RIA Submission to International Agreements Committee on UK-NZ Trade Negotiations

26 November 2021

Railway Industry Association Kings Buildings, 16 Smith Square, London, SW1P 3HQ +44 (0)20 7201 0777 ria@riagb.org.uk www.riagb.org.uk

House of Lords International Agreements Committee (IAC) House of Lords London SW1A 0AA Dear Committee Members, I am writing on behalf of the Railway Industry Association (RIA), to make a submission to your inquiry on the UK-New Zealand trade negotiations.

RIA is the national trade body for over 300 UK rail suppliers, with members representing a large proportion of the rail industry by turnover and reflecting a great diversity of disciplines within the rail sector. Our membership comprises both large multinational companies and also SMEs (around 60% of the membership), based right across the UK. The railways are vital to the country’s economy – for every £1 invested in rail, £2.50 in GVA is generated in the wider economy, and the industry supports over 710,000 jobs, providing investment and connectivity to communities spanning the lengths and breadth of the UK. Rail is also an area of exports strength. The Oxford Economics’ 2021 report1 highlights the fact that the UK rail industry is a significant exporter, selling £600 million in goods and services abroad each year.

Additionally, according to European rail trade association Unife’s recent Global Market Study, the total world rail market for rail supply is expected to achieve long-term growth of 2.3 % p.a., reaching almost a total volume of over £170 billion per annum per year in the 2023–2025 period2. More mature markets, such as Western Europe, Asia Pacific and NAFTA, will grow significantly and therefore account for the largest share of absolute growth, which is reflected in the opportunities in rail we are currently seeing in the Australasian markets.

In 2018, a Rail Sector Deal3 was agreed, which set out a new approach for the UK rail industry and the Government working in partnership to transform the rail sector. The Deal includes taking actions to increase the use of digital technology, boost productivity, improve the service received by those who use the railways, and build the skills of the UK workforce to capitalise on these opportunities. At the outset, in December 2018, the Exports & Inward Investment industry goal for the Sector Deal was to double the value of exports by 2025. To achieve this, the industry’s supply chain agreed a number of Industry ‘Offers’ and Industry ‘Asks’ of Government, and with RIA’s assistance, this pillar is still active and helping Rail Exporters increase their exports.

Overall, RIA’s Trade ‘Asks’ remain relevant to the UK-New Zealand trade negotiations: 1.

2.

3.

Rail to be recognised as a key export sector, for both goods and services, in the negotiation and delivery of free trade deals; Access to an appropriately skilled workforce and mobility for skilled UK workers – rail industry needs workers at all skills levels to support its ability to compete globally; Consistent application of standards – RIA and our members want to see mutual recognition/ equivalence and non-discrimination as core principles in all UK trade agreements. This would support the competitiveness of the UK rail supply sector and ensure economies of scale.;

1

https://riagb.org.uk/RIA/Newsroom/Publications%20Folder/OE_2021.aspx https://www.unife.org/wp-content/uploads/2021/04/Forecast-2020-to-2025.pdf 3 https://www.gov.uk/government/publications/rail-sector-deal 2

Railway Industry Association Company Limited by Guarantee registered in England & Wales Company No. 10036044 Reg. Office: Kings Buildings, 16 Smith Square, London, SW1P 3HQ

4.

5.

6.

Smooth cross border trade rules – which minimise cost and delay and avoid trade distortionary tariffs; Public procurement – reciprocal rules on market access and domestic content. As rail is primarily funded by the public purse throughout the EU and internationally, this is a key concern for the UK rail supply chain; and Opportunities for collaboration on rail research and development.

New Zealand as a key export priority market Fundamentally, RIA wants these FTAs to both open new and grow existing export markets for UK rail supply businesses. According to an October 2020 Rail Sector Deal Exports (RSG) Survey4, New Zealand ranked 13th in the list of top priority markets where companies believe their railway sector goods or services have potential to be exported with assistance from the rail industry and Government. It also ranked 15th in terms of priority market for UK exporters.

This is further supported by RIA, who in 2019 signed an MOU for closer cooperation and agreed mutual member benefits with the Australasian Railway Association, the main body for the railway sector in Australia and New Zealand – our links and cooperation remain strong today, despite the pandemic.

A 2021 Value of Rail report5 found that the total value of rail in New Zealand is estimated to be between £916 million-£1.15 billion per year. The New Zealand Rail Plan6 was also published this year. In the plan, the New Zealand Government laid out a 10-year programme for rail investment, acknowledging that the national rail network has suffered from under-investment and large parts of the network have been experiencing a managed decline. The report also highlights how investment in rail has so far taken place on a year-by-year basis, which is not fitting for infrastructure assets such as rail.

Although the Rail Plan does not list any specific projects that will get funding over the next 10 years, it does show Government commitment to state investments that will be made to restore the network, such as upgrades, safety improvements, and new rolling stock orders, as well as additional electrification. UK rail suppliers can help achieve these goals thanks to their unrivalled expertise, so it is important that the UK-New Zealand FTA sets out provisions that allow respective suppliers to bid for work in either country via the promotion and enablement of fair and equal-footing competition.

For this inquiry, we have highlighted six key points for the negotiations that are most important for the UK railway industry.

1. Environmental benefits As stated in the environmental chapter of the Agreement in Principle7, the UK and New Zealand would commit to promoting “trade and investment in environmental goods and services which support the transition to a low carbon economy”, supported by “tariff elimination at entry into force of the FTA for these environmentally beneficial products”.

As such, for this part of the inquiry, we would like to highlight that rail is a clean mode of transport – in the UK it contributes just 1.4% of transport emissions despite carrying 10% of all journeys, and only 0.5% of total emissions. As countries look to decarbonise, and with transport continuing to contribute a significant proportion of emissions globally, rail has the potential to be a huge UK green export and investment success story.

4

https://rsgtaskforce.org/assets/pdf/RSD-Exports-Survey-Report.pdf https://www.kiwirail.co.nz/assets/Uploads/documents/2021-Value-of-Rail-report.pdf 6 https://www.transport.govt.nz/assets/Uploads/Report/The-New-Zealand-Rail-Plan.pdf 7 https://www.gov.uk/government/publications/uk-new-zealand-free-trade-agreement-negotiationsagreement-in-principle/uk-new-zealand-fta-negotiations-agreement-in-principle#environment 5

Railway Industry Association Company Limited by Guarantee registered in England & Wales Company No. 10036044 Reg. Office: Kings Buildings, 16 Smith Square, London, SW1P 3HQ

Rail exports are a real growth opportunity in light of the UK’s climate targets, and as we negotiate a raft of FTAs with partners around the world, such as New Zealand. The UK has excellent capability in areas such as design, construction, and tunnelling; and in manufacturing areas, including signalling, and rolling stock. On the latter point, the UK has strong capability to build and refurbish trains, which could be capitalised on to sell to overseas partners.

UK companies also have capabilities on hydrogen, battery and electrification – on hydrogen specifically, examples include Porterbrook’s HydroFLEX8, Alstom and Eversholt Rail’s Breeze9, and the Scottish Zero Emission Train Project10; on battery, great work has been done by companies such as Hitachi11, Eversholt Rail12, Vivarail13 and Porterbrook14.

2. Tariffs More broadly on tariffs, RIA welcomes both countries’ commitments, under an FTA, to remove all customs duties on bilateral trade, with most tariffs being fully liberalised on entry into force of the FTA. As a general approach, RIA and our members would want the Government to achieve tariff and quota free trade for goods and services and establishment via reciprocal market access through a UK-New Zealand FTA. 3. Services and professional qualifications The Government’s objective for this chapter should be to make it easier for UK individuals and companies to provide services to customers in New Zealand, and vice versa. This might include transport, design and consultancy services supplied between the UK and New Zealand. Both countries should commit to ensuring fair and equal access to each other's services markets.

On professional qualifications, the Government’s objective should be to secure legal certainty for trained workers who temporarily enter the UK or New Zealand to do business and create a framework that would allow both FTA parties to recognise professional qualifications earned in either country.

4. Procurement Due to the nature of its products, the UK rail supply industry depends heavily on public procurement funding. UK rail suppliers have to compete in the UK market with a growing number of third countries. In some cases, third countries benefit from competitive financing as they are, in effect, state-owned companies. This makes the rules of the commercial game even more asymmetrical in the UK market, since such state-sponsored activity allows these companies to compete in export markets, including the UK. A level playing field needs to operate between UK rail supply businesses and those in third countries, including New Zealand.

Therefore, both FTA parties should ensure that state-owned enterprises, monopolies and enterprises granted special rights will not discriminate against goods, services, or investments from the other party.

8

https://www.porterbrook.co.uk/hydroflex-cop https://www.alstom.com/press-releases-news/2020/7/eversholt-rail-and-alstom-invest-further-ps1million-breeze-hydrogen and https://eversholtrail.co.uk/news/alstom-and-eversholt-rail-unveil-newhydrogen-train-design/ 10 https://h2-accelerator.org/projects/train/ 11 https://www.therailwayhub.co.uk/43202/hitachi-rail-to-launch-uk-first-long-distance-battery-trains/ 12 https://eversholtrail.co.uk/news/hitachi-and-eversholt-rail-to-develop-gwr-intercity-battery-hybrid-train/ 13 https://vivarail.co.uk/vivarail-battery-trains/ 14 https://www.porterbrook.co.uk/innovation/case-studies/porterbrook-launch-first-uk-hybrid-rail-project 9

Railway Industry Association Company Limited by Guarantee registered in England & Wales Company No. 10036044 Reg. Office: Kings Buildings, 16 Smith Square, London, SW1P 3HQ

Overall, RIA welcomes the commitment of both countries to provide, under the FTA, additional market access and allow suppliers to participate in each other’s government procurement markets beyond the WTO GPA. 5. SMEs RIA welcomes the attention given to SMEs on procurement in the text of the Agreement in Principle, where the Government states the provisions in the procurement FTA chapter will include the facilitation of participation of SMEs. As a general approach, a Government objective should be to seek to make SMEs’ access to public contracts for rail easier. This is because, at present, UK SME component suppliers are typically not entering tenders for large-scale overseas projects and contracts, and need support to enter overseas markets. Linked to this is the continued support needed from the Department for International Trade (DIT) for UK SMEs - it is positive to see the Government’s new Exports Strategy, and particularly the announcement of a new UK Tradeshow Programme (UKTP) to encourage SMEs into exporting. However, we do need to see how the programme will operate and encourage the DIT to ensure it is as good as its predecessor Tradeshow Access Programme scheme.

6. Standards RIA believes the Government should seek, through the FTA, to strengthen cooperation between the UK and New Zealand in the field of standards, technical regulations and conformity assessment procedures, with a view to increasing the mutual understanding of respective systems and facilitating access to respective markets. RIA therefore welcomes the commitment of New Zealand and the UK to provisions that ensure technical barriers to trade are non-discriminatory, including the coverage of standards, technical regulations and conformity assessment procedures at central government level. _______________________ We hope this is a useful submission. RIA is happy to provide further information on any of the above issues, or to meet to discuss any matter associated with the Committee’s inquiry. Please do not hesitate to get in touch with Francesca Lentini, RIA Senior Policy Executive, if you have any further questions or would like us to arrange a meeting – she is contactable at francesca.lentini@riagb.org.uk or on 020 7201 0777 / 07904 991067.

Yours sincerely,

Kate Jennings Policy Director, Railway Industry Association

Railway Industry Association Company Limited by Guarantee registered in England & Wales Company No. 10036044 Reg. Office: Kings Buildings, 16 Smith Square, London, SW1P 3HQ