Lord Green, Minister of State for Trade and Investment
Juergen Maier, Siemens UK
Chaired by Margot James MP
Lord Green spoke firstly of the need for a wider appreciation of the importance of trade and investment to the UK economy. Suggesting that the old growth model – fuelled by consumer debt and consumption – is bust, the Minister pointed to the need to address the increasingly large trade deficit that the UK has been running, excepting a few years, since the 1960s. More widely, Lord Green stated that not only is trade good for UK Plc in general terms but noted that it has been demonstrably proven that those firms engaged in international trade are more efficient and productive than those that are not. Bringing more British companies into the export environment is therefore not only a way of balancing the trade deficit but serves to strengthen the backbone of the British economy in more general terms.
UKTI’s priority is, and remains, accessing more effectively the emerging markets – the BRICS and the N-11 being the most obvious, but Lord Green drew attention to the predominance of African countries on any list of the world’s fastest growing economies. The fact remains, however, that approximately half of the UK’s trade is with the EU Single Market, a market which remains affluent despite stagnant current growth and represents the world’s largest trading bloc.
There are two particular issues that arise as a result of the UK’s membership of the European Union when it comes to trade.
1) The EU has exclusive competence to negotiate trade deals on behalf of the UK and other members of the EU. Generally, Lord Green feels that the EU’s Trade Commissioner and the EC more widely on this front are doing a good job representing Britain’s interests. Recent agreements with Korea, and free trade agreements in the pipeline with Japan and the US, are testament to this.
2) The Single Market has, in the 20 years since implementation, been of benefit to the UK. Substantial progress has been made towards a free market – particularly in the area of goods. Lord Green cited the example of the car industry, which allows UK companies to export cars to anywhere in the EU without a single modification. However, in services (particularly digital services) the glass remains less than half-full, which is of considerable importance when the majority of EU GDP (70%) and UK GDP (80%) is derived from services activity. Estimates of the economic benefit of completing the single market in services, which Lord Green feels to probably underestimate the benefits, range from 2 – 4% of GDP.
Bill Cash MP, Chair of the House of Commons EU Scrutiny Committee and co-author of a recent report on the single market, argued from the floor that there were four main faults with the single market as it currently stands.
1) The £47bn trade deficit the UK has with the EU;
2) Qualified majority voting, which can allow the UK to be isolated on trade agreements;
3) “Exclusive competence” for negotiations towards trade agreements with external partners; and
4) Over-regulation as a result of harmonisation – which Peter Mandelson in 2004 suggested costs the economy to the tune of 4% of GDP.
Lord Green noted the important work of the EU Scrutiny Committee in both Houses, but said he was not of the school that suggests Britain would have a better position negotiating free trade agreements and the like as an individual nation, rather than within the collective bloc of the EU, and reiterated his support for the efforts of the Trade Commission.
He did however suggest that David Cameron’s EU speech and the potential 2017 referendum will encourage some useful discussions about the shape of the EU. Speaking as a Europhile, Lord Green believes the EU has become dysfunctional and now is a good time to take a look at the governance structures and the regulatory burden, and to ensure that the EU looks outward to external partners as well as ensuring the continuing health of the interior. On the subject of services, it would be a good first step for the EU to look towards mutual recognition of professional qualifications.
Juergen Maier spoke from the perspective of a foreign direct investor in the UK, employing 13,500 people, in the manufacturing and technology sector. Siemens are here for three main reasons:
1) Confidence in the long-term strategies of the UK Government;
2) The skills base in the UK; and
3) Strengths of innovation and research & development.
Mr Maier suggested that in particular there are certain gambles Siemens are making – especially on wind farms, in which they are still not convinced that the UK will push ahead as expected. He would like an industrial policy that focuses the Government support on the current and potential growth sectors.
On the subject of the single market, Mr Maier suggested that a withdrawal from the EU would be damaging to the prospect of future investment from Siemens and similar firms. The UK’s leads in the areas mentioned by Juergen Maier are not necessarily strong enough to compensate for the loss of access to the single market – Siemens are an exporter from the UK, as well as an investor. Mr Maier believes that the belief the UK could negotiate free trade agreements and so forth with the EU and others as quickly as necessary after withdrawal, as a small island off the coast of Europe, is naïve.
Mr Maier also agreed with Lord Green that more needs to be done to ensure that the banking sector is open to competition and more in tune, at the high street level, with the needs and ambitions of small and medium enterprises.
On the subject of employment law, which Andrea Leadsom MP believed to be a significant negative consideration with regards the UK’s relationship with Europe, Mr Maier believes that it is better to attempt to change employment law regulation from the inside, rather than throwing rocks from the outside.
Mr Maier responded to a question about the single currency’s troubles by suggesting he believed that the European Union would make the Euro work. The timing isn’t right for the UK, but he also stated that the UK shouldn’t completely write off the possibility of joining in the future.
To extend the UK’s lead in innovation and research, Mr Maier suggested to some agreement that investment was needed to bring together universities, large multinational corporations and SMEs into technology hubs, allowing for the development and commercialisation of the products of R&D. In order to do this, of course, Britain needs engineers; whilst not a problem for Siemens, who as a large firm can pick up graduates and apprentices due to their corporate cachet, the lack of engineers and innovators coming through the skills system has to be concerning for smaller engineering firms, which feeds through the supply chain and a smaller customer base to the larger employers as well.
The Chair wished to thank Members of Parliament who attended and asked questions of the speakers, and the speakers themselves, for what was a very interesting and useful discussion.