering on visits and then using a visit by a minister, which on the face of it might have nothing to do with trade, to try and knock down some of these barriers of which you spoke, to get them to understand why knocking down these barriers helps on the face of it only trade, but really all parts of our society. Q281 Mr Hoyle: When we visited India we found the same problems, and as the TBBC highlighted in respect of Turkey, banking and finance are heavily regulated and are closed to trade, yet these are the areas where we have got real expertise and we ought to be maximising our influence there. Which sectors will you be promoting during your visit and, more importantly, which ministers will you be speaking to while you are out in Turkey? Lord Jones of Birmingham: When the Prime Minister of Turkey came to Britain back in November I met with him at the lunch and I did say I was going to come and if I could meet with him I would be grateful, I am hopeful I can. Certainly I am going to meet the Trade Minister and the Defence Minister and I would hope the Education Minister as well because of the training aspects of what we do. The other thing I do - and I think you know I have a reputation for this which I am very pleased about - is I do go to countries and I am polite but I do not gild the lily. I do tend to say it as it is, so you will find me doing that again for sure. You are quite right, if you look at financial services, it is a real jewel in our crown and it is an area where it is very difficult to break into that market, so we need to put a bit of effort in there as well. Q282 Mr Hoyle: I am glad to hear you are going to rattle the bars. How do you expect the private sector, the TBBC, CBI et cetera, to be involved in the visit? Are you going to take a delegation of business people and, if so, who might attend? Lord Jones of Birmingham: I will definitely be taking a delegation of businessmen and women. I want quite a few of the smaller businesses to come, not just the big companies that everyone would know. I also have no problem if the TBBC and the CBI, for instance, wish to come. One thing I do want is to encourage active chambers of commerce in Britain - Birmingham, Manchester, Newcastle and Leeds come to mind - to start sending more trade delegations specifically sector focused to Turkey and not always Istanbul and Ankara, Izmir and other places as well. If some of those people want to come and dip their toe in the water during my delegation in September, they are more than welcome. Q283 Mr Hoyle: Will the RDAs be involved? Lord Jones of Birmingham: I hope so, I really do. The relations between UKTI and the RDAs in Britain are better than they have been for quite a while, which I am rather pleased about, and the relationship between RDAs' embedded offices around the world, and UKTI and overseas markets are better as well. That might have something to do with the fact that I am a huge fan of RDAs and everybody knows it, so I am rather pleased about that. If they would like to engage in my visit, they are very welcome. Q284 Mr Hoyle: Finally, can I congratulate you on you using the Jaguar and getting rid of the foreign car. I do hope that you can persuade other ministers to start buying and backing British business like your good self. Lord Jones of Birmingham: Thank you very much. On that, I think the word you meant to use between foreign and car was "built". Q285 Mr Hoyle: Built in the UK. Lord Jones of Birmingham: I have got no problem that it is a Japanese manufacturer that gives me a car, I have a problem that it is not made in Britain. Q286 Mr Hoyle: That is right and you have learned from your mistake! Lord Jones of Birmingham: I thought it was made in Britain. Mr Hoyle: Well, that proves that you do not know! Q287 Chairman: Speaking as a great fan of India, I am glad you have got an Indian car, Minister. Lord Jones of Birmingham: That is very good news for the British Midlands. Q288 Chairman: We will not go there today, this is Turkey we are dealing with. Lord Jones of Birmingham: By the way, do you know, you probably do know because the Chairman of this Committee knows everything, the only two places on earth that make a Transit are Southampton and Turkey? Chairman: We did hear that when we were in Turkey, but I had forgotten. Q289 Mr Hoyle: And the British Police buy Mercedes! Lord Jones of Birmingham: Do not wind me up! Chairman: Do not wind each other up! Q290 Mr Weir: Obviously energy is a huge issue politically and industrially at the moment. What do you feel is the scope and role for Turkey in energy, particularly in terms of UK involvement in the market and perhaps supply of energy to the UK? Lord Jones of Birmingham: Firstly, in terms of security of supply, that is one of the reasons why I am very, very keen that Turkey joins the European Union as quickly as possible and why I am very keen that people who oppose Turkey's membership understand what they are playing with in terms of both Turkey being a conduit for other people's fossil fuels that are coming through the Bosphorus and pipelines and also, of course, for Turkey herself as a producer in years to come. There is a wider aspect to this membership issue rather than just the conventional one from a minister like me about wider markets of getting richer people. Secondly, in terms of the other side of energy, which is carbon emissions, as Turkey starts falling foul of the problem of every single developing economy, which is pollution and carbon emissions, I think we would have a much better chance of getting her to walk the path of responsibility if (a) she is inside the tent and (b) if countries like us work with her and do not preach to her. I think it is extremely arrogant for us or the Americans or the Japanese or the French or the Germans to turn around to your Indias, your Chinas, your Turkeys, it does not matter who, and say, "We got rich by fouling the planet, you can't". It is arrogance of the most acute sort. What we should be saying is, "We have some technological solutions here to enable you to get rich without causing the mayhem that we did. Let us share this technology with you, let us partner with you and let's be a genuine partner in this and not somebody who just wants to exploit the situation" Q291 Mr Weir: Is there any evidence of UK business doing that at the moment? Lord Jones of Birmingham: Yes, there is. One of our strengths is environmental engineering in its widest definition. Again, we were talking earlier on about small companies, a lot of small businesses do a little bit of this and the more UKTI have got quite a push. I think somebody asked me if our sectorial priorities this year are different from last year. One of them where it is different is we are putting a lot more energy into supporting smaller companies to get over to Turkey and sell some of their environmental expertise and some of their technological solutions to climate change. We must win the argument that you can pull it off, you can have sustainable economic growth without burning carbon into the environment in quite the same way we did years ago. Q292 Mr Weir: I understand Turkey has a nuclear programme. Are UK companies involved in that at the moment? What has your department had to do with involving UK companies in that? Lord Jones of Birmingham: I do not know enough about that and I will not pretend to and say something of which I am not sure. I promise you, I will get straight back to you in the next two or three days. I will ask the question, I will get the answer and let you know. Sorry, Peter has just handed me this and I will give you this evidence now. "Privately owned nuclear power plants, corresponding to a total installed capacity of 5,000 megawatts, will be commissioned by 2020". That is privately owned in Turkey will be commissioned by 2020 giving about 5,000 megawatts of capacity. "The tender of the first of these two plants is in process and will be finalised by September this year. We believe that UK companies will be particularly well placed to bid for the engineering consultancy side of that and specialised hi-tech equipment". There is a nuclear research centre planned in the north of the country and we will be bidding to help with that. They are going to be building privately owned ones and some of the consultancy work and some of the hi-tech equipment will be opportunities for us. I am sorry I did not say that before. Q293 Mr Bailey: Earlier you alluded to education and we have a situation in Turkey where, as you mentioned, it is a very young population thirsting for education, but ironically the actual number of Turkish students in FE is declining at the moment and it would appear that their preference is in the United States and Germany. When we visited Turkey one of the reasons that was put to us for that was the extra expense for Turkish students coming to this country. The figure I was given, it costs about £3,000 for another EU student to come here to learn but Turkish students have to pay the full whack, considerably more. Is there anything we can do to change this? Lord Jones of Birmingham: Get them to join the European Union I suppose is the answer. Q294 Mr Bailey: But before they join. Lord Jones of Birmingham: I guess one way of doing it is to try and get them treated differently. I am a huge believer in the benefit to the United Kingdom of getting overseas students to come here so that in 20 or 30 years' time when they are back in their countries and at the top of their tree, whatever their tree may be, public realm or media or companies or whatever, we will have a friend to call, will we not, and that has to be a good thing for our country. We make an investment if we make it as easy as possible for these people to come in and get a degree in a British university and that is both facilitation of entry and also the cost. A lot of people, including a lot in the media and, indeed, may I say, some of the Members of your House, will say that they do not understand that aspect, they do not understand the investment side of it for the good of our country, they all think of it as all they are doing is going back to take our education to their country. We have got a bit of a public opinion battle to win and also then, yes, we have got to somehow get the fees down for them. How we can get the fees down, I have not got any bright ideas today. Q295 Mr Bailey: We have certainly seen it in the context of India. Would you possibly recommend extending the EU rate to candidate countries like Turkey, that would provide one rationale, or a preferential rate for Turkey? Lord Jones of Birmingham: I certainly would. I can take that up and I will do so for you. There are one or two areas where Turkey benefit, for instance in airport landing fees and flight tax, they benefit from a European rate and not from an outside EU rate. Could that be extended to this type of operation, why not. Q296 Mr Bailey: Could we look at some sort of mechanism for educational collaboration between the countries, a working group? One idea that was put to us, and I believe it has been floated, is a British university in Turkey. Lord Jones of Birmingham: Yes, I noticed that and I think to get British universities to think of opening up in Istanbul or elsewhere in Turkey would be an excellent idea. When I visit countries, which, as you know, I do nearly every week, I always try and get to see a British university that has opened up to give them encouragement and so I can learn about where it is going well and where it is not. There is not one in Turkey and I think to get one open would be a fabulous advertisement for what we do and, at the same time, would reach out to them. One thing I notice, which concerns me a little bit, is one of the initiatives from the Turkish Government is a state university. One of the great, in fact I would probably say "the" greatest aspect of a British university is its independence and no matter how much we might not like some of the things they do, one thing I know for sure is they are free as they do it and free in their thought and free in their speech and independent of interference. I would hope we would not see state interference if it was state funded. We take that for granted in this country. There is an element of state funding of British universities by the British Government, of course there is, but somehow they are independent of it and it is good to see. We take it for granted, our bit in it, I think in other countries they would do the same. Q297 Mr Bailey: Could you briefly comment on the potential collaboration between the UKTI and the universities and the working group which has been set up? Lord Jones of Birmingham: Yes. From the universities in Britain, I am personally very engaged and very pleased that the working group is up and running. I intend to meet with them before I go in September and I intend to bang their drum when I am over there. In fact, I would quite like to take one or two of them with me, to be honest. Q298 Mr Bailey: How do you think specifically this could help in the context of Turkey? Lord Jones of Birmingham: There are many ways but two I can highlight. One is it would do enormous good for the goodwill between the two countries. Do you remember right at the start of this I talked about how we have got to keep this subject right at the forefront of people's minds all the time, that will help. Secondly, as Turkey gets richer she is going to need to become more productive because she will suffer wage inflation for sure, look at China now. As that happens she has got to have access to a better skilled workforce. That comes out of having totems and emblems of education, skills and training, no better one than having a university in your neighbourhood. I think it will develop a more productive Turkey over the next generation. You would also hope it would mean that one or two British universities would see the opportunity to succeed and make money by being in Turkey. To get that moving, you need one to start with, do you not. Q299 Chairman: One of the issues which so often comes up when we go abroad with the business community in particular is visas. It is always a sensitive issue because obviously we want to be tight on immigration controls but, equally well, there is a need for the business world to move fast and make quick decisions on travel arrangements. Is there anything to be done on the visa question which is worrying the Turks? Lord Jones of Birmingham: The issue rate for the 2007/08 financial year was 93.2%, so we are talking about problems for 6.8% of everybody who applied for one. Q300 Mr Hoyle: Can I say, that sounds good, that statistic, but what it does not tell you is how long people had to wait to actually get them issued. Lord Jones of Birmingham: I know you and I tend to think more alike than we ever thought either of us would because I was about to say that. We handled 79,000 applications in that year. The issue, and I have had experience of this a lot over the last few months, is the speed. More than always it is about, "Can you get involved to speed it up?", not "Can you get them to change their decision?". Lindsay, you are absolutely right, the issue is about getting it speeded up. There will be a significant improvement to that speed issue with the introduction of digital photographing and, of course, digital finger scans. That came in on 6 December 2007 and I hope we are going to see the figures reflect that this coming year. We have got five offices now opening in Turkey to receive applications, not just Ankara and Istanbul but also Bursa, Gaziantep and Izmir, so hopefully that will also help speed it up. We see the speed as an issue. I do not in any way apologise for the 6.8%, I think that is a totally different issue. The treatment of Turkish applications for visas is no different from anywhere else. Q301 Chairman: Can you assure us on that because the TBBC were worried about some of the sensitive personal questions applicants had to answer and they said it is not helpful to trade. Frankly, all I can say is personally I would not want to have to go through that process for entrance to a country. They are the same questions that Turkish applicants are asked as anyone from any other country is asked? Lord Jones of Birmingham: I am quite convinced in my indecision on this. Do I like being asked a question that I get asked by Americans when I go in there, probably not. Does somebody from Japan like getting asked the questions they are asked? Q302 Chairman: You think they are the same questions? You do not think the Turks are singled out on particular questions? Lord Jones of Birmingham: No, the Turks are not singled out, categorically not singled out. Are they intrusive, I think they probably are. Q303 Chairman: It is a general problem. Lord Jones of Birmingham: It is a general point. Although in the long-term I am a huge believer that with business engagement in opening up and trade and investment guaranteed to grow, you are going to get a safer society in the long haul because you are going to get more prosperous people with access to clean water and better health care and better education. That has to be where we have got to take this, but on the way through, every time you engage with another country with commercial intercourse you will have a security issue, period. Do I want a safe society, of course I do. On the way through I acknowledge that it is not an easy part. Q304 Chairman: It is a frustrating subject always looking at the future because we do not know when Turkey is going to join the EU. The earliest possible date is 2014. I think in procedural terms it is likely to be beyond that. Full membership will take a period beyond that because of the inevitable transitional arrangements, particularly for migration of labour, so a full membership is a long way off yet. We are trying to make sure Britain is as well positioned as possible when that day dawns, like this Committee it hopes it will as soon as possible so that the questions are in the present rather than the future. One issue we have not talked about at all so far is Turkey as a gateway to new markets. It struck us that Turkey is, for example, uniquely well placed in relation to Palestine and Israel, which is an unusual combination to get on well with. One of your colleagues, Jim Murphy, was speaking recently at the Wilton Park Conference on Turkey Accession and said, "We should look to Turkey to act as an economic bridge to Central Asia and the Middle East". Do you think Turkish membership means more for Britain than just Turkey? Does it open up other gates as well and other markets? Lord Jones of Birmingham: Yes. Firstly, at a geo-political and globalised level, in five to ten years from now if you drew a line down which you would fold the world it is going to go straight down the Middle East. One of the great weather vanes of where you think intercourse is going to happen in the next 15 years is look at which airlines are buying what type of aircraft and where they are basing their hubs because they are the guys who have to make the judgment calls on where they think the activity is coming. Dubai is the obvious hub that you always hear about but there are many others. The airlines that are buying them are the Asia airlines and the Middle East airlines, and where are they looking to go, eastwards and the Middle East. If you look at some of the purchasing decisions from your Lufthansas and your British Airways lately, they have been looking at the Atlantic almost as short haul, not quite, but very much, not where it used to be when we were kids which was the big adventure west. The first thing to say is Turkey will be placed on that line. If you look at that line where you would fold the world, Turkey would be there or thereabouts, so she has a role to play in being the European Union's most eastern hub, that is the first thing, in poll position to exploit where that fold in the world will be. Secondly, if you look at her geographically from an energy point of view, everybody talks about climate change as being the enormous challenge of the 21st century, of course it is, but where we get our energy from is going to be as important, whether it is nuclear, whether it is sustainable or whether it is fossil fuel. Wherever it is going to come from, we need our friends in and around the places where you will find fossil fuel. Turkey is absolutely in the place for Central Asia and also for the Middle East. She is secular, moderate Muslim. That has to be a place where we want to engage if we, as democratic nations in the European Union, believe in them having the freedom of worship in a moderate tolerant way and we having the same. Again, that will give them great leverage in a changed century. As you rightly said, if you look down at Palestine to Israel to the Gulf and then if you look up to the emerging and enormous power of Russia from a wealth point of view in the next 50 years, Turkey is in and around there as well. I think she is strategically placed for a British business in different sectors to get in there, use it as a platform to exploit everything I have just talked about, but I think from a geo-political point of view, if you were a government in the European Union you would be thinking, "I need some friends in that part of the world to lever off in various ways", all of which will help business in the long run because it will all lead to a more stable predictable environment, which is what business needs and for all of that Turkey is in poll position and, as a European Union, we would be so foolish to ignore that opportunity. Q305 Chairman: I would like to ask you a question on what we could learn from Turkey, particularly on compulsory membership of chambers of commerce, but your train summons you! Lord Jones of Birmingham: I will end with this, Chairman. TUSIAD were good friends of the CBI and they came to Britain often, we went there often, and it really did annoy me that, rightly in a competitive economy, I had to go out every day and justify membership with my organisation and they just used to say, "Well, you're a business, you've got to join". I did envy them that, that is for sure. Chairman: I envy your trip to Liverpool, the city of culture. Thank you very much indeed. |