UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 199-iiHouse of COMMONSMINUTES OF EVIDENCETAKEN BEFOREBUSINESS & ENTERPRISE COMMITTEE
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Transcribed by the Official Shorthand Writers to the Houses of Parliament: W B Gurney & Sons LLP, Hope House, Telephone Number: 020 7233 1935
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Oral Evidence
Taken before the Business & Enterprise Committee
on
Members present
Peter Luff, in the Chair
Mr Adrian Bailey
Mr Michael Clapham
Miss Julie Kirkbride
Mr Mark Oaten
Lembit Öpik
Mr Anthony Wright
________________
Witnesses:
Lord Davies of Abersoch
Q172 Chairman: Welcome to this second evidence session for our inquiry into exporting out of recession. We are very grateful to have you, Lord Davies, before us for the first time. I think we have Lords minister left in the team before we have got the full set, but I am very grateful to you. I am also very grateful to you, Gareth, for coming. When Gareth Thomas heard about this evidence session he asked if he could come, which is a very healthy sign which we are very grateful for, thank you, and we all appreciate that because there are some issues about the overlap we are very anxious to explore. Having said that welcome, could I just ask the team to introduce themselves.
Ms Durkin: Claire Durkin. I am Head of both BIS and DFID trading development policy.
Sir Andrew Cahn: I am Andrew Cahn. I am Chief Executive of
Mr Crawford: I am Patrick Crawford, Chief Executive of the Export Credit Guarantee Department.
Q173 Chairman: Thank you. My first question has to go to Gareth Thomas but, Lord Davies, please chip in as well as you want to. At a previous reshuffle-not the one we have just had but the one before - much was made of the fact that trade policy and trade issues would now be the shared responsibility with DfID; and until this last reshuffle Gareth Thomas was a minister in both departments. Now you are back again "just" being a minister in DfID and no longer shared. Does this suggest the Government has had a rethink about the relationship between trade policy and international development questions?
Mr Thomas: I do not think it does. As Peter Mandelson explained to the Committee
last week, I think it reflects some of the broader issues about the nature of
the reshuffle. The Trade Policy Unit is
still very much a joint department across the two government departments. Claire Durkin in that sense straddles both
departments. Before the Trade Policy
Unit was created there were a number of ministers who had responsibility for
trade policy work. I think I have had
responsibility for trade policy in one shape or form for the six years I have
been a minister. I do not see a
fundamental change. Mervyn and I have
already met; we are clear where each of us and where each department will lead
in terms of trade and trade policy questions; but I think we will take a
broadly pragmatic approach. Both of us
have a longstanding interest in development.
Both of us have worked with
Q174 Chairman: Speaking personally, I still have reservations about having large numbers of ministers in the Lords. This Committee has some sympathy for the idea the trade promotion minister in particular should be in the Lords for reasons we will probably explore later. One of the advantages for me of the old arrangement was that when we had Question Time for the department before the House Gareth Thomas could come and answer for trade questions on the floor of the House with an authority. We have lost a lead trade minister now; he is just in the Lords now. Who is going to answer the trade policy questions on the floor of the House of Commons?
Mr Thomas: With respect, there have been a number of departments at one stage or another on which trade questions have come up. Treasury questions have seen trade issues raised; business questions have seen trade questions raised; DfID questions have seen trade questions raised; and PMQs too. Essentially ministers from each of those departments will have to answer trade questions at different points in time. That was true of the old regime, just as it was true of the regime before that.
Q175 Chairman: Up to a point. Lord Davies, you have the over-arching responsibility here: we do not have a quid pro quo in the Commons so that we can interrogate these very important questions.
Lord Davies of Abersoch: I think some of the trade issues naturally fall into the business area, so they will be for me; and others, to do with developing markets, fall into Gareth's. It will require us to work together as a team. I think having two ministers is an advantage, not a disadvantage. I think we have a common goal, which is getting Doha Agreement and getting open markets.
Q176 Chairman: We will talk about those as issues later on.
Mr Thomas: Chairman, if I could just add. I think at the very first development questions I had to appear at as a minister I was asked a fairly complex question about the difference between the amber box, the green box and the blue box by the then chair of the International Development select committee. I raise it in a sense to demonstrate the point that both of us have just made, that questions on trade policy come up at a series of Question Times.
Q177 Chairman: Who will answer on trade question at Business, Innovation and Skills Question Time on trade matters?
Lord Davies of Abersoch: In the House of Lords I will, and in the House of Commons Gareth.
Q178 Chairman: He cannot; he is not a minister in the right department.
Lord Davies of Abersoch: I am sorry, on trade policy I thought you said.
Q179 Chairman: On trade policy. Questions about UKTI and so on, that we ask at business innovation skills questions, who will answer in the Commons?
Lord Davies of Abersoch: Ian Lucas has been covering a number of the business issues in the House of Commons. Pat McFadden as the equivalent of Peter Mandelson is covering all of the department's issues in the House of Commons.
Q180 Chairman: He is a busy man. We are used to having a Trade Minister in the Commons. Gareth Thomas was that man but we seem to have lost something in this new arrangement?
Lord Davies of Abersoch: I think we have to be careful here. I think in trade generally it is not just trade policy and a wider issue of trade promotion; I think it is important as Trade Minister that I am involved in trade policy as well as trade promotion.
Q181 Chairman: Your predecessor took a different view, of course!
Lord Davies of Abersoch: I know. I think it is important also that we realise how complex the issues are as regards developing markets; that is why a partnership with Gareth is very important.
Mr Thomas: I am touched by the sense of loss you feel of me at questions!
Q182 Chairman: It is genuine!
Mr Thomas: In a sense the area of trade policy has gained
two ministers with a longstanding interest in trade policy questions. It is certainly true that Digby did some of
the work in terms of having conversations with a number of key ministers where
he was pushing the trade promotion agenda as well. I am sure if needs be from time to time, if I
am in a particular country where there are UK interests to argue then I will
happily do that at that time if that is what is necessary.
Q183 Chairman: How are you going to ensure effective communication across three departments? Claire Durkin may be partly the answer to that question. I have heard criticism made of UKTI, for example, not criticism of the organisation but of the reporting structures it has, that it has two masters; now trade policy has three masters - without the commonality of the minister there used to be - Foreign Office, BIS and DfID; and also a whole host of other government departments too are often touched by trade policy. Are we going to get proper joined-up government communication?
Mr Thomas: On trade policy there continues to be a Cabinet committee that when necessary can meet to resolve trade policy questions. I have no doubt that, as hopefully the Doha Round gathers further momentum, there will be a need for that trade policy and that trade committee to meet. We have a joint Trade Policy Unit; it is partly Claire's responsibility to ensure that coordination at official level across government. In the end, as you will have seen from the statement on the G8 yesterday, on the biggest trade policy issue of all, the Doha Round, the Prime Minister takes a very close personal interest; and he will, through the Number 10 machinery, help to continue to ensure joined-up government operations on this.
Lord Davies of Abersoch: I think another example of coordinated effort really is in the last few days we have got leading corporations involved in Africa coming together, together with the Foreign Office, with Gareth, with myself, looking at trade with Africa; and I think huge advantage in having all of the departments involved and all ministers involved, and a great attendance from the corporate sector, and we have got full attendance from the ministerial groups; so I think we have to work as a team.
Q184 Chairman: Can I ask you about the question of the split loyalty of UKTI reporting to two departments. Does that pose any challenges or do you think it is inevitable?
Lord Davies of Abersoch: Obviously a lot of people have asked me-I am six months into government-as to whether it is a plus or a minus. I think that if you are the trade minister you work very closely with the ambassadors; you work very closely with the Foreign Secretary, and with Peter Ricketts; so I think it is a huge advantage because, at the end of the day, UKTI has its own organisation but we also have the ambassadors. We need to work as a team and I think it is a huge advantage reporting to both.
Sir Andrew Cahn: If you go back to 1999, Sir Richard Wilson did his report and recommended this dual structure. I think at the time some people thought it was a bit of a fudge but actually in practice it has worked extremely well. What it gives us is we are plugged into the Foreign Office network and it focuses the Foreign Office's mind on commercial componency, on trade promotion in a way that perhaps it was not focussed before. I think it has brought the Foreign Office very much into the field and made them committed to it. Yet we also have for the Trade Department a full commitment, and we have the home perspective. Actually the coordination would say, "Having a single minister, currently Lord Davies who straddles the two departments, means we get good coordination". I have looked at lots of examples around the world and lots of countries do it in different ways; I think ours stands up to scrutiny and compares with the best.
Q185 Chairman: We should thank you publicly for your stewardship of the Department as Acting Permanent Secretary for a while as well; for how many months?
Sir Andrew Cahn: Two-very short!
Q186 Miss Kirkbride: You said you were going to be responsible for trade policy as well as trade promotion. Bearing in mind that that is an EU competence and that we have an EU Commissioner in charge of trade policy, I was wondering what influence you would bring to bear on that issue?
Lord Davies of
Abersoch: One of the changes I think is
happening in governments around the world, and is certainly happening here, is
that we do need on matters of trade and business generally people with
expertise who have had international experience of trade, as I have, to be
inserted and injected into government. I
think that experience of living in Asia and working with governments across the
world will be a strength; and it enables me and Gareth to work closely together
and obviously liaise with the EU, and obviously also start pushing even more
aggressively the argument for open market and
Mr Thomas: Perhaps Miss Kirkbride I could add, we have in terms of the EU drawn up a wish list in terms of priorities for trade policy negotiations in terms of free trade agreements with a number of allies in the EU, and are obviously seeking to influence the Commission, not only the Trade Commissioner whom both of us have had conversations with, but also the presidency and other Member States. We do not simply sit back and in a sense allow the EU to do trade to us; as Mervyn as alluded to, we seek to actively go out and persuade the EU to take the line that we take; we seek to explain British business concerns; we seek to explain the development concerns that we have about particular trade policy questions, and encourage the Commission as far as we can do to pursue the UK interest.
Miss Kirkbride: How much of your time do you think you will be giving to trade promotion, because obviously your predecessor gave it a great amount of time?
Chairman: Not too much on that, please.
Q187 Miss
Kirkbride: In your written submission
the Committee notes that one of the new support measures for business is a
series of ministerial meetings to identify policies that might affect
Lord Davies of
Abersoch: I think inevitably my role is
making sure that I have got the pulse of UK corporates, SMEs and large
corporations; so I have got to travel across the UK, which I have been doing;
and working with the regional ministers, working with the department and making
sure that I truly understand what is going on, in the SME sector
particularly. An example of that is we have
had probably about 300 small businesses into 10 Downing Street for a discussion
in the last two weeks, entrepreneurs and exporters, understanding what their
issues are and what their concerns are.
Additionally, I have done 17 overseas visits to 14 countries since I
took the job; so it is a blend of international travel and really helping exporters
and attracting inward investors; and at the same time travelling across the
Q188 Miss Kirkbride: From your meetings with SMEs and everything else, is there anything in particular that has arisen which you think we could be doing better? Bearing in mind the Government's policy to try and trade our way out of our present economic difficulties, what is it we are going to do better and more of in the future to make matters better than they are now?
Lord Davies of
Abersoch: I think the whole series of
initiatives we put in place - and I will not go through the list but they have
been extensive - which are about giving real help now to consumers and
businesses. I think there are still some
challenges out there. The banks have
been stabilised and have got lending targets.
The challenges I think now are that we have got a global recession going
on; we have got challenges in so many different markets; on the other hand,
there are pockets of real growth in the world and we have got to make sure we
are helping businesses get that export market.
I think through a whole series of measures in UKTI, but also
governmental initiatives, we have helped business. I think there are still some challenges out
there, trade credit being of the big ones, seed corn capital for young business
- and that is why the Science Innovation Fund, which was launched last week, is
a good move - but basically we have still got some challenges out there. I think what we are doing is putting a series
of government initiatives but also working very closely with the RDAs. I had dinner with the RDAs last week, all of
them in
Q189 Miss Kirkbride: There is one issue I would like to take up with you which a constituent drew to my attention last night. It is quite complicated so I will not go into it now, but he has an SME and he is having real trouble getting his goods shipped. The particular line he was upset with was the Maersk line but he said it was a wider issue of SMEs not getting access to containerised shipping at the times they want, whereas the big boys of course with the bulk contracts had got this all sorted out; but for him the lack of flexibility and some specific issues with regard to the way we operate shipping policy, versus the way other people do, was causing his business real difficulties in that he could not ship his goods on time. Have you had this raised with you at all?
Lord Davies of Abersoch: I have not but the best thing is for them to write to me and I will take that up.
Q190 Miss Kirkbride: I certainly will
Lord Davies of Abersoch: I think the most common issues for SMEs-and, as I have said, I have met hundreds of them in the last few weeks-is around trade credit, short-term insurance and I think it is also about confidence. We need exporters and small businesses to have the confidence to reach out to international markets. I think that is very much part of the promotion we are doing in UKTI. I will take that up if they write in.
Q191 Miss Kirkbride: I am sure those issues are true, but if it gets down to a simple level of not being about to book your space on the ship -----
Lord Davies of Abersoch: Claire might have a response, but with that particular one if they write to me I will take it up.
Q192 Miss Kirkbride: I just wondered whether Claire or Sir Andrew had come across this, and you are aware of other people being concerned about this access?
Ms Durkin: I am very interested in this, if I may say so, Chairman. We are preparing for the pre-Budget Report a study on doing business with the borders, where the spirit is that we have an action plan to make sure it is a lot easier for us practically to do real business at our borders so we are as competitive as anyone else in the world. We have been out to consultation and the reason I am very interested is that we have not had this raised, and it is obviously a very real issue. If you could send it in I promise we will explore it at the different ports to compare performance and see if there is something concrete we can actually do.
Miss Kirkbride: I certainly will. You will get it later this afternoon!
Q193 Chairman: Could I just push you on one issue here to do with trade promotion. In UKTI's submission dated 28 April paragraph 6.20 talks of the meetings you are going to have, Lord Davies, or are having with ministerial colleagues across government "to raise the specific concerns of international and UK-based businesses where current or proposed regulation and/or legislation will have a potentially detrimental impact on UK competitiveness as a place to invest in ...". I entirely agree with that and welcome that initiative. "It is vital", the note says, "that ministers and policymakers ... understand the potential impact of proposed policy changes on businesses' ability to compete in global markets". The spirit of that I can only say is absolutely right. Can you give me an example if any specific outcomes of those meetings identified particular problems?
Lord Davies of Abersoch: I am a member of the National Economic Council, the NEC, which is meeting at least once a week really and it takes problems, and a good one is visas which has been very topical recently. A lot of businesses have raised that as an issue, so I have taken that up and had a meeting with Phil Woolas and just pushed it with the Home Office, so we are looking at that. I will not go into the whole list but there are a series of matters that are raised and either I would go and talk to the ministers involved, or I would go and raise it at the NEC. Issues to do with export help; issues to do with banks; there is a whole series of issues that get raised at the NEC and individually with ministers; visas has been the most recent one.
Q194 Chairman: We will want to return to the visa question a little bit later on, in one specific context.
Mr Thomas: Chairman, I wonder if I could take you back to the border trade policy issue and give you another example to back up what Mervyn said, and that is: increasingly the relationship between developed countries, in terms of increasing market access, is about trying to reduce non-tariff barriers; so trying to get agreement on the type of regulation, the standards that British business or European business has to adhere to, to be accepted in other markets. For example, in the US or in Japan, say, accountancy standards that UK accountants have to adhere to we would want accepted in the US; and that standards that lawyers have to adhere to we would also want to have accepted both in the US and Japan. Through the European Union's transatlantic economic dialogue with the US-a bit of jargon for which I apologise-we have made progress in terms of accountancy standards; and through similar dialogues we have made progress on access to lawyers into Japanese markets. I would not want to overstate the level of that additional access we have secured, but it is that type of regulatory discussion with developed countries which we want to continue developing.
Q195 Chairman: I understand that, but the implication of your evidence was that it was barriers that were erected by the British Government accidentally to export activity, like aspects of visa regime?
Lord Davies of Abersoch: We have got to constantly be aware of any legislation we bring in that we are not putting more and more obstacles in the way of business. That is why I work very closely with the Better Regulation Executive; and that is why-particularly with the burden for SMEs-we have to make sure it is not too heavy. On the other hand, we have got to introduce certain laws, so it is making sure that the balance is right. I think at the moment there is a good dialogue on regulation with the Better Regulation Executive.
Q196 Mr
Bailey: This issue of trade
promotion, I am a fairly simple soul and we have had discussion on trade policy
and trade promotion. In my own innocent
way I would have assumed that trade policy was trade promotion, banging the
drum for
Lord Davies of
Abersoch: I think at the world level,
the architecture for the world, the discussions on climate change, financial
architecture and trade, we need the world to come together and have an
agreement on open markets and the Doha Agreement. As far as I am concerned-I am also a simple
person - I think that is very, very important for continuing to take people out
of poverty and for global growth. We are
in a competitive marketplace so separately the
Sir Andrew Cahn: I think the simplest way of distinguishing the
two is that trade policy is creating the conditions within which trade
happens. Countries negotiate, the
European Union negotiates and
Q197 Mr
Bailey: I think that is quite a
helpful clarification. Lord Jones
previously saw his role very much, as he said himself, banging the drum for
Lord Davies of
Abersoch: No, not really. I think Lord Digby had his own view on
this. I am six months in and, as I
said earlier, I have travelled extensively in the
Q198 Mr Bailey: I want to deal with Business Ambassadors in a moment, but if I could just pursue this line of inquiry a little more. Obviously as a member of the Upper Chamber you do not have, if you like, the day-to-day accountability to electors which is incredibly time-consuming.
Lord Davies of Abersoch: I feel that I do!
Q199 Mr
Bailey: Maybe! Do you feel that the role of trade promotion
is more easily done by a member of the Upper Chamber because there are fewer
Lord Davies of
Abersoch: I will get Gareth to add to
that. My experience is that we do not
just need one ex-business person doing this role; we need business ambassadors. We also need the CBI; we need the
Q200 Mr Bailey: I believe, like this Committee, you made a recent trip to the UAE?
Lord Davies of Abersoch: Yes.
Q201 Mr
Bailey: Could you give us some sort of
feedback on how you felt you were successful in promoting trade there? Did you have any problems by virtue of the
fact that you had an anchor in
Lord Davies of Abersoch: I think exports to the Gulf increased 25% last
year. There is no doubt with the Gulf
generally - I have spent many years going to the Middle East-there are huge
opportunities for the
Q202 Mr Wright: On the UAE you describe it as one of the exciting markets that there is, but there is a lack of awareness out there. How are you going to respond to the lack of awareness that there is with businesses about the opportunities in the UAE?
Lord Davies of
Abersoch: You say there is "a lack of
awareness", I think it is growing.
I think what we need to do is-
Sir Andrew Cahn: Perhaps I may simply add that we have added
significant numbers of staff in UAE, in
Lord Davies of Abersoch: I think there are about a thousand British companies that are doing business very successfully in the Gulf. I think my other focus, and the focus of UKTI, and the Business Ambassadors, has got to be continuing the relationship so we attract foreign direct investment into the UK-a big opportunity for us.
Q203 Mr Bailey: Before I go on to Business Ambassadors, on the trip that the select committee made it was put to us, and fairly strongly I think, that there was perhaps a feeling that in the past the British government had not really cultivated its relations with the Middle East as it might have done; and that the one thing that you could do which was of huge benefit in making both the UAE and Saudi Arabia feel important and engaged with the country was for a prime ministerial visit, or at least the most senior minister. No disrespect to yourself, whom I reckon has unparalleled experience at this, how do you see your role in encouraging the Prime Minister and Lord Mandelson to carry out this role? What is your assessment of the added value it would give to the work that you are doing?
Lord Davies of
Abersoch: I think it is a great
point. There is no doubt that the
prime ministerial visits are very important, and obviously the Prime
Minister has visited the region in the last few months and Lord Mandelson has
visited. We need a continuous stream of
ministerial visits and the more senior the better. I am working with Number 10 on a series of
things to do with the
Mr Thomas: Mr Bailey, one of the other things we can do
in terms of encouraging British business to have confidence to invest in the
Middle East is through the negotiation of investment, promotion and protection
agreements, which help to give confidence to British investors that their
capital investment in other countries will have a higher level of protection
than if the agreement is not there. The
Q204 Chairman: Before we move on, could I just come in on that point briefly. This is one of the old chestnuts - the Committee travels around different countries and we talk to ambassadors and high commissioners and representatives of the British business community and they say, "A British Prime Minister", not just this one but the generic British Prime Minister, "cannot make as many visits to markets as the French President or the German Chancellor, because they are tied up in the day-to-day business of the Commons; and we have a huge competitive disadvantage", they say, "because the effective head of state", the head of government in our case, "cannot commit the time to trade promotion that other countries, our competitors can". Do you feel that is the scale of disadvantage that the British business community, and the Foreign Office, seems to believe it is?
Lord Davies of Abersoch: I am not going to recommend a constitutional reform! The Prime Minister is visiting extensively.
Q205 Chairman: He is very constrained. He went to
Lord Davies of Abersoch: I think he is travelling extensively. I think everybody needs to do it. I think the Duke of York's role is understated. I think he does fantastic things for business. I know he has got his critics in the media, but if you saw the letters that I get from businesses on the work that he does, he does a great job for British business. I think it is not just the Prime Minister; I think it is a collection of individuals, including the Foreign Secretary; but I would also say with the ambassadors themselves their role has changed over the last few years, and they have become hugely important for us as ambassadors, not just on foreign policy but on business.
Q206 Chairman: What we have also heard is that it is very
important that people who are seen to have the ear of the Prime Minister travel. In the Gulf we had a lot of praise for you,
Lord Davies, personally because you have a high reputation in the Gulf, you are
known historically in that region and they felt you were the next best thing -
even better probably! In
Lord Davies of Abersoch: Yes, we need leaders in every industry, as we said earlier on, to help us.
Q207 Chairman: Competitors do that too.
Lord Davies of Abersoch: I think it is not just the Duke of York, the Prime Minister, the Foreign Secretary or other ministers; you have seen Ed Miliband doing a series of visits on renewables and pushing the whole agenda, very much business related.
Q208 Chairman: The CII, the Confederation of Indian Industry, were here recently and they made their usual complaint that senior leaders of British business were not prepared to make the time to meet them; they met at a junior level of the organisation not a senior level, and there is a lack of engagement in the British business sector in doing this high level stuff.
Lord Davies of
Abersoch: We received them; I saw the
FICC; I am off to
Q209 Chairman: I want to talk about the principle, the level of engagement. You are saying British business must do its bit?
Lord Davies of
Abersoch: We need British business to
be more engaged on cross-border trade with
Q210 Mr Oaten: The point about the Duke of York and the Royal Family is very well made - incredible assets which many other of our competitors do not have. I wondered to what extent you work with them, you brief them, and to what extent you actually demand of the Royal Family get involved? How close is the coordination you have with them on this? Are there a set of individuals out there that you would like to get involved in helping to go and sell the UK; and do you practically go out and seek them and try and get them on board for this?
Lord Davies of
Abersoch: Basically, on
Sir Andrew Cahn: We agree before the year starts a budget with the Duke's household. We discuss with him in great detail what trips he should make; we agree them. I am a member of the Royal Visits Committee which agrees the programme of visits overseas for the Duke of York; and we are now in discussions with the Duke of York's office about how to evaluate what he does.
Q211 Mr Oaten: This is part-funded then?
Sir Andrew Cahn: We fund it. We do not fund his air travel; we fund the other parts of the visit. The Duke of York also does some visits on behalf of the Foreign Office which we do not fund; those are non-trade related. His trade promotion visits we fund; we task; we evaluate. We work very closely with the Duke's office.
Chairman: I would also pay my own tribute to the Duke's work as well.
Q212 Mr Bailey: You have several times mentioned in a complimentary vein the British Ambassador's Network launched in October last year. Could you briefly summarise just the initiatives it has taken so far, where it has been to and what it has done?
Lord Davies of Abersoch: Inevitably these are busy individuals who have their own careers and jobs et cetera - 18 of them. I think generally we have got a couple of people who work on helping them in UKTI. We were having a discussion about it with the executive team of UKTI yesterday. We are talking to business and academic individuals who have got a wide range of experience, and what we try and get them to do, and there are great examples, is give talks and promote business. I think that individuals like Paul Skinner, Malcolm Grant and Terence Conran have done a great job in selling the story. As always, as with all things, we are learning as we go along. It has been going some time; they have done over 40 engagements in 15 countries, but I need more from them: and if that is reported and that becomes the headline out of this that is great; because we need them to do more to help us; because the more the merrier really. It is working well and we are learning many lessons as we go along.
Q213 Mr Bailey: I am interested in looking at the individuals involved. Obviously business and education are highly represented there. When we were in the UAE we were told there were huge opportunities in education, which is obviously served through this network, but also health. I would not pretend to know the individual competences of all the members there, but it would seem to me on looking at them that we are light in terms of the health service and, if you like, the health sector in general. Given the potential for developing health services throughout the world, do you not feel that is an issue that might be addressed?
Lord Davies of Abersoch: I absolutely agree. I think with health, the NHS, we have got outstanding excellence and innovation that Paul Drayson and Lord Darzi were talking about at a launch yesterday. I think there is more that we can do to work with the NHS. I was one of the keynote speakers with Lord Darzi at the NHS Forum that was held recently, which had about 5,000 attendees; so I think we need to export that excellence and I think there is more that we can do. I think the same is true on education. I think we are doing a good job. I met with David Greenaway, the new Vice-Chancellor of Nottingham University, about ten days ago to look at creative ways that we can do more on education. The reality is, however, it is already a big export for us.
Q214 Chairman: I want to return to that in more detail later on.
Lord Davies of Abersoch: There is more that we can do but there are two sectors and they are important; we are giving them priority in UKTI; and I think we have got marketing strategies for various aspects; so we have a life sciences, marketing strategy; and I think we really do need to sell our NHS capability more.
Q215 Mr Bailey: I would just finish by emphasising that point, because I do feel that in education the Ambassadors Network does reflect the importance of this and the progress that we are making on it. I am not sure that it reflects the potential that there is within the Health Service and the providers' industry that we have here.
Lord Davies of
Abersoch: I agree; I think we should
look at it. I chair a university in
North Wales,
Chairman: I do emphasise
Q216 Mr
Wright: On UKTI, when we had Lord
Jones before us he made a very good case for more resources that were needed
for UKTI. The 2009 Budget announced that
there was £10 million of the £750 million strategic Investment Fund
particularly earmarked for UKTI to spend on promoting
Lord Davies of Abersoch: It is always a bonus on discovering you are getting more money. It does not happen very often, I am told, so I took that as a welcome sign that everybody realised the strategic importance of UKTI. Let me reassure you that the £10 million will be very, very carefully spent. Andrew can give you a bit more detail. Clearly for some high value events we have allocated already some money towards those high value events and Andrew can talk about those in more detail. I think that is one aspect. I think what we do not want to do is spend the money on extra staff. I think it is much more important that we go for high value events and initiatives.
Sir Andrew Cahn: We were given £10 million and that certainly
was extremely welcome, and we took it as a sign of confidence in UKTI, but it
is only for two years: it is
£5 million this financial year and £5 million for next financial
year. The first thing we wanted to
ensure was that we did not set up a scheme which would fall off a cliff in two
years' time. We tried to find activities
which will have a real impact on British exporters and inward investors during
the recession and as we come out of it, but which we can stop in two years'
time. That is why we are promoting
particular events. One example is we
believe one of the sectors where
Q217 Mr
Wright: I am pleased with that last
question because just recently I had the pleasure to open an extension of a
local business which is exporting across the world at which the eastern region
and UKTI representatives were there. One
of the things that came out of that was the fact that your representatives were
saying those businesses did not understand UKTI and did not know that they
existed. From that particular point of
view, I am hosting a business breakfast later this year with the assistance of
UKTI about exporting our way out of recession so local businesses, SMEs,
understand it. That is a problem in
itself. Whilst I understand that this
money is going out to promote so people can visit trade shows et cetera and so
forth as they have done in the past, is not the job as well of UKTI to actually
get out there into those localities to explain to the small businesses, who are
not aware of the opportunities abroad, to actually go forward? I understand, Lord Davies, you cannot
visit every corner of the
Lord Davies of
Abersoch: I do not think we should be
defensive about this at all; it is a hugely difficult task to cover over four
million SMEs, whether you are an RDA or UKTI.
I think there is closer and closer partnership, which was evidenced
at the dinner the other night in
Q218 Mr Wright: Do you then consider that the RDAs should be the vehicle to give more promotion? In terms of how the UKTI's ability can go there, whose responsibility would that be?
Lord Davies of Abersoch: UKTI has to bring the international markets to the corporate sector. At the end of the day we also have to work in partnership with the RDAs.
Q219 Mr Wright: Can you just explain to us what the Fiscal Compass Programme is and what it has accomplished since it was launched?
Lord Davies of Abersoch: It is basically an attempt to give corporates access to the spending programmes. Governments across the world are spending huge amounts in the fiscal stimulus. I think we have had over 200 enquiries from companies that want advice and access to some of the fiscal stimulus programmes around the world. Launched in March; early days; but so far so good. I think the target is to get about a thousand companies by March of next year so, so far, encouraging.
Q220 Mr Wright: Where would you consider the priority markets that we should be concentrating on?
Lord Davies of Abersoch: Inevitably places like China - where I am off to in about ten days, and we have done a huge amount on getting access and really understanding how the Chinese are spending money; the US; markets like Saudi. There are a few of them we have prioritised and are working with those companies.
Q221 Chairman: I get confused - I really do-about UKTI's
country priorities. You just named the
Lord Davies of
Abersoch: I think we categorise 17 high
growth markets. The criteria for those
was market size, potential for growth, political and economic importance and
the strength of their scientific and research base. We match the profiles against our
Q222 Chairman: It is an impossible task. You have got to keep everyone happy. That is the trouble. Everyone wants a different priority from you so they have got priority for us?
Lord Davies of Abersoch: No, I think we are very clear: we have got 17 high growth markets, but at the same time we have got to make sure we do not ignore the big markets that are giving us a huge amount of trade and foreign direct investment today.
Sir Andrew Cahn: We have staff in 98 markets around the world,
and many of them are very small but they provide an essential service to
British companies. We decided on the 17
high growth markets back in 2006 because, as Lord Davies said, we did a pretty
solid piece of modelling and decided those were the key growth markets for the
future; and we transferred staff from other markets round the world to
there. They are priority in the sense
that we put new resource in there.
Q223 Chairman: We are going to go to
Sir Andrew Cahn: No, we have 2,400 staff altogether. We have 1,400 staff overseas, and we have
about 700 staff in headquarters; we have about
Q224 Chairman: We are not going to ask you about defence and
security because that seems to be going very well. So we are not going to ask you questions
about that but we should touch wood indeed, Lord Davies! We were very grateful to the response to our
letter about
Lord Davies of Abersoch: It is interesting and we are chuckling because I asked the very same question yesterday with the execs. What has charging done; is it adding enough? The reality is that the response has been very robust from everybody within UKTI. It has helped make it more of a performance culture; it has helped people realise the cost of what they are producing. We had a very robust debate yesterday, and I think that the team believe that this is not the time to increase charges and put a burden on corporates; but we are producing, what, £3 million or £4 million of revenue and I know it is a small amount but it has had a profound impact on the culture and made people realise the value of their services. The team is very keen to maintain it.
Q225 Chairman: I think you are being told what they think you want to hear. I do not think you are being told the truth.
Lord Davies of Abersoch: No, it is the other way round.
Q226 Chairman: We have talked to UKTI staff on the ground and
they complain time and time again about the deskbound nature of their jobs
because of the OMIS report system and they wish they did not have to do
it. They said it could be subcontracted
to people elsewhere in the market who could do the job just as well, and they
are not providing the added value for
Lord Davies of Abersoch: Look, I think in any business, any walk of life, you have got to have accountability; you have got to have clear reporting. What I have found in six months in UKTI is that there are very clear performance guidelines, very clear reporting. Yes, we can always improve the paperwork around the reporting; but I think UKTI is producing great value-£16 for every £1 invested; I think the staff do a great job.
Q227 Chairman: Agreed.
Lord Davies of Abersoch: So I think the charging has improved the performance culture.
Q228 Chairman: I think this is something I want to challenge you on quite firmly; because I am quite clear your staff privately do not think that. The OMIS reports in particular are an extraordinary burden on them,
Sir Andrew Cahn: The OMIS reports are highly valued by our customers. They add great value to British exporting. I heard you say that it could be done by the private sector. In many posts overseas there is nobody else to do this work. What the OMIS report is built upon is exactly the networking and the knowledge of the local markets that our local staff have.
Q229 Chairman: We heard that OMIS reports were locking people at their desks and stopping them develop the local knowledge and networking so essential to inform them.
Sir Andrew Cahn: I would argue that is overstated. However, I was trying to offer you one crumb of comfort, which is that we do have one different model which we are using in China, where we use the China-Britain Business Council as a contractor; they do much of this work and the idea is indeed to leave our own staff free to do more government to government work, networking and so on. That is an interesting experiment; it has proved quite successful; and we will see how far we can move. I think in most markets it really is not possible to set up an organisation like the CBBC to do it; and there are not private sector contractors on the ground.
Lord Davies of Abersoch: Hopefully, every time you visit somewhere and you get that sort of feedback you will give it to me and I will have a look at it.
Chairman: Sometimes they tell us things they do not want attributed, of course, that is the trouble!
Q230 Mr
Oaten: I do want to talk about the
RDAs which you have mentioned quite a few times this morning as having a key
role in the whole process. You also keep
talking about banging the drum for the
Lord Davies of Abersoch: I think on international promotion that is UKTI's job. Trade promotion that is what we do. I think a while ago there was a danger that the RDAs might have duplicated what we had and started opening offices everywhere. I think the Arthur D. Little report was very clear that that was not happening; that they were coordinated. So I think our role in trade promotion is very clear. When I had just arrived into the job one of the first questions I had is: is the competition between the RDAs somehow devaluing the proposition for inward investors? I do not think it is. I think they have to be careful - a bit of competition between the regions I think is healthy, providing they overall come together and are coordinated, and I think that is happening more and more. I think inevitably there is a bit of competition but, as I said, I think that is healthy.
Q231 Mr
Oaten: Do you really want that
competition played out in public in a conference in the middle of
Lord Davies of Abersoch: No. I will give you a good example of how we are addressing that. On China I wanted, together with the team, to make sure that we really brought everyone together and so I called a meeting of the CBI, the Institute of Directors, trade associations, the RDAs, got them all in a room and agreed a clear strategy for China and how we are going to tackle that market. I think in certain key markets we do need to bring the RDAs together; but it is not just the RDAs; it is the Chambers of Commerce; it is the CBI; because the danger is that everybody does something slightly different. In that regard I think one of my challenges, one of the Department's challenges, is to really bring together information about the depth and diversity of the British economy, so that every ambassador, every MP and every business person has got that level of data. We are putting that together as we speak. I think we are getting better on co-ordination and on the key markets we are bringing everyone together.
Q232 Mark
Oaten: Would there come a point where you would
intervene and say to two or three RDAs, "Listen, you are not welcome. We do not want three of you there. You have to decide that maybe this is a
country where the
Lord Davies of Abersoch: On international activity I think they tend to work it out and have a good working relationship between each other. I do not think there is huge argy-bargy between them.
Q233 Mark Oaten: Are you concerned about the overseas offices issue or do you think that is being tackled?
Lord Davies of Abersoch: No, I think that is being tackled. If that expansion of international offices had carried on in a huge way, duplicating costs, I think that would have been a problem, yes. There is no evidence that that is happening and in fact, when you look at the co-ordination internationally, it is very good.
Q234 Mark Oaten: You mentioned that you have got 1,000 or so staff working in 98 countries, is it, that you are in?
Sir Andrew Cahn: We are in 98 countries, 1,300 staff.
Q235 Mark Oaten: Does that include in that figure those that are also there from the RDAs or is that on top?
Sir Andrew Cahn: No, it does not. The RDA offices, and these are very small offices; it is usually one person or two, and indeed with one person very often a locally engaged person who is doing other things, are, of course, focusing on inward investment. They are not focusing on trade promotion. We do the trade promotion; our staff do that. The overseas offices of the RDAs are there to attract inward investment to their particular region, but in fact the RDAs are looking at these offices now quite critically and I think we will find, very much as Lord Davies said, that it is not that they are expanding; indeed, they are even beginning to contract. The other thing I would say is that, following the Arthur D Little report, we have worked very closely with the RDAs to improve co-ordination because what Little said was that it is not that all the critics are wrong. It is not bad; there is not significant duplication, but they did propose a whole series of changes we could make to improve co-ordination and ensure that there was not duplication in the future. We have done that, we have had some pilot projects with the RDAs. They are completed. We are now doing that elsewhere. I am reasonably confident that we work very closely with the RDAs and we get efficient use of public money.
Lord Davies of Abersoch: And that includes the devolved administrations.
Q236 Mark
Oaten: I was just about to ask. Is there a separate case to be made in
Lord Davies of Abersoch: They do a bit of trade promotion. At the dinner the other night we talked about how do we make sure that we are all together as one and we had a great discussion. What we need to do more of with the RDAs, and I do bang the drum - I am going to sound like Digby now - on this issue, is that we really do need to showcase British success, whether it is life sciences, whether it is healthcare, whether it is pharmaceuticals, creative industries, you name it. We had a great discussion with the RDAs last week about how we bring these success stories together and sell them. I think that is quite a challenge.
Q237 Chairman: I will bring Mark in again in a second on education but before we do that can I just ask one other question on the RDAs? I have heard criticism in the past of regional export trade promotion visits organised by RDAs on a cross-sectoral basis. What I hear from the industry bodies is that the outward missions that work are the ones based on sectors, not regions, which are focused on a particular industry. I think you are making progress again in co-ordinating this but it does seem to me that that is a very strong message that I have heard across a wide range of industry sectors, "Please don't let the RDAs do regional export trade promotion visits". Do you agree with that analysis and, if you do, is the situation getting better?
Lord Davies of
Abersoch: I do; I am a big believer in sectoral
experience and speciality, and we have got that in UKTI. We have sector boards, advisory boards. I meet with them regularly now with the sector
chairmen and in fact all the chairmen together.
I think you need that industry focus and I am taking an ICT, a
technology group, to
Q238 Chairman: But are the RDAs doing the regional promotion now?
Lord Davies of Abersoch: They are doing it more and more as a sectoral approach with us.
Chairman: Just as I have encouraged what you said about the attempt to co-ordinate their overseas activity more generally in answers to Mark Oaten, I am very encouraged by what you have just told me about that too and I think it is very important to keep that process going.
Q239 Mr
Wright: You mentioned, Lord Davies, that you are going
to
Lord Davies of
Abersoch: I am not sure exactly the names of the people
coming with me but I looked at the programme yesterday. UKTI offices will have spoken to the regional
offices about who has got an interest in which business; they would know from
their own database. UKTI obviously has a
huge database of exporters, and we have talked to the CBI. We would work with those sorts of
organisations to make sure that we do it together. It is the other way round as well. The Chinese technology and mobile industry
came over; the minister of technology was over and brought half a dozen
companies two weeks ago. In conjunction
with other ministers and industry groups I hosted a get-together and then they
toured various parts of the
Q240 Mr
Wright: I would be interested to see the list of the
companies that are represented on that and the geographical spread because I
have this theory that invariably, when you do something with the regions, they
will probably go for the easy fix. For
instance, in the eastern region they will probably go to
Lord Davies of
Abersoch: It is a good example. On a visit that I did (I have been to
Q241 Chairman: I have just one other question before Mark comes in about trade promotion, the thorny question of trade fairs, trade shows, exhibitions. Your trade show access programme has increased the number of grants for which an individual company can apply. Has the budget gone up as well?
Sir Andrew Cahn: The budget is the same. What we did was relax the conditions. We had introduced a limit to the number of times a particular company could get a grant, and that was a sensible thing to do because there were some companies who were, if you like, living on grants for years and years, and what we wanted to do was introduce a company to a trade show, help them get there and then help them get on their own feet. We relaxed the conditions because, the external world being tougher and colder, fewer companies were coming forward. We wanted to track more companies and I think we decided that perhaps we had tightened the screw a little bit too much. We listened to what the approved trade organisations, the ATOs, said to us and they argued that conditions should be relaxed, so we did that.
Q242 Chairman: Do you test the effectiveness of participation in trade shows? We have heard criticism again from ambassadors that some British companies sit on the stool and just wait for them to come to them, whereas others research the market, do a good job, go out and meet people, use the excuse of a platform to penetrate a market.
Lord Davies of Abersoch: Absolutely. We have our pin system which evaluates all of our activities, including trade shows. I think trade shows get some pretty good -----
Q243 Chairman: So if a company uses a trade show well they are more likely to get another grant than the company which does a trade show badly?
Lord Davies of Abersoch: No. If a company is eligible it is eligible. It is a good question and I do not think I have a very good answer for you. What we certainly do do is try and follow up on where we see things have not worked properly and try and change things. If a company is eligible for a grant it would be quite difficult to say no, they could not have it. What we might do is try and give them additional advice. For example, when you go to trade shows the key thing is the preparation. Usually you need to get an OMIS - dare I say that from your earlier remarks, but if you get an OMIS at the same time as you go to a trade show and you get potential partners to meet when you are over there then you will find that you get much more out of it. If a company has not done well we will try harder next time to help them do that.
Q244 Chairman: I agree absolutely with that.
Lord Davies of
Abersoch: The other thing I was going to add is that we
are aiming to help over 4,000 businesses participate in shows. What we hear is that the numbers are down; on
the other hand people are more serious about doing business. It is a valid question about whether they are
really doing a good job once they get there.
I had realised the huge value that industry puts on trade shows. That has been a learning for me in the
job. I visited the mobile show in
Chairman: I remember our ambassador in Hungary some years ago when we visited him there said that he was struck by the number of people who complained about the ineffectiveness of trade shows and when he went to check it was they who were being ineffective and using the platform badly. It was not the trade show's fault or UKTI's fault; it was the company's fault. You want to make sure they are not living off grants; they are not the companies you want to be sending to trade shows.
Q245 Mark
Oaten: One sector which we do not talk about a great
deal but has been very successful in winning international business is the
education sector. We have had a quarter
of a million overseas students coming in in recent years. Are you concerned that that is under threat
because of the new immigration points-based system for overseas students coming
into this country, which I hope you are familiar with? If you familiar with it you will understand
that the sector is very concerned. I
declare an interest. I worked for a
lecturer at
Lord Davies of Abersoch: I met with the colleges of further education to discuss this, amongst other things, two weeks ago. In certain cases there are some issues. I have tabled those with the Home Office. I have a meeting coming up on it. I agree with you: nobody should underestimate the importance of education. Foreign students are hugely important to the British economy. I think that is well understood. I hate to do a plug for BIS now but I think there is a huge advantage in having education skills, et cetera, with business, and that is very much one of the conversations that is going on in the department at ministerial level. We have to make sure that we continue to attract foreign students. I am well aware of the issues and where there are issues we are tackling them.
Q246 Mark Oaten: Just to probe you a little bit more, I could not quite understand whether you have had the meeting with the Home Office.
Lord Davies of Abersoch: I have. I am having another one.
Q247 Mark Oaten: Can you give me a flavour of what representations you are making to them about this?
Lord Davies of Abersoch: The flavour has been that there have been a few instances where the processing of the applications has not been up to the standard they would like and we have corrected those. The Home Office are very aware.
Q248 Mark Oaten: It is a little bit more than a processing issue, is it not? As I understand it, they have been asking students to demonstrate that they have got the cash up front and sometimes present the cash up front in advance of a year's worth of study. Does not the fact that they have to be marked and registered and assessed in every single lesson that they take part in to demonstrate that they are genuine students, even though that can involve sometimes 70 lectures and being assessed on every single one of those lectures strike you as being a ridiculous burden?
Sir Andrew Cahn: Perhaps I could come in
here. There is no doubt that the new
points-based system and the various arrangements surrounding it have led early
on to an increased number of rejection of applications by students for
visas. Quite clearly there was a
problem. We have made representations
and Lord Davies has, as he said. I have
also had a number of meetings with the UK Borders Agency, including with Lin
Homer, the Chief Executive, who has been very responsive to the points we have
made. I know also that Lord Mandelson,
who is after all responsible for this area, is making representations at a
higher level. I had yesterday evening a
conversation with our ambassador in
Lord Davies of Abersoch: And we have been very involved in it.
Mark Oaten: I will let it rest at that point but with the responsibility we have in this sector I think we will probably want to check it again.
Q249 Chairman: We will.
Lord Davies of Abersoch: Absolutely.
Q250 Chairman: Can I just add a couple of questions to that? There is no doubt that the USA lost a lot of ground after 9/11 when it closed it borders effectively, and British universities did very well in that period of time to pick up the students who would have gone to the States. We cannot afford messages to go out that we are turning into the States; we just cannot afford it. The damage will already to an extent have been done in markets, but the real test comes in August. That is the high processing time for these applications so I hope your optimism is proved right come August.
Lord Davies of Abersoch: I think it will be.
Q251 Chairman: Can I just put another thought in your mind? The outsourcing of visa operations away from consulate staff into semi-commercial operations often makes it more difficult for ambassadors and high commissioners to intervene if there is a problem with a visa. I think it is a particular problem in some of the far eastern markets and it is also a problem for business travel as well, where a businessman is not getting a visa and the ambassador finds it now more difficult to sort out the dilemma.
Lord Davies of Abersoch: It is not my area of specialism but clearly any comments you have got directly on that I will take away.
Mark Oaten: As long as we revisit it.
Q252 Chairman:
Can I
ask a more general question about education, before I pass on to Tony, on the
opportunities for British universities overseas? When this Committee looked at this, having
come back from
Lord Davies of
Abersoch: You will be aware that Lord Mandelson met with
vice chancellors recently. I think that
was a very good dialogue around some of the issues the universities have
got. There is no doubt that some of the
universities, Nottingham being a good example with Ningbo and one or two others
they have done, have created campuses and have been very successful. There are only a few universities who are
able to do that. On the other hand, we
should make sure, and we are doing, that we have a constant dialogue going on
with the universities. As I said
earlier, I am Chair of one of them. I
think it is hugely important, the international liaison. The reason I met with
Q253 Chairman:
I
think Nottingham's ambitions are very large in
Lord Davies of Abersoch: So are some of the other universities'.
Chairman: There are issues about whether or not they have overreached themselves. I hope that is a misplaced fear.
Q254 Mr
Wright: Can we turn to the subject of
Mr Thomas: I think two things have
significantly shifted the levels of optimism about whether we can conclude the
round. The first was the G20 summit that
took place here in London, where all the countries who were represented signed
up to a clear sense that the Doha deal had to be done, and that momentum was
carried forward into the G8 talks where members of the Committee will have
heard the Prime Minister explaining yesterday that there had been agreement
from all the leaders to seek a conclusion to the round by 2010. The other thing that has also shifted the
levels of optimism is, as you say, the election in
Q255 Mr
Wright: In terms of what you said was the commitment
following the G20 summit, it is fair to say that ever since the round started
in 2001 every international summit has declared exactly the same thing, that
they are going to push ahead. What makes
this so different? Is it the fact that
we have had American elections as well so there may be a change of policy
there? Is it the fact that we have had
the recent European elections and the elections in
Mr Thomas: Certainly you need to look at
the progress that was made in July last year.
Pascal Lamy said he thought we had got about 75% of the way towards a
deal. The G20 summit that took place in
October last year in
Lord Davies of
Abersoch: I thought the change of mood in
Q256 Mr Wright: So by the end of the year we expect to hear good news that the negotiations have been sound?
Mr Thomas: Mr Wright, in a sense the
negotiations are ongoing. The technical
level discussions are continuing in
Q257 Mr
Bailey: Can we turn to the EU-India free trade
agreement? Lord Mandelson said earlier
on this year that he hoped to have one concluded by the end of this year, and
indeed that is the original target date.
Your previous comment would indicate that there has been a change of
approach with the Indian Government post-election with regard to
Mr Thomas: What is clear is that the
Indians are prioritising
Q258 Mr
Bailey: I think you have partly answered my question
insofar as
Mr Thomas: I would be surprised if it
was agreed before the key headlines of a
Lord Davies of Abersoch: I think we have to keep the pressure up on reform on telecoms, legal, banking licences, insurance. These are key sectors for British businesses.
Q259 Mr
Bailey: So you would still regard it as important to
pursue the EU-India FTA even if we did have-and we hope we do have-a successful
round of
Mr Thomas: Absolutely. We are very clear that we want a Doha agreement to provide a clear set of world trade rules over which can be overlaid a series of further regional trade agreements, and key for the EU is that Peter Mandelson kicked off a new round of FTA discussions when he was Trade Commissioner, of which the Korea one is the one we hope will be signed most quickly. There has been a series of rounds and discussions with the Indians already and so we are making progress on those, but realistically it is likely that we are going to take longer to conclude an EU-India FTA than we are an EU-Korea FTA. As I say, I suspect that such is the focus now on trying to see whether we can reach agreement on the headlines of a Doha trade deal that that is going to mean that the EU-India conversations, whilst they will continue, I suspect will continue into next year rather than the original hope that we might have concluded them by the end of this year.
Q260 Mr
Bailey: They are seen as complementary to
Mr Thomas: Absolutely.
Lord Davies of Abersoch: Absolutely.
Q261 Chairman:
Do
you think Lord Mandelson, if he were speaking in
Mr Thomas: I think he might use slightly
different language in terms of timescale but I think he would still be
extremely upbeat about the case for an EU-India FTA. I believe it makes economic sense for
Q262 Chairman:
The
reason I say that is that Anand Sharma, to whom you referred to earlier, I met
recently. He is extremely
pro-Britain. He has a very strong
positive attitude and so here is a big opportunity to capitalise on.
Lord Davies of
Abersoch: Absolutely.
Q263 Chairman: I like Patricia Hewitt; she is able and she was a talented minister, but should those kinds of organisations be led by politicians? Should they not be led by business people?
Lord Davies of
Abersoch: As a senior independent director for BT she
had huge experience of
Q264 Chairman: But I do hear this complaint I repeated from the Indian business side that there is not the same sense of engagement at senior level in British business.
Lord Davies of
Abersoch: I think there is always more that British
business can do with
Mr Thomas: I think, Chairman, that if we can get a deal on the EU-India FTA that will substantially change attitudes even further. As Mervyn says, there is progress, but clearly an FTA would help.
Q265 Chairman:
One
last question from me. We have talked
about the opportunities of places like
Lord Davies of
Abersoch: I think you have to name and shame those
markets and countries that go protectionist.
I was dwelling on that on the way here.
Just before coming out I was reading Global Trade Alert's first report
(just to show that I am reading this stuff, so I am really a sad person
already). I think that protectionism -
and it is stating the obvious, we all know - would be horrendous for the global
economy. I think the danger in the
financial crisis was that certain markets would go very protectionist and I do
not think there is any evidence of that.
There has been a temptation to put measures in just to protect your own
economy. We have not gone down that
route internationally. I think we have
to keep on banging the drum and saying that we have to have a
Mr Thomas: Chairman, I wonder if I can
add that we have deliberately used the summits that Gordon has attended as
Prime Minister to press the case for countries to continue to keep markets
open. In a sense the WTO has been given
a very specific brief to watch for creeping protectionism. They have published a series of reports, I
think their third came out yesterday, on levels of protectionist measures. We have sought to replicate that
international effort, not only through launching Global Trade Alert, which
Mervyn has just referred to, but you will have seen, and I think you may have
participated in, and forgive me if I am getting this wrong, the first ever UK
World Trade Week, which is an idea that we have shamelessly poached from the
United States. Their world trade weeks
were launched in response to the recession in the 1930s, where their
politicians increasingly recognised that protectionism was slowing down the
opportunity for the
Q266 Chairman: I am going to make a confession. It passed me by entirely but I am sure it did a lot of good work.
Lord Davies of Abersoch: It will not next time.
Q267 Chairman: You mentioned Global Trade Alert. I was going to ask when it was going to be set up. It has been set up. What exactly does it constitute? It is bringing together a network of international think-tanks, is it not?
Mr Thomas: The WTO, with respect to the Secretariat, produce relatively dry commentaries on what is happening in terms of protectionist measures. Global Trade Alert, as you say, is a network of think-tanks, academics and leading economists who can be more voluble in terms of their commentaries on protectionist measures or not, and therefore they throw a sharper spotlight on what is happening internationally in terms of particular protectionist measures. They are a way for the business communities to engage in and highlight measures that are taking place in particular countries. It is a way of going beyond the dry WTO reports and increasing the pressure on countries to resist protectionist responses.
Q268 Chairman: Lord Davies, you said there was a need to name and shame. Can you name and shame someone here today for the Committee?
Lord Davies of
Abersoch: No, I am not going to do that; I will resist
that temptation, but what I would say is that we do need business to have a
louder voice on this. Now that I am on
this side of the political fence I keep on saying to business leaders that they
do need to speak with a louder voice everywhere, internationally, in support of
a
Q269 Chairman: The thing that alarmed the Committee slightly earlier in the year was that the relaxation of state aid rules in the European Union seemed to be accompanied by protectionist clauses around that relaxation. I will not name and shame anyone but quite a close neighbour seemed to be guilty of this in particular. Is there any evidence of protectionism in European Union countries at a modest, disguised, subliminal level?
Lord Davies of Abersoch: We are going to put you on the spot right now.
Ms Durkin: I know that there is an active debate on whether or not some of the interventions could be seen as straightforward protectionist measures or inadvertent protectionist measures. What we have sought to do is establish that any intervention within Europe is focused and time limited and with the state aid relaxation we talked about two years and a review of that and drawing back, so while we acknowledge that because of the downturn there are inevitably going to be some actions that would in normal years not be necessary. If they are necessary we will make sure they do not get established and we will review them and very quickly step back.
Mr Thomas: There was concern earlier in
the year about a "buy
Q270 Chairman: I am grateful for that. Thank you very much. I do not want Mr Crawford to get away without speaking. That is what I was just deciding.
Lord Davies of Abersoch: I can think of questions for him.
Q271 Chairman: There is a novel idea! Lord Davies, what would you like me to ask Mr Crawford, on the record? Mr Crawford, we were aware of the increased interest in the ECGD's activities and increased funding. Is there anything that you would like to say to the Committee about the contribution you make to British exporters? It is the softest question you will ever get from a select committee chairman, so enjoy it.
Mr Crawford: First of all I should stress
that ECGD has responded to the downturn.
Inquiries by exporters have gone up 50%.
We supported just under £31.5 billion of new business in the last
financial year to 31 March. We expect that
that will double or even more in this financial year. We have played a key role in helping Airbus
aircraft exports. We have historically
been supporting 17-18% of their deliveries.
It is quite likely that we will support double that in this financial
year. We have just closed a consultation
on a possible new product to confirm the share risk on confirmations by British
banks of
Q272 Chairman: Do you want me to ask him a question, Lord Davies?
Lord Davies of
Abersoch: No. I
think the problems in the short-term trade credit market, which were alluded to
earlier, have caused huge problems, not just in the
Q273 Mr Bailey: From my perspective as a representative of an area with a huge number of SMEs, many of them were quite significantly affected by that. Can I just stress that this consultation needs to be concluded very quickly and very productively.
Lord Davies of
Abersoch: I think there are two issues. First, the letter of credit scheme, as we
say, will be coming out in the next week or so.
There is the separate issue of trade credit and the role of the
firms. I am meeting with the two
Chairman: Can I just say this in public. We take the absence of criticism as a sign of success and we have heard very little criticism of ECGD. Having said that, of course, the flood gates will open and we will have you back in for a separate inquiry, but so far so good. Gentlemen, there are many other things we could have explored but we have done very well in two hours. We are very grateful to you for your time and trouble. Thank you very much indeed.