Points of Order
Tuesday 7th November 2017
(7 years ago)
Commons ChamberRead Full debate Trade Bill 2017-19 Read Hansard Text
Ian Murray (Edinburgh South) (Lab)
On a point of order, Madam Deputy Speaker. The Foreign Secretary has come to the House this afternoon to provide a statement clarifying the comments he made to the Foreign Affairs Committee last week. He said in his statement—my hon. Friend the Member for Rhondda (Chris Bryant) has already read this out: “My point was that I disagreed with the Iranian view that training journalists was a crime, not that I lent any credence to Iranian allegations that Mrs Zaghari Ratcliffe had been engaged in such activity.” The transcript from the Committee says:
“When we look at what Nazanin Zaghari-Ratcliffe was doing, she was simply teaching people journalism, as I understand it”.
Those two statements are inaccurate and contradictory.
In addition, Madam Deputy Speaker, could you give me some advice? The Foreign Secretary accused me of performing on the Foreign Affairs Committee with “glassy indifference”—I think those were the words he used. May I just say to the Foreign Secretary, if he does not like me asking questions about Iran and US sanctions, that my expression was one of incredulity at his incompetence at answering the questions and not glassy indifference?
Madam Deputy Speaker (Mrs Eleanor Laing)
I thank the hon. Gentleman for his point of order. On his first point, as the House knows, it is not for me to opine on this matter. We have had quite a considerable time this afternoon during which these questions have been put to the Foreign Secretary, and the Foreign Secretary has now answered those questions. If there is a difference of opinion, that is in the nature of political debate and not a matter for the Chair.
On the second point, the hon. Gentleman has put a description rather different from the one that the Foreign Secretary gave of him. Once again, that is a matter of opinion, and the two opinions have been expressed. It is not for me to rule which one is correct.
Stephen Gethins (North East Fife) (SNP)
On a point of order, Madam Deputy Speaker. Earlier today, during the urgent question on the Brexit sectoral analysis, the hon. Member for Edinburgh South (Ian Murray), who is aware that I was going to make this point of order, said, quite rightly, that the Secretary of State for Scotland had said at Scotland Office questions that the sectoral analysis of the impact on the economy of Scotland existed and had been shared with the Scottish Government. My colleagues in the Scottish Government had not, and have not, seen such analysis despite repeated requests. Madam Deputy Speaker, can you give us some advice on how we can correct the record?
Madam Deputy Speaker (Mrs Eleanor Laing)
I appreciate the point that the hon. Gentleman is making, but, once again, it is not a matter for the Chair. He asks for my advice on correcting the record, and I think that he has just put his issue on the record. It will be noted, and I am quite sure that those on the Treasury Bench will note it.
Bill Presented
Trade Bill
Presentation and First Reading (Standing Order No. 57)
Secretary Liam Fox, supported by the Prime Minister, Secretary Boris Johnson Secretary David Davis, Secretary David Mundell, Secretary Alun Cairns, Secretary James Brokenshire, Secretary Michael Gove, Secretary Priti Patel and Greg Hands, presented a Bill to make provision about the implementation of international trade agreements; to make provision establishing the Trade Remedies Authority and conferring functions on it; and to make provision about the collection and disclosure of information relating to trade.
Bill read the First time; to be read a Second time on Monday 13 November, and to be printed (Bill 122) with explanatory notes (Bill 122-EN).
Trade Bill (First sitting)
Tuesday 23rd January 2018
(6 years, 10 months ago)
Public Bill CommitteesRead Full debate Trade Bill 2017-19 Read Hansard Text Amendment Paper: Public Bill Committee Amendments as at 23 January 2018 - (23 Jan 2018)
The Chair
Before we begin, I have a few preliminary points to make. Please switch electronic devices to silent. Tea and coffee are not allowed during sittings. We will first consider the programme motion on the amendment paper. We will then consider a motion to enable the reporting of written evidence for publication and a motion to allow us to deliberate in private about our questions before the oral evidence sessions. In view of the limited time available, I hope we can take those matters without too much debate or delay. Date Time Witness Tuesday 23 January Until no later than 10.25 am Global Justice Now; Computer and Communications Industry Association; Christopher Howarth, former Senior Political Analyst, Open Europe Tuesday 23 January Until no later than 11.25 am CBI; International Chambers of Commerce UK; Unite the Union; FSB Tuesday 23 January Until no later than 2.45 pm Dr Lorands Bartels, University of Cambridge; Dr Roiger Hestermeyer, King’s College London; Hansard Society Jude Kirton Darling MEP Tuesday 23 January Until no later than 3.30 pm George Peretz QC, Monckton Chambers; Professor Alan Winters, UK Trade Policy Observatory; Law Society Scotland Tuesday 23 January Until no later than 4.15 pm British Ceramic Confederation; UK Steel Manufacturing Trade Remedies Alliance; British Chambers of Commerce Tuesday 23 January Until no later than 5.00 pm UK Finance; British Retail Consortium Standard Chartered Bank Thursday 25 January Until no later than 12.00 pm Devro plc; Scotch Whisky Association Food Standards Scotland Thursday 25 January Until no later than 1.00 pm Business for Scotland; British Furniture Association Hologic Date Time Witness Tuesday 23 January Until no later than 10.25 am Global Justice Now; Nick Ashton-Hart, Trade Policy Consultant and Associate Fellow, Geneva Centre for Security Policy; Christopher Howarth, former Senior Political Analyst, Open Europe Tuesday 23 January Until no later than 11.25 am CBI; International Chambers of Commerce UK; Unite the Union; FSB Tuesday 23 January Until no later than 2.45 pm Dr Lorands Bartels, University of Cambridge; Dr Roiger Hestermeyer, King’s College London; Hansard Society Jude Kirton Darling MEP Tuesday 23 January Until no later than 3.30 pm George Peretz QC, Monckton Chambers; Professor Alan Winters, UK Trade Policy Observatory; Law Society Scotland Tuesday 23 January Until no later than 4.15 pm British Ceramic Confederation; UK Steel Manufacturing Trade Remedies Alliance; British Chambers of Commerce Tuesday 23 January Until no later than 5.00 pm UK Finance; British Retail Consortium Standard Chartered Bank Thursday 25 January Until no later than 12.00 pm Devro plc; Scotch Whisky Association Food Standards Scotland Thursday 25 January Until no later than 1.00 pm Business for Scotland; British Furniture Association Hologic
I first call the Minister to move the programme motion, which was decided by the Programming Sub-Committee yesterday.
Motion made, and Question proposed,
That—
(1) the Committee shall (in addition to its first meeting at 9.25 am on Tuesday 23 January) meet—
(a) at 2.00 pm on Tuesday 23 January;
(b) at 11.30 am and 2.00 pm on Thursday 25 January;
(c) at 9.25 am, 2.00 pm and 5.30 pm on Tuesday 30 January;
(d) at 11.30 am on Thursday 1 February.
(2) the Committee shall hear oral evidence in accordance with the following Table:
(3) proceedings on consideration of the Bill in Committee shall be taken in the following order: Clauses 1 to 3; Schedules 1 to 3; Clauses 4 and 5; Schedule 4; Clauses 6 to 12; new Clauses; new Schedules; remaining proceedings on the Bill;
(4) the proceedings shall (so far as not previously concluded) be brought to a conclusion at 2.00 pm on Thursday 1 February. —(Greg Hands.)
Manuscript amendment made: In the table on page 2 of the amendment paper, in the first entry for Tuesday 23 January, leave out
“Computer and Communications Industry Association”
and insert
“Nick Ashton-Hart, Trade Policy Consultant and Associate Fellow, Geneva Centre for Security Policy”.—(Greg Hands.)
Main Question, as amended, put and agreed to.
Ordered,
That—
(1) the Committee shall (in addition to its first meeting at 9.25 am on Tuesday 23 January) meet—
(a) at 2.00 pm on Tuesday 23 January;
(b) at 11.30 am and 2.00 pm on Thursday 25 January;
(c) at 9.25 am, 2.00 pm and 5.30 pm on Tuesday 30 January;
(d) at 11.30 am on Thursday 1 February.
(2) the Committee shall hear oral evidence in accordance with the following Table:
(3) proceedings on consideration of the Bill in Committee shall be taken in the following order: Clauses 1 to 3; Schedules 1 to 3; Clauses 4 and 5; Schedule 4; Clauses 6 to 12; new Clauses; new Schedules; remaining proceedings on the Bill;
(4) the proceedings shall (so far as not previously concluded) be brought to a conclusion at 2.00 pm on Thursday 1 February.
Resolved,
That, subject to the discretion of the Chair, any written evidence received by the Committee shall be reported to the House for publication.—(Greg Hands.)
The Chair
Copies of written evidence that the Committee receives will be made available in the Committee Room.
Resolved,
That, at this and any subsequent meeting at which oral evidence is to be heard, the Committee shall sit in private until the witnesses are admitted.—(Greg Hands.)
The Chair
Before we start our formal session, I invite members of the Committee to declare any relevant interests.
Mr Mark Prisk (Hertford and Stortford) (Con)
I am trade envoy to the Nordic and Baltic nations, and to Brazil.
The Chair
Q
Will the witnesses please introduce themselves for the record?
Nick Dearden: I am Nick Dearden, director of Global Justice Now.
Nick Ashton-Hart: I am Nick Ashton-Hart from the Geneva Centre for Security Policy.
Christopher Howarth: I am Christopher Howarth, former senior political analyst at Open Europe, and now senior researcher in the House of Commons.
Barry Gardiner (Brent North) (Lab)
Q
Nick Ashton-Hart: Thank you for inviting me—this is a first for me. To answer the first question, it depends very much on whether it is in the interests of the counterparties to those agreements to roll them over without modification. Since those agreements were created for a number of member states other than just us, those partner countries will go through a process of evaluating the net trade benefit to them of applying those terms to us alone. Where they have an interest in changing the terms to their benefit, they will seek to do so, because that is what Trade Ministries do—they seek economic benefit for their country, and they expect you to seek it for yours. Unless the trade benefits for them are exactly the same for us alone as they are for 28 other countries, they are going to ask for changes in their interests.
If the shoe were on the other foot, I suspect we can all imagine that it would be hard for our Trade Ministry officials to come to you all and say, “Well, we have just copied an agreement with a large trading bloc for one country’s benefit because it is in a hurry.” I suspect we will find that this will take some time—trade agreements always do.
The Chair
Before anyone else answers, may I ask Members and witnesses to speak up so that we get everything on the record? That would be perfect. Sorry—the acoustics in this room are terrible.
Barry Gardiner
Q
Nick Dearden: We are really concerned about the lack of scrutiny and accountability in the Bill. Global Justice Now, and a number of other organisations, worked on the Transatlantic Trade and Investment Partnership for a long time. We had some concerns about that agreement—not with the potential tariff areas, but with the non-tariff areas. In modern trade deals, non-tariff aspects make up the bulk of the agreement. That means everything from regulation—we probably all now know more than we would like about chlorinated chickens, but that is just one symbol of the regulatory aspects of trade deals that really concern the public, and I think many parliamentarians, too. Intellectual property, which has a direct correlation to the price of medicines and the price that the NHS may bear for them, through to local government procurement and e-commerce can also be added to that.
Modern trade deals touch on huge areas of public policy, which should be within the scope of Parliament to control. We are concerned that the Bill does not allow for that scope. As Nick said, it is difficult for us to imagine that many of these deals will be a straight cut and paste. That is why the explanatory notes allow for substantial changes to be made to the deals, but without the requisite scrutiny that we believe Members deserve and require if we are to have proper control of our trade policy.
Barry Gardiner
Chair, I know that others on my side wish to come in, but those on the other side may wish to speak.
Bill Esterson (Sefton Central) (Lab)
Q
Nick Dearden: Certainly. We think there should be several stages. First, before the negotiations, Parliament or a parliamentary Committee should give consent to those negotiations and should have some role in setting out the broad framework or objectives. We also think that at that stage the Government should have a responsibility to conduct and publish impact assessments and public consultations. It is set out in great detail how those should be conducted in the European Union and the United States.
As the negotiations are proceeding, Parliament should be able to scrutinise Ministers on what they are negotiating. It should be able to see negotiating texts. We think there should be a presumption that negotiating texts should be transparent to everybody, but even if there are specific reasons why they cannot be, they should certainly be transparent to MPs. If the Government want to change their mandate, they should have to come back to Parliament or to a parliamentary Committee to ask for that.
When negotiations are finalised, there should be a guaranteed debate and, at the least, an up-or-down vote. That would make a huge difference, because at the moment at none of those stages does Parliament have any control: it is not allowed to know what is going on in the negotiations; it has no role in setting the mandate; it is not allowed to see the negotiating texts; it is not guaranteed a debate; and it cannot vote against a trade deal. We think that what I have suggested would bring us into line with other modern democracies.
I will give a very small example. CETA, which still has not had a proper debate in the House, has been discussed in detail for days by the Wallonian Assembly in Belgium. They take seriously the regulatory aspects of trade deals and we think that, post-Brexit, we need to be looking at a similar model.
Bill Esterson
Q
Nick Dearden: We know that post-Brexit we want to be doing a trade deal with the European Union and the United States, so they are good places to start. Both political entities have set out in detail a number of ways in which they negotiate and give Congress or Parliament power over trade deals. In the United States, a 700-strong citizen advisory board is allowed to see all the texts. They have to have very specific public consultations. At the very least, Congress gets an up-or-down vote at the end, and if it does not fast-track trade deals, it gets substantially more power than that.
In the European Union, the Parliament gets to feed into a mandate—the Council gets to set a mandate. Various parliamentary Committees get to look at, scrutinise and give recommendations to the Executive for how a trade deal would affect jobs, the economy, the environment, human rights, or whatever else we may be concerned about. At the end, the Parliament is given a proper debate and an up-or-down vote.
On top of that, as I have already said, many trade deals are required to go back to member Parliaments for them to have a say, too. If you look at how Denmark, Germany, the Netherlands or Finland operate, they already exercise far more scrutiny over external EU trade deals than the UK does.
Mr Prisk
Q
Nick Dearden: There are various ways in which you could do it. One of the ways is to have a Committee set up particularly to scrutinise the Government on this. When the time comes to enter negotiations on a deal, it will discuss with the Government what their priorities are and they will say, “We think this is acceptable and this is not acceptable.” It will be brought in from the very beginning.
I think that is important, because the Secretary of State has said a number of times, “I really want to avoid a TTIP-style situation, where we end up with a deal in discussion that has lost public support and lost a lot of parliamentary support.” To do that, we must have that buy-in from the very beginning, and that must require some degree of parliamentary discussion about what the objectives for this country should be in a trade deal with country X.
Mr Prisk
Q
Nick Dearden: That would probably depend on exactly when proper trade negotiation starts and we are properly discussing a trade deal.
Mr Prisk
Q
Nick Dearden: You can look at how it happens in Denmark, for example, because they do exactly that. They have a parliamentary Committee that sets a mandate at the initiation of trade talks. I understand that obviously the Government are talking to loads of different countries at any one time about possible trade, but within each of the countries they are talking to, they must have objectives. It is for Parliament to scrutinise, set and agree to those objectives.
At the moment, I do not feel that we have that ability. We are talking to a lot of countries; we have 16 trade working groups currently set up between the Secretary of State and other countries. We know, because we have read it in the media, that various negotiations are ongoing with some of those countries, but Parliament, and we as civil society, have no right to know what is being discussed, when it is being discussed and with whom. That is a profound democratic deficit. At the very least, if these are formal working groups involved in trade discussions, we should know what they are talking about, to whom and when.
Mr Prisk
Q
Nick Dearden: I would say at the very least, at this point in time, for each of the trade working groups that has been set up, there should be a mandate set by parliamentary Committees.
Mr Prisk
Q
Nick Dearden: There is something to be said for that if you look at previous trade agreements such as TTIP—how they have worked and how people have felt about them. There is a big populist backlash going on around the world at the moment, part of which is a result of people feeling there is a democratic deficit in the trade agreements being signed.
We have lots of ideas for how we could construct a trade agreement and how we would want to do it, and I should say now that we are absolutely not against trade; even with TTIP, we were not against the tariff aspects of that trade agreement. When it comes to public policy, it is different. Again, I am not against international co-operation, in trade agreements or other agreements, but there has to be a democratic basis for how those things are decided.
Mr Prisk
Q
Nick Dearden: They might be or they might not. It depends how they are done, who they are done with and what the terms are. If you have two very different types of country, in terms of wealth and power, obviously there can be a big problem because some people have a much bigger negotiating hand than others. That is what we have seen with economic partnership agreements, which is why we would prefer, for example, to give tariff-free access to goods coming from those countries rather than do a reciprocal agreement, which also puts what we believe to be unsustainable and unhelpful conditions on the African country concerned.
Mr Prisk
My concern is not with the follow-on scrutiny of events that happened, but more the idea that somehow Parliament should require our existing teams in negotiations to seek approval before they start those conversations. That is my concern, but I will not delay the Committee any longer.
Barry Gardiner
Q
Nick Ashton-Hart: I would also say on the point about when terms of reference are set and whether our ambassadors need permission before they go and talk, I worked with most of our trading partners in Geneva and dozens of other countries. There are a lot of commonalities in how legislatures interact with Trade Ministries. Generally, the Trade Ministry will say, “We want to achieve these objectives over the course of this Parliament or this year,” and that is done in consultation with the relevant parliamentary Committees.
Ambassadors explore ideas with countries all the time; they do not need a mandate to do that. When it becomes clear that there is interest in formalising something, a process goes on in the capital to say, “Okay, what is our net benefit to be achieved?” To do a deal of any configuration with country X, the economics teams in the Ministry would go away and say, “Where is the net trade-generative agreement here? What sectors would we have to include? What likely trade-offs would we have to do with the other side?”
But that process would generally be informed by a consultation with the stakeholders in the industrial sectors that have most to gain or lose, the unions in those sectors and the like, so that before you even get into a negotiation, you know where your benefits lie, you have your stakeholders signed up to what you are trying to achieve and the other side knows that you have those things.
As I pointed out in my comments, the reason why you see so many leaks in trade negotiations is that it is in the interest of one party or another to put pressure on the other in their capital. Leaks do not happen by accident; they are deliberate.
Mr Prisk
I think we are familiar with that!
Nick Ashton-Hart: You are familiar with how that dynamic works. It is no different in trade negotiations.
What I have described is pretty much a common process everywhere in the world, and it is not accidental; it is because the political economy demands that you have the backing, as a negotiator, at home when you are sitting across the table from your counterparties and that they know that you have that. They can watch your processes of consent and agreement and evaluate where your weaknesses are—where there are buttons they can push, but also where you are likely to need support. People know that you have to get to a sustainable deal also, and sometimes you have to do a concession at the right time to solve a problem in a domestic constituency for your counterparty, provided that it is in your interest to do so.
Tom Pursglove (Corby) (Con)
Q
Nick Dearden: I do not have a complete list of all of them, but I do know that we have very serious concerns about the economic partnership agreements with African countries, for example, because of some of the conditions that are placed on those countries. We have particular concerns, because we worked on it, with the CETA agreement with Canada, again related to the so-called non-tariff barriers in that agreement.
One problem is that no matter what we thought about the agreements when they were originally negotiated, they are going to look different when it comes to being translated into or replaced by a UK-Canada or UK-African country agreement; they are just going to be different deals. Given that, I think it only right that there be some degree of scrutiny. It says in the Bill, “Well, we aim for these deals to be as similar as possible.” I understand that, but it may well be that some of the deals will be more similar than others.
For the deals that are more similar, I think it would be right and proper for Parliament to say, “Okay, fine. We will wave that one through. We understand that that is continuity.” But for other deals—what a substantial amendment or change in the deal would look like is not defined—we believe that Parliament should have proper scrutiny and proper ratification powers. That is particularly important for deals that have not even been through the proper ratification process in the European Union—examples involve Singapore, Japan and Vietnam. Those deals may all be replaced by UK deals, but they have not been through the proper process as yet in the European Union, and we do not want to see a situation in which they are taken on just because we are so rushed that we do not have time to really think about the consequences of the deals.
Tom Pursglove
Q
Nick Dearden: As a campaigning organisation, we are likely to pick up only those deals—
Tom Pursglove
Q
Nick Dearden: I would say we are supportive of trade, but it depends on how it is done. Absolutely. For example, I would say that an awful lot of trade that has happened in the European Union over the last 40 years —not all of it, because some of it we would be concerned about—has raised standards. It has raised standards for producers and for consumers, and that is positive. In the European Union, there is at least a balancing of trade and economic interests with social interests and environmental interests and with democratic scrutiny and accountability, so it is possible to do that.
Judith Cummins (Bradford South) (Lab)
Q
Nick Ashton-Hart: There are so many moving parts. Assuming that there is a date, that we know it, and that all counterparties have a few years’ advance warning of it—the date that matters is a date on which existing agreements will no longer be available to us—we would have to look at their approval process and count backwards to find the date by which we would have to conclude our negotiations with them. That is the only way that you would know what your actual hard finishing date was for any of those agreements. I do not know if that analysis has been done by the Department for International Trade—I am hoping that it has done some of it, and I am guessing that it probably has. Say it takes two years, and we have two years. We are not going to finish an agreement tomorrow, so that means that that deal will not be done in time. What percentage of our GDP, and of our exports and imports, is that deal, which will not be available?
That is the first thing that you would have to do is know how much negotiating time you have, and with which parties. You would then have to prioritise deals based on their economic importance to us. I am not sure what the decision tree is within the Ministry—I am sure that there must be one—for what it prioritises. The only way that you all will have a clear picture of the deadlines is to work backwards. I have seen no discussion at all of how long it takes our counterparties to conclude approving an agreement, but it can be a considerable time, depending on the country. I imagine it would be very difficult. The short answer is that it is hard for me to imagine that there are even enough people to negotiate that many deals simultaneously with that many parties, unless you had several years to do it.
Martin Vickers (Cleethorpes) (Con)
Q
Nick Dearden: It probably is, yes, because there may be countries where, for example, the human rights situation is so bad that any trade deal that you do is effectively reinforcing and giving succour to a regime to which we would not want to give succour.
Martin Vickers
Q
Nick Dearden: For example, there are serious human rights abuses in Turkey at the moment. The Prime Minister, as many people know, was the first political leader to visit Donald Trump in the United States after he was elected. After visiting President Trump, she went to President Erdoğan of Turkey, and a trade deal was part of the negotiations there. At that time, she also sold £100 million-worth of weapons to Turkey. That was an inappropriate thing to do, and it was connected with our ability to conduct a trade deal with that country, post Brexit. You may disagree with that, of course, but at the very least, there should be parliamentary control over those kinds of actions and activities. I do not think that just because they are in the international realm, they should be negotiated under royal prerogative; they have an impact on policy here. MPs should be apprised of that and should authorise it.
Martin Vickers
Q
Nick Dearden: That is a really important point. On the public policy aspects of trade deals, traditionally we thought that we did not need to worry about whether we ratified the trade deal, because Parliament would have the power to authorise implementing legislation for the various things that we needed to do to put the trade deal into effect. There is a problem with that: once a trade deal is signed and ratified, it really makes no difference whether Parliament enacts that legislation or not—we are committed to it under international treaty. It is too late to say no. Normally, we do not intend to say no—we have done the deal—but if there was a real dispute, and Parliament said, “We have a problem with that”, we would have real difficulty in stopping it, because we had already agreed to do it.
Various things that impact on public policy are never brought forward for implementation as legislation anyway. One of the things that people were particularly concerned about with TTIP, as you probably know, was the investment protection tribunals that allow overseas companies to sue Governments for various things—for what they regard as unfair treatment, for the indirect expropriation of assets and so on. There is a lot of public concern about those bodies, because people feel that this infringes on democratic sovereignty and accountability, yet those things never need to be signed off by Parliament. They just exist in the trade deal, from day one, so Parliament does not have a say in whether things that have been proved to have tangible impacts on public policy come into effect. That is one example of why it is important for the ratification process to be seen as directly impinging on public policy, and why scrutiny and accountability are necessary.
Faisal Rashid (Warrington South) (Lab)
Q
Nick Ashton-Hart: Several. I think first for the agreements you wish to transition you would look at the net economic benefit of transitioning them. You would then have to look at what likely changes the other party would be asking for—they would be doing the same analysis—and what changes you would ask for. You have to assume the worst. You have to assume the other party is going to ask for changes, and you have to assume that you will need to ask for some also. If you get lucky and you do not have to do any of that, that is great, but you cannot do this on hope. You have to do it on the worst-case scenario.
I think at that point you would have to bring in stakeholders to help you make that analysis. The expertise to do this is not all in government. It never is. It is also in the private sector and in academia. At the point where you had that you would know the basis on which you were transitioning the arrangements. This is not a trivial undertaking. Because of the regulatory impacts that newer deals, especially, have, you would also have to look at the consequences of certain changes to other arrangements.
For example, if there are most-favoured nation clauses in a deal that you wish to transition, as there often are, and if any changes are made to that arrangement when you transition it, it can impact all the other deals that have MFN clauses. This is now being discussed publicly, related to whether the EU could do an expanded services deal with us, and who would automatically get the benefits of it. For example, a Canadian deal would provide that the EU would have to give the benefits they give us to several other parties, Japan and Canada included.
We are in the same situation because there are MFN clauses in these agreements that we wish to transition, so you have to analyse the net economic benefit to you of the deal in question, but also the consequences of any changes to other deals that you want to transition, because you can guarantee that, for any MFN clause in any other deal, the parties that you are going to negotiate with will be looking at what you are giving in these other discussions and of course expecting to receive in them also.
There is a good reason why trade arrangements are slow, and there are not many going at one time. It is because this is an enormous number of moving parts to try to manage at one go—for us but also for the other Trade Ministries, because deals with us are not the only deals that they have going or that they are working on. If I were you, I would be asking the Ministry: “Look, what is your plan for dealing with these different eventualities?”
Faisal Rashid
Q
Nick Ashton-Hart: I think it is essential, aside from the benefits in terms of being a democracy that is looked up to by others as an example, and not wanting to set an example that is far below the minimum level of accountability in any other developed economy, which is what we would be doing—we would be setting a precedent here that should concern everyone.
Secondarily, it is in our interest to do that, because there is going to be a political hue and cry about various provisions in probably all the 40-plus deals. There is going to be something that someone does not like about them. That is the nature of trade agreements. Some sectors win and some lose. Losers complain and winners keep quiet mostly, because they do not want to provoke people who won. The objective is to have a net benefit, but that does not mean that within that there are not winners and losers.
There is going to be controversy associated with these arrangements. Having effective and robust consultation now will help insulate the negotiating process and provide a rationale for all of you, the Members, to go to your constituencies and say, “Look, there is a reason why we are doing it this way. We have had an oversight process. Here is what the country will get out of this.” For those districts or constituencies that will be negatively impacted by a deal, you will be able to go to your constituents and say, “Okay, on this one we may not do so well, but we will do well on this and this and this, and the net benefit to all of us is positive.” The consultation process provides all of you with the ammunition you need to explain why at a real level—the firm level and the sectoral level—transitioning the arrangements in the way that they will be agreed is in your constituents’ interests and the national interest.
Without that dialogue, you do not have that ammunition. Every time you are hit with a news story, you will have to go and ask the Ministry concerned, “How do I counter this?” Being reactive all the time on trade policy has a very unhappy history of negative views of trade in general, and of deals in particular. Criticism does not have to be true to stick, as I am sure we are all familiar. I would say—Nick might disagree—that there was some criticism of TTIP and provisions that were alleged would be in the deal, such as things that affected NHS procurement, which were actually excluded from the negotiating mandate. The fact that those criticisms were levelled did not stop there being a political cost to the negotiation as a whole from the allegation that those provisions would be inbuilt. On a pragmatic basis, there is a very strong argument for a robust consultation process, but the negotiators themselves are going to need information that is in the private sector and in academia as part of their negotiating arguments, and without a robust consultation process they will not have access to those.
The Chair
Can I say, before I go on to the next person, that I have at least six people who still want to ask a question and we have a maximum of 23 minutes, so can people bear that mind?
Mrs Kemi Badenoch (Saffron Walden) (Con)
Q
Christopher Howarth: It is important, getting back to the Trade Bill, that it only gives a power for existing trade agreements. These trade agreements are already in force and companies already rely upon them. When we talk about impact assessments, the biggest impact assessment is that these agreements are already in force or have already gone through a scrutiny process and may come into force, such as CETA. Obviously, in leaving the European Union, we are moving to a different scrutiny system. Before, they could be decided by the Commission, the European Parliament by qualified majority voting or, in the cases of mixed agreements, you would have to get unanimity, occasionally from devolved Administrations as well. We are moving to a new system, but these agreements are already in force.
The relationship with the European Union (Withdrawal) Bill is that we are keeping retained legislation and we are keeping the EU standards, so if there are any amendments to these agreements, they have to be in line with the regulations—the food safety and environmental standards—that are being retained in UK law. The scope for actually changing things is quite narrow. These have been through a scrutiny process. They are in force. This Bill is necessary, in my opinion, so that the people who rely on these agreements can be sure that they will be transferred over in time.
Mrs Badenoch
Q
Christopher Howarth: Trade agreements do traditionally take a very long time. In this case, they are already in force and we already have texts. Small amendments may need to be made around quotas—in some of the agreements we need to agree with the European Union and the counterparty how to split the quotas up—but the texts by and large have been agreed. In the future we may wish to come back to them to improve them or to fit them more to UK interests, but these agreements do exist. Trade agreements traditionally take a long time. I refer you to Parkinson’s law: that trade agreements tend to expand to the amount of time available to negotiate them. If you give trade negotiators 10 years to negotiate an agreement, it will probably take 10 years. In this case we have a fixed deadline, and I assume both sides will want to fit the negotiations and the necessary functions to that.
Barry Gardiner
Q
Christopher Howarth: I think it is true to say that the agreements the European Union made were fitted around European Union interests and that if the UK were starting from scratch, we may have had other interests. The EU interests would protect French farmers and the French audio-visual industry. You would get a price on the other side, say with Canadian agriculture. If the UK was doing it, we might do it differently. That is probably a discussion that would take longer and we would come back to later, and these agreements would probably stay exactly as they are. On the scrutiny side, we had a sort of mirror of this debate in the European Union (Withdrawal) Bill negotiation and discussions in Parliament. There may be some—
Barry Gardiner
Q
Christopher Howarth: There may be some minor changes, potentially around the EU agreements and our relationship with the European Union. If there is an EU-agreed quota in an agreement with a third country—in terms of how we split that up, how we change that or the wording of the agreement—then there may be references that need changing in the agreements. There may be minor changes, but I imagine the substance of the agreements will stay pretty much as they are.
Barry Gardiner
Q
Christopher Howarth: Indeed, it might be an opportunity for the UK to get a better deal, because if we are a more liberal economy and we have more to offer, we may be able to get better access.
Barry Gardiner
Q
Christopher Howarth: Yes, but speed will probably be the overarching thing that dictates that they will remain as they are for the foreseeable future. We may come back to that at a later date.
Iain Stewart (Milton Keynes South) (Con)
Q
Christopher Howarth: The timeframe that we are working on at the moment is that we will leave the European Union on 29 March 2019, so that will be two years, then three years after that. That is a substantial time in which to negotiate. The United States and Australia negotiated a full agreement in roughly two years. Some countries take longer, some less, but that would be a substantial amount of time to revisit and improve agreements.
Iain Stewart
Q
Christopher Howarth: The countries that the European Union has agreements with—South Korea, South Africa, Mexico—are major trading partners. Something that has not been mentioned so far is the plurilateral World Trade Organisation government procurement agreement, which gives British businesses access to over £1 trillion of Government contracts around the world. As a liberal country that tends to accept contracts from other countries, it is important that we get reciprocal rights for British businesses to other countries. Remaining part of that plurilateral agreement, which the Bill allows, would be important for British businesses when seeking Government contracts abroad.
Nick Smith (Blaenau Gwent) (Lab)
Q
Christopher Howarth: I work for a group of mostly Conservative MPs.
Nick Smith
Q
Nick Ashton-Hart: I am not really an expert in how the Australian Government do their consultations, so I cannot describe them in detail. I can describe how the trade officials who I deal with view them. From my conversations with trade officials over the past six or seven years, most of them find the oversight process challenging. The Australians are no exception to that.
For example, in the discussions on the flow of data that have taken place at the WTO and in the trade in services agreement negotiation, of which Australia is a part and which the US and Australia created, a significant portion of all the issues that delayed all the services parts—all the digital elements—of TISA were related to the flow of data and to the Australian negotiators’ view of what they could get their oversight processes to consent to in relation to it. A comprehensive change to their data protection regulation came into force about four years ago, and its structure made it impossible to evaluate how it would work in a plurilateral context because of how it applied liability when private information was given to non-nationals. That meant that they were unable to make an offer or respond to other offers for a considerable period of time—about 18 months, I think—as a result of their oversight process at home. That was in relation to just one part of the plurilateral negotiation.
That example has held true. I have seen it happen with probably half a dozen countries on various issues over time. If there is a political problem in one area, it generally gums up everything else because it is often not convenient for you to say, “I have a problem in Parliament at home, so I cannot talk to you about x and y.” Instead, you would say, “We are still consulting on that.” Meanwhile, you will ask for something impossibly difficult, knowing that the other party will then get stuck. Once your problem goes away, you can withdraw the thing that is causing things to stick over here, because this is the political economy. You do not want to be negotiating on your weaknesses. You want to negotiate on someone else’s, so you have to create them if you have a negotiating bloc.
Alan Brown (Kilmarnock and Loudoun) (SNP)
Q
Christopher Howarth: It is probably a matter of practicalities. There are a number of these around the world and starting negotiations with all of them at the same time is probably impractical. That is not to say that these agreements were not based on EU interests; UK interests are slightly different. There are things we would have prioritised to gain access for British companies and there were some defensive interests that were not relevant to the UK. Taking an example: citrus fruit or things we do not produce in this country. There were things we would have done differently.
These are probably questions to come back to at a later date. At the moment, it is about trying to make sure these agreements still exist when we leave the European Union, so it is the practicalities of getting these agreements moved over into the UK’s name and out of the EU’s name, putting the UK’s signature on them.
Alan Brown
Q
Christopher Howarth: If one of the European Union’s agreements has a quota in it, as the UK leaves, the counterparty might wish to continue to be able to export the same amount into the European Union and the UK. So it would be a three-way negotiation, which would involve splitting the quota up, with different countries taking different views as to what the fair way to do that would be.
Alan Brown
Q
Christopher Howarth: Yes, it would need splitting up. You either do it with the counterparty via the WTO and you would need to discuss it with the European Union as well.
Alan Brown
Q
Nick Ashton-Hart: It depends very much on the nature of the deals in question and how recent they are. All the deals tend to be more focused on tariffs and the like, whereas it is somewhat simpler. Where it involves services, yes, even though these agreements are in force now, as was explained, you still have to accept that what France wanted from that deal when it was negotiated, what Germany wanted, what we wanted: these are not the same as what we and the other party want now. There are things such as protections for certain industries that we do not protect, but the other party will say, “Can we take that out?” and we might say, “Okay, but then we want this over here.”
Human nature is such that, if you are given a chance to negotiate on something and it is of serious monetary value, you are going to ask for a better deal than you got last time. If we buy cars, we do this. We don’t go and buy the car and say, “We will pay full price”—although some people might—or a house or the like. Countries do not do this. So you have to assume that normal human behaviour is not going to be thrown out of the window simply because we are in a hurry to transition our arrangements over to someone else. You have to assume that human nature will still apply and the other country is still going to behave as a rational negotiating partner, which is to seek their advantage from our need for speed.
The only way then to proceed is to say, “Okay, let’s look at these deals as they apply to us now and let’s consider: what is the other side likely to ask for? What is it in their interests to ask for and is it in our interests to agree to it, because it is expeditious, or because it is in our interests, or both?” You have to treat this as a negotiation, not as a replication.
Barry Gardiner
Q
Nick Ashton-Hart: I cannot imagine that the constituencies of this country would see it any other way. This is a substantial portion of our GDP; it is a substantial portion of our export and import. How can you say to people that you passed up an opportunity to make things better, when that was part of the premise under which we are doing this whole exercise in the first place? And our other counterparties certainly will not see our need for speed as anything other than an advantage to them, because it is. We are the ones in a hurry. Japan is 1.8% of our exports or something like that.
The Chair
May I just say that I have at least two, and possibly three people who still want to catch my eye, and we have a maximum of four minutes left? So perhaps a short question and a short answer would help.
Gillian Keegan (Chichester) (Con)
Q
Nick Ashton-Hart: If people are trading with us now under an arrangement, there is an incentive for them to see that it continues. I am not suggesting that that is not true. What I am suggesting is that it is an opportunity for the other parties to ask for things that they wanted last time and did not get, or that the passage of time of those agreements—age—means that it is appropriate to ask now. I am saying that everyone needs to bring home some benefit for something.
Gillian Keegan
Q
Nick Ashton-Hart: I am saying that I have never seen or heard of a Trade Ministry not asking for some improvement when any deal is being renegotiated, because that is how you are seen to be doing your job.
Gillian Keegan
Q
The Chair
May I move on finally to Anna McMorrin, because she has been waiting patiently, for probably the last question?
Anna McMorrin (Cardiff North) (Lab)
Q
Nick Ashton-Hart: It depends on the nature of the agreement. If it is a situation where a quota has to be split, then yes. We see this in Geneva now, where the quotas at WTO level are being split up, or even our closest trading partners are arguing over whether one plus one equals one. In other areas, it is not necessarily the case. It really depends on the way the original agreement was made, and who else might benefit from a change to it through an MFN clause, or the like.
Anna McMorrin
Q
Nick Ashton-Hart: Where there are rules that we are accepting from the EU, then of course we have less flexibility to make a change if it is asked for by the other side; that would conflict, of course.
The Chair
Order. That brings us to the end of the time allocated for the Committee to ask questions. I thank witnesses for their evidence, and I thank Nick Dearden and Nick Ashton-Hart for their written evidence; I am sure that we are all grateful for it.
Examination of Witnesses
James Ashton-Bell, Chris Southworth, Tony Burke and Martin McTague gave evidence.
The Chair
Q
For this sitting, we have until 11.25 am. Would each of the witnesses please introduce themselves for the record?
James Ashton-Bell: I am James Ashton-Bell, head of international trade and investment at the Confederation of British Industry.
Chris Southworth: Chris Southworth, secretary-general of the International Chamber of Commerce here in the UK.
Martin McTague: I am Martin McTague, national policy director for the Federation of Small Businesses.
Matt Western (Warwick and Leamington) (Lab)
Q
Chris Southworth: There are four key elements within the Bill that are broadly in the right direction of travel around setting up a trade remedies Bill, sharing data and so on, but there are missing elements—I think we agree with a much wider community of non-governmental organisations and unions—where we need a more inclusive approach to dealing with trade, more democratic oversight and more policy connectivity. We are speaking in a context of G20, where there is a very public commitment to developing a free trade model that works for everyone. That is missing in the current Trade Bill.
Matt Western
Q
James Ashton-Bell: I think we start from the place that the Bill does a lot of really important things for business, in terms of providing continuity. Continuity is absolutely key in all business leaders’ minds when it comes to our trade relationship with the EU, but also with third countries and the World Trade Organisation. The Bill goes a long way toward providing assurances with regard to the WTO on things like procurement, ensuring—as you have heard—that trade remedies are available and provisions for replication of free trade agreements that we currently enjoy through the EU.
I think business is looking for more in the longer term, and there is a broader question about whether or not this is the right vehicle to use to create the kinds of structure that they need around consultation. Any major trade country in the world has extensive and formalised ways of engaging with civil society to ensure that they get the maximum amount of input into trade policy that they need. The question of whether or not this is the right legislative vehicle to create such a structure and such a process is one that I will leave to Members, but business is looking for those kinds of structure, and if not now, when?
Matt Western
Q
James Ashton-Bell: Yes.
Matt Western
Q
Martin McTague: Our clear priority is the transition process. It is vitally important that there is no cliff edge at this very early stage. Our members, and the small business community as a whole, see this as an enabling Bill, something that will help a smooth transition, so in principle we welcome it.
Matt Western
Q
Chris Southworth: There is a general recognition across the international community since the EU referendum—of course, that was followed by Trump and further issues across the G7—that the existing models for handling trade need to change. That is because there is a disconnect within society and over wider communities and regions, particularly in the lower-skilled areas, where they have not benefited from the growth of trade.
Everybody is looking for exemplars. Some countries have more structured set-ups, such as the US and New Zealand, where it is much less around the ad hoc consultation and engagement that we have in the UK. That is one key point to make. There are definitely lessons to learn from elsewhere, including the EU, I have to say. The propositions in the Trade Bill are a lesser option than what already exists within the EU. Although the EU itself can improve, there are elements of their structures that would work well for the UK, going forward. That is a key point to make.
The Chair
May I interrupt to welcome Tony Burke, who is the assistant general secretary of Unite the Union? We are very grateful to you.
Tony Burke: Apologies for being delayed. St Pancras and King’s Cross tubes were closed. I have done some fleet footwork to get here.
Matt Western
Q
James Ashton-Bell: I support everything that Chris has just said. For us, we look at the spectrum of different formal ways of engaging civil society. At one extreme you have the United States, which has an incredibly elaborate set of technical committees, numbering several hundred different members of civil society, to provide technical assistance to officials. At the other extreme there are less formalised systems for economies that tend to be a little bit less complex and tend to be significantly smaller than ourselves.
Business would come down somewhere along the lines of being closer to the US model than something less formalised for a less complicated economy that is also quite a bit smaller. Does that mean we need everything that the US model has? No, absolutely. We need a UK-specific bespoke model but it would probably be quite elaborate, to ensure that it takes in every business and wider civil society from across every region of the UK, across every size and shape of organisation and across all the different types of technical expertise, which crosses many different policy issues—everything from intellectual property to issues of data.
Matt Western
Q
James Ashton-Bell: I struggle to understand how any Government, engaging in trade policy, be it at multilateral or bilateral level, would be able to get the best possible outcome for that negotiation unless they were using the full strength of their economy, pooling from the best minds that exist within and outside Government.
Matt Western
Q
Martin McTague: It is difficult to draw parallels with any other country withdrawing from a 40-year relationship. The view that we have taken in the past is that consultation has worked well, inasmuch as the small business community, which we think is a vital part of the economy, has been listened to, and we would hope that that would happen in future. However, there is a temptation, because the bigger corporates sometimes have more access to Government, that small business does not really get listened to. This component, we think, is absolutely vital in the development of the policy.
Mr Prisk
Q
Martin McTague: At the moment our view is that the early stages of development of TRA look encouraging, but we know they are a consultation. We know that they are looking at a variety of different options, and we are willing to wait for the consultation process before we get into a committed decision.
Chris Southworth: The principles are there in terms of setting up a trade role and it is as much to do with the speed around that. I would echo the same thoughts: there needs to be a lot more consultation around them and there needs to be clearer evidence of learning best practice from others. We are not the only country proposing a Trade Remedies Authority. I would start with the idea that having a trade remedies authority and the core concepts that exist in this Bill feel broadly right.
Mr Prisk
Q
Chris Southworth: Yes, I would have thought so. I do not think there should be any opposition to the idea that one may need to evolve in time. The UK has to re-learn how it does trade as an independent country, so we will not get it 100% right in the beginning. It should be able to evolve over time, and if there is a better way of doing it, then do it.
James Ashton-Bell: I take a slightly different view. As to what is in the Bill at present, our internal analysis of the Trade Remedies Authority is that there is a fundamental question, and we are looking for an answer to it: that question is about who makes the ultimate decisions about when to take action and when not to take action.
Having an independent organisation to advise on the data that exists—or does not exist, in many cases—is useful. The EU has found time and again that it does not have access to the kind of data information it needs to draw the kinds of concrete conclusions that it would like to draw. Given that scenario, it is useful to have an independent organisation to make those choices and to be clear about what information is and is not there.
When you have things like the economic interest test that is currently being floated as part of this authority, which in essence allows for the identification of particularly problematic trade behaviour from a third country and for it not to be actioned by the Government or authority, it means that there will be a decision at some point not to take action. If there is not enough information, then that in itself becomes a subjective decision about which parts of the economy are worth protecting using these particular tools, and it is argued that, if a subjective decision is going to be made, then it needs to most certainly be made by a Minister who is accountable for making those choices.
Tony Burke: Right from the get-go, the Manufacturing Trade Remedies Alliance, which consists of three trade unions and a number of trade associations including UK Steel, chemicals industries and ceramics among others, pressed strongly to get a trade remedies clause or a structure in there. We were able to put forward our proposals in advance of the discussions taking place at this level. One of the things that we would say from the trade union point of view is that it is absolutely essential that the TRA has a trade union voice—a worker’s voice—on it, particularly at non-executive level. We should also obviously be subject to International Labour Organisation conventions that protect workers in that remedies arrangement. We are supported by the employers on this. From our point of view, the situation in Unite is that we have many members in manufacturing who have suffered at the hands of dumping: steel, tyres, ceramic, chemicals and pharma. It is a big concern for us. We would see that we need a remedies authority that is transparent, and that has trade union and employer representation. At the end of the day, Parliament has to have consent over any decisions made.
Mr Prisk
Q
Tony Burke: As it stands, but we do not see the transparency that we would like to see, and we also have a view about what appears to be an ability for the Minister to appoint people. We believe that working people and companies should have an opportunity to have a say, and also for trade unions to bring a case. This is important. We have learned from America. We have worked closely with the steelworkers’ union in the United States. They as a trade union in America do bring cases to protect their members in steel, rubber, paper making and industries like that.
Barry Gardiner
Q
James Ashton-Bell: My organisation does not have a defined position on that blank sheet of paper you have just described, but to follow your rationale, and consistent with what I have said so far, bigger organisations do not have a monopoly on understanding how trade impacts the economy. In anything where you are making choices about trade and how it will impact the wider economy, you should have a wide and balanced group of people advising Government, or an independent authority, about how to make those choices. That means, indeed, that small business are very much equal to big business, and workers also, because workers are just as impacted as the businesses themselves.
Chris Southworth: I just want to clarify my point. It is exactly the same: the representation is a critical point. An independent body, yes, but there must be representation within that independent body to represent all the important voices, which includes all those here, but I would also include NGOs and civil society, who have equal interest in the implications of trade. They must be at the table and that has to be in everyone’s interest, including business—big, small and medium.
Martin McTague: Barry, it will not come as a massive surprise to you that, yes, I do agree that small business should be a serious voice on this. It is nice to know that James supports me. That is a welcome change. [Interruption.] It is something that we have clearly got unanimity on.
Mrs Badenoch
Q
Chris Southworth: Ultimately, it is about having a rounded decision made by an independent body. That political oversight is critical—James is completely right. Ultimately, it is going to come down to a political decision whether a decision is made one way or the other. If you operate in an organisation like the World Trade Organisation, then all these voices come into play. It is incredibly important that the decisions prior to any engagement in a global environment are made in a good way that is inclusive. The role of Parliament is critical in that too.
Mrs Badenoch
Q
Chris Southworth: Trade is slow, it is technical, and it is difficult. It involves implications for people’s lives and for businesses of all shapes and sizes in every region. There isn’t a component of public or professional life that is not impacted by trade. It is important that everyone has their say, so that when the negotiations begin, the negotiators and all the stakeholders are confident on what those positions are. It is equally important that, during the negotiation when important points come up that are difficult and tricky, which they always are at that stage, there is also an opportunity to come back and say, “What do you think? Do you agree with this, because we are going to have to make a compromise?” That could mean an implication for Welsh farmers, businesses in the midlands, or local communities in Sheffield. It could mean all of those things.
Mrs Badenoch
Q
Chris Southworth: Again, you need to come down with a political decision at some stage on whether or not it is right in terms of timing. The key point is: has there been proper consultation beforehand and has every stakeholder had the chance to voice their views in a proper structured format, not throughout the consultations, but in a proper structured way? That is the important point. Ultimately, there is always a sensibility around trade remedies, particularly if you are talking about things such as steel dumping. That has huge implications for a lot of people, particularly in geographies that tend to be vulnerable, so there is a difficult decision to be made. It is important that everyone has a chance to have their say about what that decision should be.
Mrs Badenoch
Q
Tony Burke: I think we would agree with everything that was said about the make-up of the board. It has to be wide-ranging and it has to have expertise. On the point you raised: when we put our evidence in from the Manufacturing Trade Remedies Alliance—industry and the unions—we wanted a system that worked. Don’t forget, we have not done this for a long, long time. We needed to make sure that we got it right. There were some folks’ voices saying, “Let’s have a fast-track. Look at America, it takes a long, long time”. We said, “No, if you do fast-track, you could get it wrong”. You need to have a system that works, step by step, but is widely consulted on, as has been said.
We may have problems in a particular industry, where we have to bring expertise in and we need to have people in that discussion at the remedies authority who know exactly what they are talking about and are able to demonstrate it. They can be very complex. When we look at the US system, it takes a very long time and moves very slowly. We do not want to rush it, but we need something that works and is as wide as possible. As I said earlier, I do not think impartiality comes into it, providing there was oversight from Parliament.
Faisal Rashid
Q
Martin McTague: We believe it has been taken into account at this early stage, but a lot more consultation needs to take place. We have a position and we are developing that position on exactly how this will affect smaller businesses. At this stage, it is not a developed position.
Faisal Rashid
Q
Martin McTague: It is only in conversations with officials that we believe that a lot of those consultations have been accepted, or at least understood. We are not at a position now where we are taking a firm line on this issue.
Faisal Rashid
Q
Martin McTague: I can come back to you with concrete examples, but I do not have them at my fingertips.
Chris Southworth: No, I do not think it has been satisfactory at all, certainly for the international community, which is what I represent. When I asked the question of officials, “Who have you actually consulted?” I was told, “The USA and Japan.” That is completely inadequate in terms of the countries that the UK is trading with. Their voice—they also have SMEs, also in supply chains, also funding livelihood—is equally important. This is going to affect other people’s countries and communities. So it was completely inadequate and haphazard. If you happen to name a name, that person will get consulted. If that person happens to be missed, we do not know, and they are completely missed off the consultation. That is not a way to consult on trade. It is slapdash.
Faisal Rashid
Q
Chris Southworth: As I understand it from the explanatory notes and the Secretary of State’s speech on Second Reading, there is no intention of consulting within the Bill—that all comes later, whenever that is. It was not clear in any of the communications whether that would be a further Bill or a paper. It all sounds distinctly like it will be something informal, which I would argue is completely the wrong approach. Bear in mind that the Bill is the first opportunity for Government to tell the world, not just the UK, how they will create a free trade model that works for everyone. This is the moment to set out the stall on what that structure for engagement will be. It is all missing in the Bill. There is nothing in it.
Faisal Rashid
If there is no new Trade Bill, those Henry VIII powers stay.
Chris Southworth: I go back to my point that, if I were living in Scotland, Northern Ireland, Wales, the Yorkshire Dales—where I am from—Sheffield or the north, I would be concerned about where my voice is coming into this process. We are talking about rolling over the terms of 88 countries. That is a lot of countries, and they are not all EU. It is extremely unlikely to happen. I would want to have a say in that process, not to wait.
Tony Burke: When the Manufacturing Trade Remedies Alliance put forward its document, which it had worked considerably hard to produce over a long time, we were surprised at the speed at which the whole thing moved. There were areas that we had gone through in great detail to prepare.
As I have said, there was unanimity on things such as International Labour Organisation conventions, trade union representation and industry representation, and on some of the real technical detail as well, which we could not go into today. We would be happy to revisit that document. I understand that the other folk from the MTRA are giving evidence to a different Committee today, and I think they will say very much the same thing. We have no problem in going through it again and picking out some of the key issues from the point of view not just of trade unions but of industry.
Some trade associations on that body are very concerned about what could happen to their industries. They will be putting forward those points of view today. The speed at which it was done was far too fast. The view seemed to be that that was it, even though people had spent a lot of time putting the arguments together.
Tom Pursglove
Q
Tony Burke: The big danger is that, if we do not have one that works on day one, we could be subject to what we have already seen in the past few years. Steel has been subject to the most horrendous situation for the past two or three years—lots of jobs have been lost. The industry came together to try to make sure that it holds together, but without a trade remedies structure in place, the big fear is that we would be subject to the dumping of steel again, particularly from countries such as China, although I am not singling it out. That is one of the issues.
There are other constituencies where we talk to colleagues—MPs and others—and our members. The tyres industry, for instance, is very concerned about the dumping of cheap tyres on the market, which would undermine our premium brands and well-paid skilled jobs. We need something in place. Of course, as I have said, we have not had anything for 40 years and it will take some time to work through, but it is important to have a wider group of people who can push the arguments for various industries.
My fear, and the fear of our members in steel in Corby and other steel areas, is that, if we do not have trade remedies in place, we could be faced with horrendous dumping on the basis that, in respect of what is happening and what has been said, there is massive over-capacity. Steel in particular is being sold at cheaper rates than it costs to produce.
Tom Pursglove
Q
Tony Burke: You have to have something in place. Certainly, many of our members in the steel industry have followed this and are extremely concerned about what could happen and about market economy status being granted to China. Those are the key issues, and they will expect us to keep pushing the issues wherever we can to get this right. It was said earlier on. We do not want to just harp on steel—there are lots of other industries—but it is one area where we have had a really bad time. Many of our members in the steel industry understand the arguments and would expect us to come back to the issues again whenever we could.
Tom Pursglove
Q
Tony Burke: We have not got to that situation directly in talking to our shop stewards and reps. We have been talking with our parliamentary colleagues who have steel in their constituencies, and our union reps are talking to them, so there would be concern.
Judith Cummins
Q
Tony Burke: No. We have been working with the Manufacturing Trade Remedies Alliance, which includes a number of trade associations—as I have said, steel, chemicals, fertilisers and so on—and I think there has been a coming together. We would have preferred a longer period, obviously, to go through this in detail—a longer period to argue for the things that we put forward in our document, which were generally accepted by everybody. To answer your question, the only way we are going to be able to make sure that the voice of working people is heard is to have representation on that body directly from the trade unions.
Chris Southworth: I would make an additional point. I completely support that point, but if there is one thing we have learned over the last year and a half, it is that we have to accept that there is generally a low understanding of trade, and trade itself has moved on significantly in the last 40 years; the world we live in today is not the same as it was 40 years ago, either. I think that extra diligence in relation to consultation and informing the public, and business for that matter—businesses are in the same position, surprising as that may sound—is a good idea.
Bill Esterson
Q
James Ashton-Bell: Specifically when it comes to trade remedies, I think the most important place to start is: where have mistakes been made and where have processes not delivered outcomes, either in a timely way or in terms of the right kind of outcomes for the wider economy? I know there is a lot that officials have been looking at to learn what not to do from the EU, because everyone agrees that that system is not perfect. Much of that thinking has coloured some of what has gone into this Bill. There are aspects of the US system that do not work. No one has a system that we have found you can hold up as an absolutely perfect system. There are always going to be different balances that have to be made, but the fact that officials working on this have looked at the US, Canadian, EU, Japanese and Swiss systems means that they have certainly made a good effort to try to learn from others’ mistakes, and that is an excellent place to start.
Bill Esterson
Q
James Ashton-Bell: Getting to some very technical areas that, as the Bill stands, would be covered by secondary legislation—so the devil will be in the detail—for me the central question is who ultimately makes decisions about whether to take action, where to take action and what is a proportionate action to take. The reason I say that is because taking action in a case of using trade remedies and defence is a highly political move and a highly economic move. It is never without controversy and, as I mentioned before, never with absolutely perfect information and data to make an objective decision.
Having very clear reporting structures and decision-making structures about who is the ultimate arbiter is key. Having lots of time for everyone to feed in as much information across the wider economy is key. So have as much information as you can at the beginning, but have a very clear process for using that information and have clear decision making to ensure that the outcome is someone’s responsibility and that they will be held accountable for it. It feeds into our wider industrial strategy; it is not just a trade issue.
Bill Esterson
Q
James Ashton-Bell: The mistakes are usually procedural. I am not going to pronounce on individual decisions because, as I said, they are never made without controversy, and for me to pronounce on another country’s individual trade remedy decisions would put me in a very difficult place. In terms of process, some have commented that in the American system, they can be very rushed and not all information or all stakeholders are taken into account. In other instances, such as with the EU, the process can be so long that they do not actually take action early enough to ensure that you can fix the problem when it is a problem. Procedure is absolutely core to most of the problems that occur when designing a system like this.
Chris Southworth: I have a difficult situation, which is a real one: the market status of China. That was very live last year or the year before. You have a classic situation there where we clearly want to be supportive to China as it comes on board as a global leader. China itself knows perfectly well that it wants to wind down steel production and that it is over-producing, but you cannot just wind down the Chinese economy overnight—that will take 10 years to do, as Europe did with its mountains in the past.
Where is the balance? In the meantime, the impact is on steel communities in the UK, across Europe and other parts of the world—we are not on our own—but who decides what that balance is? There is an implication either way on either the political relationship with China and supporting the Chinese economy, or local communities here in the UK. Someone has to come down and say, “Okay, this is where we are going to be.” That may potentially evolve: you may want to take several positions over a period of time so that you get to the end goal that you collectively want, but that must involve the people who will be impacted by those decisions.
Bill Esterson
Q
Chris Southworth: I have already made the point, and broadly speaking I support the comments made here that you have to have something on day one. Do not be afraid to evolve that over time, but you have to have something in place that feels broadly right. Having listened to the conversations here, I would say that the stakeholder representation needs to be looked at, but the basic structure is there to work with—get on with it.
Bill Esterson
Q
Tony Burke: I agree with some of my comrades here. Everybody has got to look around the world at different systems. In Unite, we are focusing on the US system primarily because of our relationship with the United Steelworkers union in the States, which, as I have mentioned before in other areas, almost does this for a living. It has officials on the hill working on this all the time, and at times it is very time consuming and costly. So if there are many mistakes, they can either be rushed in the States, as has been said, or be very slow and very costly. We are looking for a system that works and that can be easily understood. I do not know whether you want to extend the debate into the market economy status for China. I will resist the temptation, but I have to say that that is a major issue for us in our industries.
Martin McTague: The only thing I would add is that in the States there is a temptation—there seems to be plenty of evidence that it happens—for the bigger, more concentrated industries to get dealt with more quickly. What you have got is that the more fragmented industries that are supplied by lots of smaller companies do not get dealt with effectively.
Gillian Keegan
Q
Tony Burke: The EU system was slow. At times, when we had the situation that I mentioned—going back to steel, when we had a crisis—we were quite concerned about the glacial pace of getting the whole thing moving and recognising what was happening. We are looking for the TRA in the UK to be, as I said, one that we can move forward on, and for decisions to be made that will assist companies and industries fairly quickly, without being too rushed—you need to take opportunities to listen to what people have got to say and take the best advice and evidence.
Gillian Keegan
Q
James Ashton-Bell: My only comment would be, based on what is in the Bill, that it feels like there is a good framework to start with, and to work from that to create a better version of what the EU currently has, but much of whether or not that will be successful will be defined in secondary legislation, I believe. Based on what I have seen, we have a good starter for 10; we now need to build on it and ensure that more consultation responses on some of the more controversial issues are taken into account, and then translate that into secondary legislation.
Chris Southworth: I would support those comments. I would not be too quick to dismiss the EU; they are very difficult decisions to make across 27 countries. The decisions themselves are incredibly diverse, as well as the 27 countries being diverse. There are very difficult decisions when you are talking about these kinds of issues around trade remedies.
Gillian Keegan
Q
James Ashton-Bell: Correct.
Chris Southworth: I agree.
Martin McTague: The principle is that we want to get this thing up and running as quickly as possible—efficiently and possibly more efficiently—while taking into account some of the interests of smaller businesses. I think that that is clearly understood, and we support the points that James made earlier, but do we need it? Is it something that essentially has to be there on day one? I do not think there is any doubt.
Barry Gardiner
Q
Chris Southworth: Again, I think it all goes back to consultation and scrutiny. If people have an opportunity to look at the measures or issues properly, you are more likely to head those issues off. I agree that we do not want to become the second best option, or the optimal option for the wrong reasons, if you know what I mean. At the end of the day, these are people’s livelihoods, so it is very important, but it comes back to the same premise throughout this conversation: consultation, proper scrutiny across the stakeholders with Government and then coming to a conclusion as to what is right.
Barry Gardiner
Q
Chris Southworth: If we are going to create a free trade model that works for everyone, the answer is absolutely yes. There must be those considerations and there must be that input from the range of stakeholders. It has to be the right way forward. It is the only way forward, because what we definitely know is that what we have at the moment does not work. The backlash to that model is sufficient to make everybody sit up in their seats and say, “That doesn’t work, let’s try and be better.” The answer to your question is yes.
James Ashton-Bell: I agree with that. We do not have a defined position as an organisation on this, but I would say that we do have a defined position that trade, industrial strategy and your wider domestic agenda are inherently linked and should never be seen as running in parallel or separate. Given those concerns, we would say that you would never take a decision on anything to do with trade defences without taking into account every impact on your wider economy before making that choice.
Tony Burke: I agree. The question of taking the environment into account is important, but so is this question of social impact. When you look at what could happen with the dumping of goods and how that affects particular companies or industries that centre around certain areas, I think it is absolutely essential. As colleagues have said here, you have to take into account an industrial strategy that ensures that all regions and industries—particularly foundation industries—are protected as best as we can possibly do it. We definitely would need to include the environment, but social impact on localities and industries is very important.
Barry Gardiner
Protect Mr Pursglove’s constituents.
Martin McTague: The only thing I can add to that is that I do not see anything in the Bill that prevents you from doing that. This is something that we would support in secondary legislation.
Barry Gardiner
Q
Tony Burke: Are you referring directly to the MTRA’s evidence, Mr Gardiner?
Barry Gardiner
Well—
Tony Burke: Yes. Well, as I said earlier on, one of the issues was that we have done a tremendous amount of work on this and lots of wide consultation. We came up with our proposals and we were quite surprised that almost overnight that was what we were going to do. What was the feeling? The industries represented on there were somewhat taken aback that it was done so quickly, and concerned—as would be expected—about whether their voices would be listened to. From the union’s point of view, that was very much the same. We thought that we had done one hell of a lot and put the arguments there very clearly, and obviously some of the key issues for us, such as ILO standards and employment protections, were not there. Hopefully we can try to revisit them and get them in at some point.
Barry Gardiner
Q
Tony Burke: I believe that was the case, but then I will stand corrected. I remember it all happening.
Barry Gardiner
Q
James Ashton-Bell: The thing I can say is that the optics were not ideal.
Barry Gardiner
You should go into the diplomatic service.
James Ashton-Bell: We start from a position that much of what is in this Bill is a framework. The framework itself can be argued to a greater or lesser extent as non-controversial. The controversy starts arising when you start putting in the detail that is not currently in the Bill as it stands and, from our perspective, more importantly, what is not in the Bill at all and probably should be. Those are bigger questions.
On that basis, we know a number of conversations happened in the run-up to publishing this Bill, particularly around the issue of dumping. The elements that went into the Bill seemed to be the ones that were the least controversial and could be built around with more detail. Presentationally, was it the right thing to do? Maybe not, but I have more confidence that there is opportunity for the House to alter this legislation to fill in on the more controversial element.
Chris Southworth: My overall impression is twofold: too fast, and not enough consultation of the international business community, bearing in mind we are talking trade here. This is not public health in Yorkshire or somewhere. This is trade. We must be talking to our trading partners, who are just as perplexed and confused about what is going on over here as anybody else. I don’t think they were consulted enough, partly because of the speed and partly because there was not enough communication as to what the UK is trying to do. That would be my answer.
Martin McTague: The best way to answer this is that small business as a whole is completely split down the middle. If I speak to the average leave voter, they would say “Why don’t you get on with it?” This isn’t fast enough for them. The average remainer will consider it a recklessly rushed process. We are not reaching a conclusion—it depends on which perspective is looking at this. That is largely the view we are getting from small businesses.
Barry Gardiner
But however quickly you take the process, you would want—
Martin McTague: How quickly you take the process is either perceived as being far too fast or reckless.
The Chair
I have at least three people still seeking to catch my eye and we have a maximum of eight minutes. If we can have short questions and short answers, and if a panellist does not feel they have anything to add to someone else’s answer, perhaps we can skip on, just to try and get as many people’s questions in as possible.
Alan Brown
Q
Chris Southworth: Overall—not just the Trade Remedies Authority—I would be concerned if I were in the devolved Administrations. There is specifically no opportunity for the devolved Administrations—or the regions, I have to say—to feed into decisions on trade. I would be very concerned about that, particularly in the devolved Administrations, where there are vulnerabilities on a whole range of different industries.
Alan Brown
Q
Chris Southworth: My point is back to James. What is missing in the Bill is clear direction on what the Government are going to do to create a new, more inclusive structure to include all the stakeholders. That is the central point to all of the content of the Bill and every other Bill relating to trade, going forward. We must do things differently and it is all missing. There is not even a reference to it. There are references to things that will be very agitating, such as Henry VIII powers—the ability to overrule. That, to the outside world, will look like an aggravating factor, I would have thought, when we need to do the opposite and be more inclusive.
On the world stage, I have to say, the UK Government are exemplary on this. We are pushing out the message very publicly, as the Secretary of State was doing in Argentina just before Christmas time at the World Trade Organisation ministerial conference, around inclusive trade—the need to do trade for everyone and to make it work for everyone. It was exemplary. We were the most vocal Government around it, actually, but back home, when you look at the Bill, you think “That doesn’t make sense.” That was my reaction to it.
Alan Brown
Q
James Ashton-Bell: I agree with that.
Faisal Rashid
Q
Tony Burke: As it stands, no.
Chris Southworth: Look at what you have got today. That is what you get when you do not get proper consultation and involvement in trade. That is what we are dealing with right now: huge social division, division and disparity across the regions, industries vulnerable. You get all of that. That is what we are dealing with. That is what you have if you do not make change. That is why the Bill needs to demonstrate change.
James Ashton-Bell: The reason we have been calling for a very formalised form of consultation is twofold. One, there are many examples in history—many countries have designed very elaborate free trade agreements that businesses do not use because they were not designed with business in mind. That is a waste of everyone’s time and our negotiating effort.
The second reason is that we find in many instances, as we saw when trying to ratify CETA, through Belgium, or with TTIP, if you do not have an inclusive process that is incredibly formalised and elaborate, you actually lose public support. Having the right advocates to push the deal across the line is something that is good for the economy. It needs to be grounded in fact to ensure that it is good, and also something that has consensus and that we can actually stand behind.
Tony Burke: Again, I am in danger of agreeing with a lot of folks in what they are saying at the moment. Regarding what has just been said, if you look at CETA and TTIP, there was massive opposition from across the spectrum. It is important that we get this right, and inclusivity is the key. We had no involvement in discussions with regard to the UK in those trade agreements and I think the same thing could happen again if we are not careful. We cannot just go casting around trying to pick one off the shelf. This is going to be a very complex issue, so everybody needs to be on board.
Martin McTague: We have regarded this as an enabling piece of legislation. It is a framework. I can say that the area where TTIP really came alive for small businesses was when they introduced the small business chapter, which meant the real concerns of small businesses had a basis on which they could discuss those issues and get them properly grounded.
Matt Western
Q
James Ashton-Bell: I do not believe the Bill as a vehicle can deliver a good Brexit in any scenario. There are too many Bills and pieces of legislation that are necessary to deliver a good Brexit. This is one piece of the puzzle. There is a lot of detail that is not in here. Our position is not necessarily that that has to be in here. There are other pieces, like the consultation issue, that we believe need to be formalised in legislation. That could happen at a later date.
Our concern is that to deliver a good Brexit we are going to have so many pieces of legislation in a very truncated period of time. A lot of pressure will be put on Parliament to rush through legislation without properly scrutinising it, or legislation will not make it through. Either way, we get a bad outcome. Our question comes back to the one I started with. If there are essential elements for your trade policy, if they are not in this Bill, why not, because you have it in front of the House anyway?
The Chair
Order. That brings us to the end of our time allotted to the Committee to ask questions. I thank our witnesses on behalf of the Committee for their evidence, in particular Mr Burke, for the tortuous journey he had getting here.
Trade Bill (Second sitting)
Tuesday 23rd January 2018
(6 years, 10 months ago)
Public Bill CommitteesRead Full debate Trade Bill 2017-19 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 23 January 2018 - (23 Jan 2018)
The Chair
For those of you who do not know, I am James Gray. I am a stand-in for Joan Ryan, who unfortunately has, I think, a family problem of one sort or another. I shall be in the Chair for this afternoon’s proceedings. I mentioned earlier on that, contrary to normal practice, I voted on Second Reading in favour of the Bill, but I do not think that that affects my ability to be dispassionate. A Chair who had not voted on the Bill could not be found, so that is why I am in the Chair—I hope that is all right. With that, let us have the witnesses in, please.
Examination of Witnesses
Dr Lorand Bartels, Dr Holger Hestermeyer, Jude Kirton-Darling and Dr Brigid Fowler gave evidence.
The Chair
Q
Dr Fowler: I am Brigid Fowler, from the Hansard Society.
Jude Kirton-Darling: I am Jude Kirton-Darling, a Labour Member of the European Parliament for the north-east of England, and a member of the European Parliament Committee on International Trade.
Dr Hestermeyer: I am Holger Hestermeyer, the Shell reader in international dispute resolution at King’s College London.
Dr Bartels: I am Lorand Bartels, a reader in international law at the University of Cambridge, and senior counsel at Linklaters.
The Chair
I do not know whether you have a thought to do so, or would like to do so, but you would be more than welcome to make a short introductory statement if you wish. If not, we will move straight on to questions, starting with Barry Gardiner.
Barry Gardiner (Brent North) (Lab)
Q
Dr Hestermeyer: The first thing to note—in fact, it is even in the Government’s comments on the Bill—is that the deals will be technically new international agreements, so they will be technically separate. As to their content, first, there are the technical details that will need to be changed—for example, rules of origin, which define when a product benefits from a trade deal. Those are quantities, so they will say, “50% of a car has to be from the EU.” That, of course, no longer fits; it will have to be the UK, and the numbers will have to be changed too, because a UK car is substantially now 44% UK-content. We will not benefit from the deals if we do not change the numbers. Those are technical issues, but they are vital.
There are some deals that are structurally so different that, quite frankly, I wonder whether we really want to reproduce them one-on-one. For example, Norway, Iceland and Liechtenstein are in the European economic area—as was recently explained, in the sidecar to the single market. Do we really want to reproduce those deals by statutory instrument? It seems peculiar to me that we would want that. Turkey, for example, is in a customs union with the European Union. Do we want a customs union with the European Union? We might say yes or no, but I wonder whether a statutory instrument is really the way to take those decisions. Switzerland has a whole number of agreements, some of them linked by what is called a guillotine clause, free movement. Do we want that? That probably could not be reproduced even if we did want it, so that is also a no.
You might say, “All this is insignificant,” but if you add up the numbers, the EEA is 2% of UK trade, according to the Government’s assessment of the Bill; Turkey is 1.3% and Switzerland is 3.1%. That amounts to roughly half the trade we are talking about, or half the 15% that the Government assessment arrived at for those agreements. I do not think that will be rolled over, because I am not sure we would want it, quite apart from the technical issues that will arise and the question of whether other states and our partners will say, “We also want something.”
Dr Bartels: I would rather focus on the implementation aspects. Obviously, the question of which agreements the Government choose to roll over is a political decision; it depends on negotiations and so on. My reading of the Bill is that it talks about the implementation of those agreements. What is important there is to identify the scope of the agreements that can then be implemented.
One point of interest is that the Bill extends to agreements that have been signed but not ratified as of Brexit day. I think we can safely say that that is likely to be the comprehensive economic and trade agreement with Canada, the agreement with Japan and others as well; and if the EU agreement is provisionally applied at the same time, some might think that they are in force and ratified. In fact, I found the language in some of the documents around this area blurred the point a little bit, but there is a fundamental difference in international law between a signed and provisionally applied agreement and a ratified agreement. The Bill is quite extensive when it comes to signed agreements.
There are other points to do with the definition of the sorts of agreements that are covered here, such as a free trade agreement, which is here defined to include a free trade agreement and a customs union agreement by reference to World Trade Organisation definitions. Then, interestingly, we have in clause 2(2)(b),
“an international agreement that mainly relates to trade, other than a free trade agreement.”
I do not know whether you would like me to say anything about that now. It could be quite broad. I noticed one idea in some of the amendments, which was that it could be further defined as including a strategic partnership agreement, the language used for the framework agreement sitting on top of CETA, and mutual recognition agreements.
I must say that I think the amendment is very comprehensive; for a start, the strategic partnership agreement is not even tangentially about trade, so it could not really be described as an agreement about trade. The point of it is political and human rights conditionality and so on. In that sense, the definition is over-inclusive. It is also under-inclusive, in the sense that mutual recognition agreements are only one type of agreement relating to trade that one might legitimately want to include here. For instance, one would also have customs co-operation agreements as an obvious agreement that should be rolled over and implemented.
The broader point is that, despite what I said about the strategic partnership agreement, it is an outlier in this respect. A lot of agreements have to do with trade. Environmental agreements have trade aspects; the Montreal protocol on substances that deplete the ozone layer is all about banning trade in ozone-depleting substances. The convention on international trade in endangered species is all about trade in endangered species.
Therefore, I think the definition is a little bit unclear. One could say, “Well, it’s agreements that just liberalise trade,” but that is a problem too, because FTAs do not just liberalise trade. They have intellectual property provisions, which might arguably in some way promote trade, but more likely investment. Certainly, they are not the first thing that you think about when thinking about a trade liberalising agreement. There are provisions in the FTAs in addition to intellectual property: competition law, labour and environmental protection provisions are in all the modern EU agreements that we have talked about. Essentially, this gives the Government the ability to implement labour standards provisions, which include not exactly sanctions, but obligations that need to be performed. Frankly, these two Bills strike me as very old-fashioned; they do not seem up to date with the reality of modern trade agreements.
Jude Kirton-Darling: I will follow on directly from that last thought, from my experience inside the European Parliament as an MEP, scrutinising trade policy at EU level. Of course, our MEPs have done that job for the last few decades. From our perspective, what really is missing from the Bill is the parliamentary scrutiny dimension. No-one on the panel has mentioned that so far. In terms of process, compared with the parliamentary scrutiny powers that British MEPs have today in the European Parliament, the Bill is an enormous step back in democratic oversight of trade agreements.
To add to what has already been said from a legal perspective about what these trade deals are, any kind of roll-over is likely to come up against the offensive interests of our trading partners. We have already seen that what was supposed to be quite a technical question of the division of tariff-rate quotas going to the World Trade Organisation has turned into an enormous political issue, with countries who supposedly are our friends and allies defending very actively their offensive interests in relation to tariff-rate quotas.
Once we start opening trade deals up to technical tinkering, whether that is a number here or a point there, our trading counterparts will also use that opportunity to try to get a bit more leeway for their interests. It is likely that these deals will be very different at the end of the process from what we have at the beginning. That parliamentary scrutiny—the role of MPs in ensuring that there is democratic oversight—is absolutely crucial but entirely missing from the legislation.
Dr Fowler: If the question is which of these agreements will change significantly, my answer is, we do not know that. Other people who are much more expert than me in the details of trade agreements would have better sight of that, but as someone who looks at what is coming to and through the Westminster Parliament, we simply do not know at the moment. On that basis, I make two points.
First, Parliament needs to be happy that it has procedures in place to deal with agreements that might be changed significantly. Even the Government have indicated that that is a possibility—they use language about substantive change in the Bill documents. Secondly is the point about transparency and possibly some kind of reporting function, which does not have to go into the Bill; it could be done through other means. However, I feel that, given the number of these agreements that have to be dealt with in the amount of time that we are talking about, some kind of regular reporting transparency about exactly what is going on would be useful to Parliament.
The Chair
Thank you; that was very useful. It is not necessary for all four members of the panel to answer all the questions. You may want to target them, because we have half an hour left and we want to make the best use of our time.
Mr Mark Prisk (Hertford and Stortford) (Con)
Q
Dr Bartels: One of the features of the package that you have been presented with is a split between fiscal and non-fiscal measures that can be adopted. I am not entirely convinced that that is a very sensible division of tasks. For instance, because of that division, what seems to be missing is the ability to impose quotas—not tariff-rate quotas but quantity quotas—as safeguard measures, which is permissible under WTO law and is done. Because of the split, nothing on those measures is set out in this agreement, and the other agreement only deals with duties, so you are limited to tariff-rate quotas. That is one overall observation. I could say other things about the treatment of developing countries in the other Bill, which I find under-complex, to use a German term that my colleague is fond of.
More directly to your question—again, this links to what I am saying about the split—the major issue when it comes to the Trade Remedies Authority here is that we do not have it in a context that enables appeals. I know that in the other Bill there is a reference to the possibility of an appeals mechanism. The United States is very big on appeals—it is very elaborate. Of course, one can disagree with the way in which the United States conducts itself—we have all paid some attention to the Bombardier dispute and the United States’ interpretation of its WTO obligations—but at least formally speaking there is a sequence of decision making that includes a court, appeals and so on established there, and we do not have that here. It is very, let us say, basic at this point.
On the rest of it, reading this together with the other Bill, I would say in general terms it looks fairly standard. There are some choices you can make when setting up a Trade Remedies Authority, such as the duties that can be imposed and whether you go for a lesser duty rule or not—we seem to be doing that here. One can make a political choice on that, but in general terms, other than the point on appeals of decisions, and connected with that the relationship between the authority and the Secretary of State, which here is extremely close and in other systems might be a little more arm’s length, I think the detail of what the authority can do is fairly standard.
Mr Prisk
Does anyone want to add to that?
Jude Kirton-Darling: I would add one thing. I heard the evidence this morning in which there was quite a lot of discussion of the EU trade defence instruments and the EU system, and some of it was a little bit out of date. During the steel crisis, quite a number of reforms came in to modernise and speed up trade defence inside the EU, mainly led by the European Parliament. That is one of the key elements missing from the Bills: the role of Parliament in terms of oversight and scrutiny.
If I think about the role of MEPs when it comes to trade defence instrument questions, we have the right to veto proposed duties and to scrutinise all of the Commission’s proposals, we have access to all of the documents in relation to investigations, and we can demand closed-door meetings with Commission officials to really get into the detail of those investigations. It seems to me that lots of that scrutiny is missing from the proposals on the table. That scrutiny gives a quality to the process of ensuring balanced trade defence instruments that are effective.
Mr Prisk
Q
Jude Kirton-Darling: There is a clear role for stronger scrutiny. Inside the legislation, there is no obligation on the Secretary of State or the new Trade Remedies Authority to engage directly with Parliament through, for example, a specific Committee of Parliament. In future, that could be the International Trade Committee—an amendment could be tabled to ensure that link and that scrutiny—but at the moment that is not in the proposals. It is a missing link, if you think about what we already benefit from in the current system, of which we are a member.
I would hate to give the impression that what we have is perfect; that is not what I am trying to say. Today, in the European Parliament’s Committee on International Trade, MEPs have voted on a modernisation package to try to rectify some of the weaknesses in the EU’s regime. If you are thinking about what to improve on, our system is not perfect, but, at the same time, MEPs—your counterparts—have a clear role in the process, which is entirely missing from the proposals tabled.
Anna McMorrin (Cardiff North) (Lab)
Q
Dr Bartels: One can look at what is covered in modern trade agreements according to two poles, and then there is a sort of meeting in the middle. On one side, you have the pure market access issues, where you are reducing duties—you are liberalising trade—in certain economic sectors. Those sectors are going to be affected negatively and are not going to be happy about it, because there is competition that they were not used to. To do that, you need to be able to trade sectors off against one another. There is a reason for confidentiality with that traditional sort of trade negotiation. Not everybody would agree—you might say that someone whose job is at risk should get a right to know what is being negotiated—but there is at least a traditional and strong argument there for confidentiality.
On the other side, you have purely regulatory issues, such as the question of what you think in your system of the precautionary principle for health and safety. That sort of principle would normally be dealt with through the normal democratic process, and I cannot see any reason why that should be changed and negotiators should be given the ability to haggle that away, particularly if they are doing that in secret. In the middle, you have rules that are regulatory but arguably are also protectionist, so the trade negotiators would say, “We should be able to negotiate those away in secrecy.” It is hard to know where to draw the line, but it is certainly useful to conceive of what is in a trade agreement according to those two poles.
None of that means that this should be limited purely to the Executive, even when there is confidentiality on market access. Many other countries have systems where parliamentarians have some rights to see what is being negotiated and to be kept apprised of negotiations as they go. The European Union, for instance, is extremely advanced when it comes to that; there are strict limitations in terms of going into and coming out of the room, no phones are allowed, and so on. The US Congress has similar arrangements. There is a palette of options to enable parliamentary involvement, even within the framework of confidentiality. I am not sure that the Bill is the right place to address that sort of issue, but there is certainly nothing like that in the Bill.
Anna McMorrin
Q
Dr Bartels: It is true, but it is generally more true in certain sectors. It is true, for instance, in sanitary and phytosanitary standards. It is usually not the standards themselves that are protectionist. There are examples of standards, such as the beef hormone standards, that I can say are protectionist because WTO cases have said they are protectionist—I just need to cite Geneva on those—but it is often done by having overly complicated conformity assessment requirements, and so on. There is definitely room for regulations that purport to be there simply to protect the public also to be protectionist. Usually, you have both aspects in the same regulation. But even in that sort of situation, I still think that the regulatory dimension is sufficient for there to be at least some type of domestic scrutiny over haggling that away.
The Chair
Q
Dr Hestermeyer: There are certainly examples of standards being used only for protectionist purposes, but it is far more common for standards that one side sets to be perceived as protectionist by the other. Let us take hormone beef. There is real concern on the part of a lot of European consumers that hormone beef is not healthy. There is no direct scientific evidence to show that that is true, but the concern is nevertheless there. So the standard reflects the democratic choice of the populace—whether we think it is adequate or not. That is important to see. With any standard set, some sides will say, “This is protectionism,” and it is also rhetoric to attack the standard.
Jude Kirton-Darling: I guess the last point missing from that is that if we look at where trade agreements and trade policy have been controversial in recent years, it is when the perception is that standards held very dearly by the public for exactly those reasons are perceived to be negotiated away behind closed doors, with only a certain number of vested interests having access to the process. That is one more reason why having an open process, with parliamentary scrutiny and engagement, gives credibility to any final agreement, which at the end of the day has to have public support, after the negotiations. You build in societal acceptance through the process by engaging Parliament in an active way.
Dr Fowler: I would very much endorse that. If it is the case that some degree of secrecy or privacy is an advantage in one respect, there is probably a trade-off in terms of not being able to have that societal buy-in that might be wanted at the end of the process. There is a trade-off and losses if it is all done in private.
Tom Pursglove (Corby) (Con)
Q
Dr Bartels: I will kick off. Yes, I would agree with that, but I would also say that what is important about the Bill is that it gives the Government the power to change those agreements. They are, legally, new agreements, and that is recognised specifically in the Bill and in the explanatory memorandum, where no bones are made about saying that new obligations might be undertaken, so it would not be the same agreement that is subject to scrutiny. What is important here is to work out whether there are any limits on the Government’s ability to undertake new agreements—or new obligations in what are named as existing agreements—and implement those obligations, and if they do that, whether that is then sufficiently being scrutinised by Parliament.
Dr Hestermeyer: I would like to go back to my first answer and take as an example the Turkey agreement. I do not think that we would want the kind of customs union that Turkey has, but currently the Henry VIII power would allow implementation of any agreement that we then make with Turkey, even if in the end it looked completely different. That is the first problem with this scrutiny process.
The second problem, as Lorand identified at the beginning, is that some agreements have been signed but not ratified, so the scrutiny part of ratification has not yet happened. They have not been fully scrutinised.
The third element is that I do not think that the Ponsonby rule, as qualified, is sufficient because, first, it allows only delay and not a straight up-or-down vote; and secondly, it requires scheduling of an actual debate and vote. With Government control of parliamentary timetables, there is no guarantee that it cannot be indefinitely delayed. Even theoretically, therefore, that is not possible.
Jude Kirton-Darling: I fully agree with previous speakers.
The Chair
In which case, you may just nod.
Dr Fowler: I would agree with that. In terms of existing scrutiny through the European scrutiny system, one point is that it is imperfect. As we know, the European Scrutiny Committee here spends a lot of time trying to get time on the Floor of the House and trying to ensure that it sees documents in time and to arrange things so that it can have a meaningful say. Then there is the problem of the agreements that will not have been fully through the European scrutiny process before they come back again. Then there are the CRAGA problems—it seems that no one quite knows how the CRAGA provisions would work. That may be because no one in either House has ever tried to do anything under them, but it seems to me that part of this process ought to be that agreements are going to come before Parliament that it might want to do something about, and merely as a minimalist position—
The Chair
I am sorry to interrupt. May I just say that there is a gentleman in the gallery who may not take photographs? Please carry on.
Dr Fowler: If you wanted to take a minimalist view, merely as a bit of constitutional housekeeping, it seems to me that there is scope for at least clarifying how the CRAGA provisions would be used, before possibly going into strengthening the powers.
Faisal Rashid (Warrington South) (Lab)
Q
Dr Fowler: As you will know, under the negative procedure, Parliament has the power to pray against an instrument. In order to do that, first, Members need to use the early-day motion procedure, which is obscure and many Members do not even know about. Secondly, and more importantly, there is the issue of trying to get time on the Floor of the House. There have been cases where Members have wished to pray against a negative instrument and time has not been granted on the Floor of the House within the scrutiny period, so it has simply been impossible to annul a negative instrument before it came into force. That is one problem with the current system.
Faisal Rashid
Q
Dr Fowler: Inasmuch as the Trade Bill provides for use of the negative procedure, yes, that would be fair. I am sure there would not necessarily be any wish to do that on the part of any Government, but as the procedures currently stand, Back Benchers cannot be sure that they can get time on the Floor of the House if they want it.
Judith Cummins (Bradford South) (Lab)
Q
Dr Fowler: At the moment that procedure happens through the European scrutiny system because of the EU’s competence to conduct trade policy. The main instrument is the so-called scrutiny reserve, under which the Government deposits relevant documents with the European Scrutiny Committees in both Houses and they scrutinise them. The relevant Minister is not supposed to sign up to things in the EU Council if the relevant documents are still held under scrutiny. That works every time a new set of documents is tabled along the process.
The system can be quite effective but there is a difficulty about timing, and getting time on the Floor of the House. There is a difficulty if something has to move quickly at EU level, and then the Government quite often uses what is called the scrutiny override where it just says, “We had to go ahead with this.” Then there is also the difficulty about trying to schedule appropriate debates in Committee or on the Floor of the House.
Jude Kirton-Darling: My only addition would be that currently, one of our frustrations as MEPs is about what happens when some things that we have scrutinised heavily at European level, pass to the national level. We see the level of scrutiny in the German Parliament, in the Belgian Parliament, in Scandinavian Parliaments, where there are very detailed scrutiny processes—often going on at the same time as we are scrutinising at European level, so we get feedback from those Parliaments during the process—and we do not feel, in many cases, that same process from Westminster. So, regardless of what happens in terms of Brexit, it is one of the ways in which Westminster could do more to scrutinise trade in any case, and that would be a benefit for everybody.
Dr Hestermeyer: Just as a reminder, the scrutiny override was used for CETA. To compare that, under German law, for example, Parliament gets involved very early on. There was a change in the constitution and then an additional statute was passed, so Parliament gets involved very early on and can make binding statements for the Government, which will then be taken into account by the Government also in the Council. That way, there is a large impact of parliamentary statements in governmental positions, because in the end, the Government will have to defend measures in the Council.
Martin Vickers (Cleethorpes) (Con)
Q
Jude Kirton-Darling: Unfortunately, no.
Martin Vickers
I thought you might say that.
Jude Kirton-Darling: Globally, our voice will be very much reduced by Brexit. Currently, we negotiate together with our neighbouring countries and that collective weight is leveraged in negotiations with trading partners, which, unfortunately, we will lose as a result of Brexit. The benefit of that parliamentary engagement from the national level from other countries creates that societal acceptance, in many cases, of European trade deals. We saw that where there is poor parliamentary engagement, societal acceptance is called into question. The biggest example—it may be a very small region of Europe—was the case of Wallonia and the CETA negotiations, where, through the powers they have as a regional Parliament, they were able, even if they were a small region in Europe, to leverage quite significant improvements in the CETA deal to address some of the concerns they had about that deal. That is where the Parliament is working effectively to really ensure they scrutinise trade deals.
After Brexit there will be a case, if there are improved scrutiny powers included in this Bill and in the accompanying measures toward this Bill, that could mean that MPs would be able to be far more effective in terms of trade policy. My basic answer is that we will be weaker post Brexit because we lose our place and we will become, in effect, a rule-taker rather than a rule-maker when it comes to international trade negotiations.
Martin Vickers
Q
Dr Hestermeyer: On a technical-legal point on mixed trade agreements, all trade agreements except for Kosovo, if I am not mistaken, were mixed trade agreements. The Council decides by common accord, which means that the UK alone could prevent agreement.
Martin Vickers
Q
Dr Hestermeyer: There might be political pressures but I am not a politician; I am just a lawyer, so on a legal position. Obviously, that is the past; that is not the future.
Alan Brown (Kilmarnock and Loudoun) (SNP)
Q
Jude Kirton-Darling: In my experience of the European Parliament’s level of scrutiny, what we have at European level legally is quite limited. Inside the treaty we have a right to accept or veto trade deals at the end of the negotiations. That is included in the Bill, but the second element which we have which is not included in the Bill, which we use much more effectively, is that we have the right to be kept informed throughout the negotiations. That is a legal obligation inside the European treaties. That effectively then gives Members of the European Parliament a hook on which is placed the whole of parliamentary scrutiny at a European level.
You could amend the Trade Bill to include a hook in the same way, which would then allow you to develop some kind of working statute which could evolve over time. These processes evolve over time—improve, I hope, over time—with more transparency as trust is built between institutions. However, you need that legal hook at the beginning. Within the European Parliament, as a result of the hook, we have monitoring groups on every single negotiation that the EU is undertaking and established trade agreements. We have monitoring groups which meet behind closed doors on a regular basis with the chief negotiators, in which MEPs can scrutinise and ask any question. We have access to the majority of documents. During the negotiations you will have heard about the TTIP reading room. We had access to all the EU side of the negotiation documents. Crucially, in that reading room, we also had the read-outs from the European negotiating team of the process of each round of negotiations. To put it into context, you had the legal text of the EU negotiating position and, through the read-out, you could see where the room for manoeuvre was with the US side of the negotiations. Those documents give you the capacity then really to question.
The Chair
Thank you. At quarter to three, I will stop you talking, even if you are mid-sentence.
Bill Esterson (Sefton Central) (Lab)
Q
Dr Fowler: First, Parliament needs to be very clear whether it is happy that the Bill only covers the replicated agreement. You might want to decide that you are happier with these agreements and then do something stronger for the completely new agreements that the UK will be negotiating. I believe that is something that the Secretary of State has indicated he would be open to, but I suggest that Parliament might want to get that nailed down in some way at this stage.
As I have mentioned before, the main issues are the weakness of the CRAGA procedure at the moment—
Bill Esterson
Q
Dr Fowler: For example, you might simply want to have an affirmative motion, a motion for resolution, rather than the negative power that is applicable at the moment. That might be one option that the Government need to bring a motion for affirmative resolution. That is one possibility. Even more important is the preceding stage, which is processes around the signature of the new agreements, particularly where they might have been changed significantly from the existing EU ones. Again, there are things that Parliament could do about transparency, possibly having an approval motion, or recreating some kind of scrutiny reserve, possibly through a Committee. There are all sorts of institutional options, but I think the House might want to look at a set of processes around signature that the House might want to look at.
The Chair
We have a few seconds—I take the opportunity to thank our panel. You have been extremely clear and interesting and will greatly add to Members’ understanding of the Bill. Thank you very much for your evidence. Perhaps if you would like to shuffle off in one direction, the next lot will shuffle in.
Examination of Witnesses
Professor Alan Winters, Michael Clancy and George Peretz gave evidence.
The Chair
Q
Michael Clancy: Thank you, Mr Chairman. My name is Michael Clancy. I am the director of law reform at the Law Society of Scotland.
George Peretz: I am George Peretz. I am a QC practising for Monckton Chambers in London on EU and international and all sorts of other bits of law.
Professor Winters: I am Alan Winters, professor of economics at the University of Sussex and director of the UK Trade Policy Observatory.
Barry Gardiner
Q
Professor Winters: In general, they have been a pretty poor piece of policy. As far as the UK is concerned, I would suggest that we might want to consider rolling them over for two or three years, but I would hope that that two or three-year period was then used to try to devise a more satisfactory regime. They encourage distortions in the developing countries. The developing countries are put through the agony of trying to negotiate together, which is very costly and time-absorbing for them, and rather ineffective. What we need to do is to try to find a much simpler way of allowing developing countries access to the British market than the current EPAs.
Barry Gardiner
Q
Professor Winters: By and large, countries find it very difficult to resist the offer of tariff-free access to a market. If they were put in a position where they were told it was the equivalent of the EPA or nothing indefinitely, my guess is that most would shrug and accept the EPA, but given one quarter of a chance, they would want to talk to us about a more reasonable and satisfactory—and in the end more efficient—process of market access.
Mr Prisk
Q
Professor Winters: The Trade Remedies Authority is something we clearly need. Without seeing a lot more details about exactly how it operated, I would not want to say whether it is robust, but I would like to emphasise three things about it. One is, I understand, Government policy; I think the others are not.
The so-called lesser duty rule is important for safeguards and anti-dumping. That is essentially the rule that says the duty you put on goods that are allegedly dumped is the lower of the amount of dumping—the dumping or injury margin—required to make good the British industry. That is a good rule to have.
The two things I am less clear are there at the moment are, first, a very strong degree of transparency. Its operations need to be, with the exception of commercial confidence, pretty much out in the open. The second is that experience through decades in nearly every country suggests that these trade remedies are captured by producer interests. They are complex, they are triggered by the producers complaining that they cannot manage or that they are being cheated, and the whole process essentially favours them.
The really important thing is that, exactly like the House of Commons, you need an opposition. I would urge that we try to supplement the Trade Remedies Authority with an officially sanctioned and resourced group to represent the consumer interest, to do the analysis and actually have the right of audience at the TRA to make the case.
George Peretz: If I may add to that, of course the trade remedies provisions are spread across this Bill and the customs Bill. If one looks at the customs Bill to find out where the appeal mechanism is—as a barrister, my first thoughts go to what the appropriate appeal mechanism is—all you find is a power of the Secretary of State to make appropriate regulations.
It is my personal view that that is somewhat unsatisfactory. There are a number of important questions that arise about appeals, one of which is very important, and that is what the appropriate standard of review is. Is it a merits review, which enables a specialist appeal court to correct the decision maker on questions of fact as well as questions of law, or is it simply a judicial review mechanism, where all the court is doing is saying, “Is this a reasonable decision, whether it is right or wrong?”? It is a very important decision to make and it seems to me that that is one that ought to be made by Parliament in primary legislation and not by the Secretary of State or the Executive in a statutory instrument. That is a decision for you.
The appeals mechanism is important. I said slightly flippantly that it was because I am a barrister, but it is the experience of all regulatory processes that what actually happens at the regulatory stage is often very conditioned and influenced by the form of an appeal. Any sensible regulator will, during the process, have their eye on what the appeal route is, who can appeal and what the level of scrutiny of their decision is going to be.
If you have a very robust form of appeal mechanism, which is open to both parties— the complaining industry but also a range of interest groups whose interests might be affected by the imposition of duty—and if they are allowed routes to appeal that will encourage the regulator, in this case the TRA, to take robust decisions. That is robust in the sense of fully reasoned decisions that will sustain detailed scrutiny, to ensure that all parties are properly heard so that they are fully aware of where the objections to what they are proposing to do are and can properly evaluate them. You get better decision making out of all of that.
I sent the secretary to this Committee a copy of a briefing paper I did for the UK Trade Forum website, which is there if any of you want to read it. It expands a bit on that point but I would emphasise the appeal mechanism. There are other issues about the trade remedies. I have probably spoken for long enough but if people have other questions they could ask about them.
Michael Clancy: I read your blog; it is very good. The other thing that I would say is that the tenure should be made more independent by having term limits. That is quite important in reinforcing independence and impartiality. We have had experience in Scotland of the whole system of judicial appointments being reworked for temporary sheriffs because they did not have a stated term and were subject to the whim of the appointing Ministers. That would be my addition to this discussion.
George Peretz: The provisions for the appointment of members of the Trade Remedies Authority are very similar to the provisions for appointments to the Competition and Markets Authority, which as anyone who has watched the press this morning knows takes very important decisions about the economy. There is a difference with the Trade Remedies Authority, and the argument why you might need a more constraining set of rules governing whom the Secretary of State might appoint. At the moment the Secretary of State appoints the majority and the rest are staff members. There may be an argument for a more constraining set of rules, particularly if the Trade Remedies Authority is—as the customs Bill contemplates—itself given the remit of applying a wide range of economic interest tests as the trade remedies body. That means that even if the TRA accepts that there is a legal basis for opposing a trade remedy, then as a matter of economic interest to the UK it is able to say, “We are not going to do so here because, for example, the consumer interest outweighs the interest of the particular producers affected.”
That seems to me to be a political position: it is balancing the interests of jobs in a particular area of the country against the interests of consumers across the country, to put it crudely. If the TRA is, as the customs Bill contemplates, itself going to be taking that kind of decision, then there is a case for saying that its composition ought to be balanced by statute and that it ought to reflect a variety of different perspectives. In that sense its role is much more political than that of the Competition and Markets Authority.
The Chair
We have half an hour left. Incidentally, Mr Peretz’s evidence is available in written format in the Committee Room.
Anna McMorrin
Q
Professor Winters: Yes, I’m afraid that I do see complications of a technical nature and, in a sense, of a political nature as well. The technical complications concern rules of origin to begin with. Every trade agreement essentially has rules of origin that determine whether a good qualifies for zero-tariff entry. A typical rule of origin says that 50% of the value must be contributed from the country claiming the duty-free access. If we take a good that is exported to Korea that is made in the UK but with a 40% input from the EU and 30% input from the USA, it gets into Korea tariff-free because the UK plus the EU27 contribution is at 70% larger than the rule of origin requires. If we are outside and by ourselves we have only 30% of the content—the value of that good—and we would not get into Korea tariff-free if the Koreans applied the same rule.
Equally, there are cases coming the other way of goods that are exported to the EU where, for instance, Korea could export a good directly into the EU27 because it has a free trade agreement for a good produced in Korea. But if they send it into the UK and we insert it into something that we then seek to send to the EU, then it might not get in because Korean content will not count towards the UK content to meet the EU’s rule of origin.
What do you do about all this? You essentially have to do something called diagonal cumulation. Korea, the UK and the EU essentially have to agree that each of them retreat from its rule of origin the content of the other two as the defining origin. In that specific case, it would restore the status quo. That needs to be negotiated with the Koreans and the EU.
Other places where we have technical problems are in the splitting up of tariff-rate quotas. For instance, there are tariff-rate quotas in the agreement with Canada: that is an agreement to import a particular volume of goods tariff-free. This has to be settled on an EU28 basis, and now it has to be divided between the UK and the EU27. On occasions, there are clauses of these agreements that refer back to a body of law in the parties. In the financial services agreement with Korea, there is a reference to accepting goods into the Korean market that were introduced into the European market without asking any further questions as long as they are consistent with existing law and do not entail a modification of existing law. That existing law—if that clause makes any sense at all—was law when the agreement was signed; it is EU law. If we tried to introduce even an equivalent law, we would have to argue the case that it needs to be treated as such for us to get access to Korea for financial services. Those are the technical reasons why there are serious problems.
Politically, we need a deal. If the transition is handled in any way that is fairly straightforward—although George has a proposal that is complicated but perhaps gets around it—it is possible that the transition will allow Korean goods into the UK tariff-free, but not UK goods into Korea tariff-free. Therefore, we really need a deal, and if you really need a deal, that is not the time to be negotiating.
Anna McMorrin
Q
Michael Clancy: Under the Scotland Act 1998, paragraph 7 of schedule 5, international agreements, including trade agreements, are not within the competence of the Scottish Parliament. In that sense there is no formal role in agreeing international agreements. That being said, one of the things we have sought to promote throughout this process, with the European Union (Withdrawal) Bill, this Bill and associated measures, is that there should be some form of whole-of-governance conversation about getting things right. As we know, this Bill will affect the competence of Scottish Ministers and allow orders to be made that may amend, for instance, Acts of the Scottish Parliament, and measures from Wales and Northern Ireland too.
There is clearly an issue about how the Sewel convention or legislative consent convention is interpreted in respect of that. Under devolution guidance note 10, any proposals in UK Parliament legislation that seek to alter the legislative competence of the Parliament or of Scottish Ministers require the consent of the Parliament. That also applies to the National Assembly for Wales and the Northern Ireland Assembly. Therefore, there is an issue. Today in the Scottish Parliament there is a debate about legislative consent in respect of the European Union (Withdrawal) Bill, and the Finance and Constitution Committee of the Scottish Parliament is currently consulting on the legislative consent memorandum on this Bill, where the Scottish Government have indicated that they would not recommend that the Parliament pass it.
It is a matter of political debate and discussion, and something that I know both the Scottish and UK Governments have in their sights in the concordat they are thinking about. That includes a framework for dealing with trade matters. There is a role, but I do not know it yet, because neither the Scottish nor the UK Government have told us what it is.
Iain Stewart (Milton Keynes South) (Con)
Q
Professor Winters: Information is very important, not least in my trade, for analysing what goes on. The case for collecting reasonable amounts of information, as long as it is cheap to do so, is very strong indeed, subject to the standard confidentiality requirements. I confess, on reading the Bill it did not strike me that there were obvious things that were missing, but I would not want to assert that I read it sufficiently carefully to say that nothing is missing. It is important that the Government have the right to collect information, and that information should be made as widely available as possible. The Government clearly need to make policy, but there needs to be public debate, too; it is not just the Government who need to discuss policy issues. I did not interpret this as being part of the Bill, but in general, information other than private or commercially confidential information really should be made available to a wide community of people to enable them to analyse policy.
Iain Stewart
Q
Professor Winters: I am not sure that I can comment on the practicalities. They certainly want a large amount of information. My general rule would be that that needs to be information that firms collect anyway in the normal course of their business, and that it should be a simple matter to transfer it to HMRC.
Faisal Rashid
Q
Professor Winters: Yes. I gave the example of rules of origin and tariff-rate quotas. Those very clearly have to be negotiated with the EU, because the EU is intimately involved in them, and they have to be negotiated with the partner. We cannot just arrive in Korea and say, “Here it is. We don’t want to talk about it.” They very clearly have trilateral dimensions, which I guess need to be sequenced and taken seriously.
Remember that there is a further wrinkle: these are going to be new trade agreements and we are going to have to notify them to the WTO. Although the WTO procedure for reviewing regional trading arrangements does not require us to ask permission, the WTO secretariat will make a good deal of information available to members, and other members may wish to clarify things to discuss and even, ultimately, to dispute. It is actually somewhat broader than trilateral, but you cannot avoid a tripartite discussion on quite a lot of aspects.
Faisal Rashid
Q
Professor Winters: I would not hold myself up as an authority on exactly what was promised, but it does not deliver a satisfactory framework for negotiating new trade agreements. There are many different models, but experience from around the world suggests that one needs a good deal of consultation, input and legislative oversight of trade agreements. You cannot have a position where Parliament can unpick a trade agreement that has been concluded. If Parliament claimed that right, no one would negotiate with us. That means that Parliament and the devolved Administrations need to have an important role in setting mandates, and there need to be consultation and information during the process. Civil society would certainly claim that it, too, ought to be consulted, and I would advocate that, to the extent that one can generate one, there should be a discussion publicly.
Trade policy comes along in treaties. It is intrusive. It affects people’s livelihoods. It is a very good thing that we are talking about trade policy now in a way that we have not for decades—since before the EU existed, in fact.
George Peretz: I would add as a footnote that one of the best short things I have seen written about this is a piece by Stephen Harper, the former Prime Minister of Canada. He is not generally known as a politician who always wanted to do everything by consensus, but it is simply an explanation of how the Canadian side prepared itself for the CETA negotiations. It very much emphasises the need to consult with everybody in Canada, to bring the provinces together as well as all industry, trade unions, all the political parties and other actors to try to get as much consensus as possible on what Canada was trying to achieve at the outset of the process, before it started. It is a very good piece from somebody whose perspective on it is interesting.
Barry Gardiner
Q
Michael Clancy: That is a very difficult question to answer without getting into uncomfortably hot waters.
Barry Gardiner
You could write to the Committee.
Michael Clancy: Let’s give it a shot, shall we? The important thing is that the UK Government are the negotiator of these international agreements. Parliament is the body that then ratifies agreements made by the sovereign power, exercised by Government. Therefore, in that sense, it is quite difficult to see how the devolved Parliaments would be able to exercise any form of consent reserve in respect of the making of an agreement and the ratification of an agreement.
The issue is that the parliamentary oversight of the agreement is deficient in this place and it is even more restrained when it comes to the devolved legislatures. That is the issue I would like people to focus on. Clearly something needs to be done to enhance oversight here. Earlier, we heard Brigid Fowler explain that the Constitutional Reform and Governance Act 2010 provisions are inadequate. Why are they inadequate? Because they have only got this perpetualisation of the 21-day period, and this Bill does not allow for any form of implementation order other than a negative procedure order. Therefore, there is an issue about that.
The read across to the European Union (Withdrawal) Bill and the sifting procedure that the Procedure Committee advanced and had accepted into the Bill—Mr Walker’s amendment last week or the week before—raises issues about what the relationship is between orders under this Bill and those under the EUWB. Why does this Bill amend the EUWB? Why not have amendments brought forward for that Bill, reflecting this Bill? I am sure that parliamentary draftspeople have an amour propre in respect of such things, but an ordinary individual—a rather rustic lawyer like myself—is not going to catch it immediately. These are the issues we ought to look at: parliamentary oversight, extending across these islands, and how we write something that attains the intention of Parliament.
If I might just cross over, I do not think the Bill is meant to implement new agreements; it is meant to transpose existing agreements. That is quite an important facet to dwell on. Although, if one scoots to the explanatory notes, one sees in paragraph 44 that there may be
“technical changes to the agreement”
and in paragraph 53 it says:
“It may also be necessary to substantively amend the text”
of the provisions. The question, therefore, is what is an existing agreement and how far does it have to be changed for it to change from being an existing agreement to a different agreement. That is a question that I do not care to essay on at the moment.
Mrs Kemi Badenoch (Saffron Walden) (Con)
Q
George Peretz: If I might go first, one can see the difficulty. It is a commonplace of the legislation on Brexit generally that there is a lot to do in a very short space of time. There is certainly a case for doing things by statutory instrument that ordinarily one might be very reluctant to see done in that way, simply because of the process of time and the time it takes to get primary legislation through.
We were discussing a few minutes ago general policy in relation to how Parliament should scrutinise future trade negotiations. It is entirely a fair point to say that the Bill is not about that. There may well be a case for the Government to produce a Bill about that, but that is a different question. This Bill is not about that, but about the roll-over.
We have touched on the difficulties. You have a number of difficulties in scope: what an international trade agreement is goes beyond trade and customs agreements. As I think Holger Hestermeyer pointed out, technically the definition includes the EEA agreement and the Turkey customs union agreement. If you think the Government have rather wide powers to implement the EEA agreement—one assumes the Government have no intention of using it that way—it is quite a wide power to give them.
There are questions about scope and about whether negative procedure is right, and there is the question Michael touched on about what is an existing agreement. The cynic in me as a lawyer tends to say from general experience that if you go to the other party to a contract and say, “I need to change this contract,” the normal response of a well-informed and well-advised counterparty is, “Well, yes, but let’s take the opportunity to get some other things in it.” So things are often not that simple. You may have quite wide and important changes being made, but I do not think there is a right legal answer. It is a question for you to think about as to whether this is an appropriate power to give the Government, given the need to do things quickly.
Mrs Badenoch
Q
Michael Clancy: We do not have enough time—there are 430-odd days between now and 29 March 2019. Trying to get through primary legislation, if we were to scrap this and go for another Bill, would be problematic to say the least. The intergovernmental conference in October is really the defining factor that we have to aim at. Then there are all these orders, which are going to be put through. If one waits until this Bill gets the Royal Assent before the orders start to be consulted on, there are difficulties about that. I am afraid that I would be for looking to keep this Bill and to move it along and see what improvements can be made to it to make it a much better and more robust piece of legislation.
Professor Winters: May I comment? In principle—I am not a lawyer and cannot really comment on how one can do this—essentially there is the very short-term, immediate problem of all these things that have to be done, but we do not want that to define the long-term by default. I think we need to have a very clear understanding from the body politic in general. The trade policy is an important instrument for a sovereign country to operate. It can be done well or it can be done badly, and we do need to continue to review it and go back to some of these things, so that even if we have to patch something up in the near future, which as near as dammit is the status quo, that should not say it is therefore closed forever. We need to go with our partners and say, “We need to reopen this.”
Bill Esterson
Q
George Peretz: Not all WTO law is clear, but what is pretty clear is that we could not simply automatically carry over existing trade remedies imposed by the EU and say, “These remedies will apply to the UK now that it is a separate WTO jurisdiction”—if I can use that term loosely. We cannot do that for one very simply reason: it is a condition of all trade remedies that there is a domestic injury. A domestic injury is defined, and the UK is obviously not the same as the EU. It is potentially an issue that applies the other way around, incidentally, but that it a problem for the EU rather than for us.
As far as I understand it, the Department for International Trade is feeling its way to dealing with this problem. As a first step, it is asking industries that benefit from an existing trade remedy to set out why they think it should continue and to explain what the domestic injury is. There is probably also a need for the UK to discuss with the European Commission what the position is. After all, in its investigation of all these remedies, the Commission will have built up a case file that will include quite a lot of information about what the injury is, some of which will be pinned down geographically. It will be able to say that that is evidence of an injury in the UK. Perhaps that could be used to justify carrying on the remedy after we have left the EU, but it would have to be the judgment of the new Trade Remedies Authority whether that evidence was good enough to withstand domestic scrutiny and appeals and, ultimately, a possible WTO challenge. There is a very difficult set of issues there, which will be a challenge for DIT and the TRA.
Craig Whittaker (Calder Valley) (Con)
Q
George Peretz: I do not claim to be a great expert in parliamentary procedure, and I am not sure that I can add very much to what Brigid Fowler said about that—she is an expert on parliamentary procedure.
Plainly, there is an opportunity to challenge a statutory instrument that uses the negative resolution procedure, but clearly it is less likely to be challenged—just look at the statistics—than a piece of primary legislation, because one fundamental point about any statutory instrument is that the vote is simply an all-or-nothing vote on the instrument. There is no ability to have the primary legislation to say, “We agree with most of this clause but we don’t like clause 5, therefore we would like to amend that.” It is take-it-or-leave-it. The problem with a lot of this is that you will be told that the clock is running and you need to decide very quickly what to do.
Professor Winters: There is very little time, so be realistic about what the cost of a challenge would be and the pressures that that would generate.
Michael Clancy: It is the balance between speed and scrutiny—that is the whole point. To get that right is quite difficult with a negative or indeed an affirmative resolution procedure. Although theoretically each of these could be debated, I think it would be very difficult to get each of these debated. There simply is not enough time to do that—we are told that there are between 800 and 1,000 orders in relation to the EUWB. I do not know how many of them might be here—63 existing trade treaties, maybe more, and other things as well. That is the difficulty.
What are the defects? The defects are that we have an alternative procedure of super-affirmative if we need extra time to look at something—that is where the sift comes in. If the sift identifies a particular order as being important, it might then get better scrutiny, and better scrutiny might mean the affirmative resolution procedure on a super-affirmative basis. We do not know that the sift applies to these orders because the sift is not mentioned in this Bill. Will it be? Are you going to propose amendments? Is the Government going to take that forward to this Bill? That is another story for another day perhaps.
Then there is the issue—I think it is in one of the Hansard Society papers—of the difficulty, in fact the incapability, of amending these orders. They have to be taken back by the Minister and re-presented. That induces time and delay, and we are running out time and inducing delay.
Craig Whittaker
Q
Michael Clancy: That is true, but the ultimate test is overturning the order. We saw that the last time an order was overturned in the other place—it resulted in the Strathclyde review because it was such an outrage, so we have to be careful about that, because it may have more political impact than we would imagine.
The Chair
We are having trouble with time and scrutiny as well. We have only two minutes left for Matt Western.
Matt Western (Warwick and Leamington) (Lab)
Q
Professor Winters: Because the roll-over is not straightforward. Maybe you can say that this is an implicit recognition that it is not entirely straightforward and that there will have to be changes. Some might be purely technical, but some are clearly going to be substantive.
It is precisely because it is difficult, contentious and requires negotiations, that the Henry VIII powers are so important, because it is the Minister, their designated authority or delegate who will make those decisions.
Matt Western
Q
Professor Winters: The division of tariff-rate quota on cheese into Canada, or which bit of law financial services access to Korea will refer to. There are, I have no doubt, plenty of others.
Matt Western
Q
George Peretz: I am not sure I have much to add to that very complete answer to the question.
Does it require Henry VIII powers? It probably does require them because you have to amend primary legislation. The questions about the degree of scrutiny and so on, are, I think, questions for you, but the need for a pretty fast procedure to amend our law to deal with what will quite often be technical points that involve changes seems fairly clear.
Alan Brown
Q
Michael Clancy: When I get elected?
The Chair
With that, can I thank all three of our witnesses for their extremely interesting evidence? You have covered a lot of ground in a short space of time. We are most grateful to you all for that.
Examination of Witnesses
Tom Reynolds, Gareth Stace and Cliff Stevenson gave evidence.
The Chair
I have a couple of quick admin points. I understand that there may be a Division in the House at 3.45 pm. If there is, I will suspend the Committee for 15 minutes until 4 o’clock and we will add an extra 15 minutes at the end to make up for it.
Mr Stace, I gather that you have to give evidence to the Taxation (Cross-border Trade) Bill Committee and you may therefore have to leave this session early. Is that right?
Gareth Stace: That is correct. If that were possible, I would be grateful.
The Chair
It is possible. Just tip us a wink when you have to go and we will say goodbye.
Gareth Stace: I think one of your Clerks is going to escort me.
The Chair
Perfect. I call Barry Gardiner. [Interruption.] Well, failing that, I call Mark Prisk.
The Chair
No, the Opposition failed, so we will give the Government a try. I call Mark Prisk.
Mr Prisk
Q
Gareth Stace: Let me start with what would need to change in the Bill. We would like to see more detail in the Bill. The Bill sets out powers to create an independent arm’s length authority—the Trade Remedies Authority—to advise the Secretary of State, but there is no detail. There is little detail of the powers that it might have or of the scope of its remit. I am sure that will come in secondary legislation or after that, but as you quite rightly said, industries that are or have been subject to dumping and unfair trade practices are quite nervous about what is going to happen in the UK, and the more detail we have, the better. That is why at this stage we are quite nervous about what might or might not come out down the line.
Mr Prisk
Q
Gareth Stace: Yes, an appeals process—there is no detail in the Bill—is not even set out as: “The appeals process will be this, this and this.” We do not even know what the basis of appeals might be, because we do not know how the TRA will define subsidy, injury and dumping. We do not even have something to base that on.
Tom Reynolds: It is clear that we need a TRA, and it is certainly welcome that the Bill establishes one. I want to rebut a point made by an earlier witness, who said that trade remedies are invariably captured by producer interests. That certainly has not been the experience in the European system. I am sure that Gareth agrees that that was apparent in the steel crisis—the trade remedy system was slow to react to the producer interest.
We have to read the Bill alongside the Taxation (Cross-border Trade) Bill. My feeling is that the rules for the TRA, which are set out in that other Bill, tip the balance the other way, against the producer interest. There are areas where that Bill and the way that it works with this Bill can be improved, which I would be happy to explore with the Committee.
Mr Prisk
Q
Tom Reynolds: There are really four points. The public interest test and the economic interest test is of concern because, as Gareth has already pointed out, the lack of detail means it could operate in any number of ways. Our fear is that it might include an over-simplistic cost-benefit analysis that appears very seductive in its indication that the benefit for producers may be outweighed by the damage to the consumers, when it does not show the full story and perhaps the long-term impact to the consumer that removal of a competitive environment for domestic producers creates if the trade remedies are insufficient to keep production here in the UK.
A big concern for ceramics—the country of concern that is dumping into the European Union at the moment is China—is how you calculate the dumping margin in instances where the domestic price cannot be used because it is subject to such state distortion. That detail is crucial to the effectiveness of the trade remedies system.
There are other issues, such as the lesser duty rule—it was touched on earlier. For the proper operation of the lesser duty rule, we would need to see the detail and how you calculate injury. That is crucial. Pushing all of this into the long grass just adds a lot of uncertainty and concern for producers.
Cliff Stevenson: Because the Bill is simply setting up a framework for the TRA and not really having anything more substantive than that, there are only small points that you might look at, but there are some important points. For example, the composition of the members of the TRA is critical because trade remedies is a highly political area of policy where there are very different views. Some see trade remedies as purely protectionist and would abolish them completely, and some see trade remedies as an essential competition policy-type tool to correct multilateral distortions.
I am in the second group. I believe that, in the absence of multilateral competition rules, trade remedies are the only thing we have that allows state distortions and other unfair practices to be addressed. Within the EU, we do not need anti-dumping or anti-subsidies law because we have really good competition and state aid law.
What we want from this legislation—you have to see the two Bills together—is a coherent, robust system that could redress those problems. In terms of this Bill, the composition of the members is very important to look at because, if all the members thought trade remedies were protectionist, we would never get any trade remedies through—or all members might believe that trade remedies were essential. You would want to ensure that there is some balance in there.
There are some other smaller issues that could be significant. For example, regarding the provision that the TRA should report to Parliament annually, I think there could be a little bit more detail on what it might report on, so that, if the TRA was being biased one way or the other, by being obliged to provide certain statistics, such as number of cases opened, measures adopted and so on, it could be assessed.
Barry Gardiner
Q
Cliff Stevenson: Yes, what would definitely be of importance is to have a substantial report submitted to Parliament on an annual basis. In the Taxation (Cross-border Trade) Bill, there is a provision on reporting. There is already a proposal for there to be an annual report. The EU anti-dumping regulation is quite specific about what the European Commission must report to the European Parliament in terms of the statistics it must provide. A little more detail ensuring that certain things were provided in this report would be useful.
Tom Reynolds: The question about Parliament’s ongoing role with the Trade Remedies Authority is an interesting one, but so is Parliament’s role in setting up the rules for the system. The point made by Jude Kirton-Darling earlier on about the level of involvement of MEPs in scrutinising and offering amendments on, for instance, the new anti-dumping methodology and the TDI modernisation, which was mentioned, has been integral in improving that legislation from the Commission’s original proposals. I would be more comfortable if there was a more rigorous approach for parliamentarians to get involved in the setting of the rules for the system as well.
Bill Esterson
Q
Gareth Stace: Do you mean the board?
Bill Esterson
Yes.
Gareth Stace: The board needs to represent interests. From my point of view, I would like to see someone from industry and someone from the trade unions on that board to provide that balance, clarity and expertise as well. That could be set out in primary legislation. It is not there now.
Tom Reynolds: One of the most successful acts of Parliament in setting up a non-departmental public body over the years has been the Health and Safety at Work etc. Act 1974, which stipulates that the Secretary of State, in making appointments to the commission—now the HSE board—must consult with organisations for three of the members. There could be representatives of the employers, and three of the representatives could be from the trade unions. That sort of model might lend itself well to the establishment of the Trade Remedies Authority and the appointments made to the non-exec board.
Gareth Stace: However, we would not want anything that you would add to it that would then create more work and delay measures in place or delay the investigations that would take place by the authority.
Bill Esterson
Q
Gareth Stace: There is a whole range of “if we don’t get this right”. If we get this very wrong, we become the dumping ground—not just in Europe, but for the rest of the world. Think of the steel sector, which thrives on free, liberalised trade. That is what we are. Over a third of all steel produced travels across borders globally.
Also, something crucial, in particular for the steel sector, is that in 1994 we agreed as a sector with Governments to abolish all customs tariffs for steel for developed countries. There are no tariffs. So when you think about us coming out of the EU, whatever agreement or not is put in place, we as steel will not be subject to customs tariffs. That is not an issue for us—non-tariff barriers are an issue for us, but not tariff barriers. That enabled us to be even more liberalised in terms of trade. What supports that? Trade remedies support that: they are the safety valve that enables free trade to take place. Sometimes the debate turns the other way round, as if trade remedies were there to provide protectionism. We would say that if there were not a strong trade remedies regime in the UK or anywhere else in the world then you would see a rise in protectionism, with weak trade remedies.
There is a whole range of things that could go wrong. When the investigations take place in the end, will they find that there is no injury or dumping for whatever reason, even if there is? If they do find that there has been injury or dumping, what are the tariff levels that are set? Are they high enough to stop the illegal trade in the UK—the dumped steel that is against WTO rules? If the endgame is not that those tariffs are high enough, then we have a problem.
Bill Esterson
Q
Tom Reynolds: We have a very similar experience. We are a sector that thrives on international trade: we export over half a billion pounds’ worth of products each year. We are not protectionist. However, as the Government have rightly pointed out, free trade does not mean trade without rules, and unfortunately some of our trading partners do not play by those rules. Examples from our sector include cases involving tiles and tableware. In the case of tiles, imports rose from a fairly stable level of around £4 million worth of tiles a year from China up to 2004, and rocketed in less than a decade to over £30 million worth of imports from China. If you were to look at volume, it was an even sharper rise.
The European Union introduced anti-dumping measures in 2011, which were not enormous—they are not the 230% tariffs that the United States has looked at. They were between 13% for co-operating companies in China, up to just short of 70% for non-co-operating companies. The introduction of those measures allowed our UK industry to stabilise and invest. As a result, employment has gone up by 40% in the sector, with even further boosts to the supply chain as well. All that could be at risk if we get things wrong.
It is worth noting that in 2011 the UK Government voted against the tiles measures in Council. That was understandable because the UK’s role within the European Union was as a liberal counterweight across the 28 member states. As we forge an independent trade policy we have a different role, but some of the most experienced civil servants and experts are steeped in that heritage of the UK being the liberal counterweight within the European Union. That is why we come back to this point about a non-exec board being a watchdog, ensuring a balanced system in the UK. It is an integral part of getting things right.
Bill Esterson
Q
Tom Reynolds: It is not something that the BCC or the Manufacturing Trade Remedies Alliance has made a submission on; it is something that we would have to consider, and maybe we can write to the Committee.
Faisal Rashid
Q
Cliff Stevenson: Obviously, the wording is not effective at the moment in terms of ensuring that there is a balanced composition of those members. If you look elsewhere and compare, the closest major trade remedy regime to the UK’s proposed system is Australia’s. It has a separate anti-dumping commission that works in a similar way to how the Trade Remedies Authority would work, but there is a big difference in the sense that it is headed up by one person, an anti-dumping commissioner: there is not a committee or a group of members in the way that is proposed for the UK.
One concern I slightly have with this is that it is an extra level of decision making. There is no detail on how the members might make a decision—whether they would vote if they disagreed—and that could hold up investigations, which are always subject to very severe time limits given the amount of work that has to be done.
In the US and Canada, for example, there are examples of independent bodies such as the United States International Trade Commission, which does the injury determination for the cases. It is a completely independent body that has six commissioners who vote at the end of the investigation. If there is a positive finding of injury and three out of six vote in favour, it will be an affirmative determination. In that case, where there is a quasi-judicial system where it is completely separate and not under any political control, there are these commissioners taking a vote on the basis of the technical information.
Gareth Stace: You have to look at what the TRA and the whole system is trying to achieve. Why is it being set up? It is being set up because we are leaving the EU. Is that an opportunity to have a system that is fleet of foot, quite simple and employs fewer people than the European Commission does?
That is why a year ago we, as UK Steel, said that actually what this arm’s-length, independent body could be doing is just looking at the dumping margin, because that is a really simple, straightforward—almost—calculation. It is what they do in the US, which is seen as a champion of free trade, and we want to create strong links with the US going forward. There was that opportunity to do that, and so the make-up of the TRA and the committee would not be as important as if it was then doing the injury calculation—that is much more of a black box. You stick a load of numbers in, and you hope that something will come out. You twiddle some dials as well, and the tariffs come out of that. So you probably do then need some independent committee to look at it, but how much are they going to influence—[Interruption.]
The Chair
Order. There is a Division in the House, so I suspend the Committee until 10 minutes past 4.
The Chair
Welcome back. We are going to change the order of questioning slightly, because Mr Stace has to go and give evidence to our sister Bill Committee.
Barry Gardiner
Q
Gareth Stace: I think it would. You are not going to say to the USA, “Hey look, can we do a really great free trade agreement with you? Look, our trade remedies is really weak and yours is really strong so can you weaken yours and then we will do a great deal?” They will not do that. They will keep their regime and hope that ours is weak, and they will then see more trade coming from them to us.
It is the same when we think about the zero tariff for steel with developed countries. When India exports steel to the UK, it is at zero tariff; when we supply steel to India a tariff is applied. So when we say to India, “Can we do a free trade agreement with you? Hey, you know, we could do zero tariff”, India will say, “We already have zero tariff, so why would we want to do anything else?” What would add something would be having a strong trade remedies regime in place.
If we had a weak regime, what would that mean? We talked about that before. It would mean a loss of jobs, and in the steel sector I do not want to talk about loss of jobs, because we saw a lot of that in 2015-16. But we would also see a rapid rise in imports. In rebar—reinforcing bar that goes into construction—in one year China had zero per cent. of the UK market. It did not import anything, and within four years, because there were no duties in place, China had 43% of the UK market. Then, once duties came in, the percentage went back to zero.
I know I have to go, but I want to make just one point about the lesser duty rule, which I am sure will be raised later. I know it is not in the Bill but it is very important, in that there is talk that if we did not have a lesser duty rule prices would rise and the consumer would be disadvantaged. Let me put that into context. In the hot-rolled flat case we had recently, the injury margin was 17.5% and the dumping margin was 29%. There is a difference there of 11%. If we think of a luxury car priced at €45,000, not applying the lesser duty rule in that case would increase the price of that car by a whopping €16.50. Everyone is saying that if we did not apply it in the UK it would be dreadful—consumer prices would rise and it would be awful—but €16 is all it would increase the price of a €45,000 car by.
The Chair
Mr Stace, thank you very much indeed for doing two Committees in one afternoon. That is very noble work. Thank you for your evidence to us. I think someone is going to escort you off to the other Committee.
Judith Cummins
Q
Cliff Stevenson: In principle, I think it is not necessarily a bad idea—that if you have an organisation full of trade expertise, you might use it for other purposes as well. I mentioned Canada earlier. The Canadian international trade tribunal, the independent entity that makes determinations on injury, can also be given other tasks and produce expert reports. So I do not think it is a bad idea in principle that the TRA may do other things. The concern would be about resourcing.
Trade remedy investigations are highly resource-intensive. They are incredibly detailed. Gareth mentioned earlier about the dumping calculation being easy. In a sense, what he was saying is that it is straightforward, the steps are very clear—but it is a massive calculation with thousands of data entries on a spreadsheet or in a model. To the extent that there would be a concern, it would be to ensure that there was sufficient capacity ring-fenced for the different functions. Principally, it seems to me that the Trade Remedies Authority’s purpose is the administration of the trade remedy regime. That would be the only issue I would raise.
Matt Western
Q
Tom Reynolds: One example I can give you is from MTRA partner sectors, the chemicals fertiliser sector, around the long-term implications for the consumer if adequate trade remedies are not installed. In Ireland, for instance, the domestic manufacturing industry for fertilisers sadly went by the wayside, because the anti-dumping measures were not introduced in time to provide a defence for their industry. As it became a less attractive market because of less competition, the prices started to rise for all the previously dumped exports, so the lack of competitive environment in Ireland ended up costing farmers more for their fertilisers.
Cliff Stevenson: Obviously, it depends on the product, because when you are talking about products used in another industry, such as in the case of steel, even a fairly substantial anti-dumping duty, if you work it through to the final price to the retailer of the downstream product, is going to have a much smaller effect. Obviously, in the case of a consumer product, where the product goes directly to the consumer, the impact of the duty would be exactly at the level of the duty, so that is certainly true.
It is important always to consider what the purpose of trade remedies is. They are about remedying a distortion, an anti-competitive situation or a subsidy. In that way, any time you increase a duty the users, the importers, or the consumers of that product are going to face the negative impact of the increase in duty. What is really important to remember about trade remedies is that they are not about protecting domestic industry, I do not believe. They are about restoring effective competition. That is a key point. Even if a consumer product does increase in price, in the long term the consumer is better off if effective competition is maintained.
The Chair
Are there any questions? No. May I thank you both very much for your very useful evidence? I am sorry that a Division disturbed the middle of your session—these things happen in Parliament. It was very kind of you to come, so thank you very much. If the next witnesses are here, perhaps they would like to take the stand.
Examination of Witnesses
Anastassia Beliakova, Stephen Jones, William Bain and Edward Bowles gave evidence.
The Chair
Q
Edward Bowles: I am Edward Bowles, managing director at Standard Chartered Bank.
Stephen Jones: I am Stephen Jones, chief executive of UK Finance.
Anastassia Beliakova: I am Anastassia Beliakova, head of trade policy at the British Chambers of Commerce.
William Bain: I am William Bain, international trade and Europe policy adviser for the British Retail Consortium.
Barry Gardiner
Perhaps I can kick off with—sorry, is it Mr Jones who is from Standard Chartered?
Barry Gardiner
Mr Bowles is from Standard Chartered and Mr Jones from UK Finance. Is that right?
Edward Bowles: Correct.
Barry Gardiner
Q
The BRC has identified, among others, the agreements involving Norway and Turkey as the most significant of our EU FTAs. Of course, the Government have already indicated that there will be an end to free movement, which rules out simply replicating the Norway model, and that we will leave the customs union, which rules out simply rolling over the Turkish model, so what elements of the agreements—not just those two, but the others—do you consider it most important to replicate on substantially the same terms?
William Bain: The key provisions are those on tariffs, because if the UK leaves the European Union, it is not part of the EU’s common external tariff system, and we could then face higher tariffs on imported goods. A great deal depends on the kind of transitional arrangements that are adopted, but the kind of additional MFN tariffs that would apply would be 12% in relation to clothing from Turkey, 13% in relation to soft fruit from Chile and Peru and 27% on imported processed canned tuna from the Seychelles. Those would, I think, lead retailers and consumers to face considerable price pressures, so the main element that we would want to see is replication of the zero-tariff or low-tariff provisions on imports.
The other key areas that are very difficult in terms of replication and, we believe, may require a degree of assistance from the European Union are in relation to rules of origin. For example, with the Canada trade agreement, there is a complex rule of origin. The same is true in relation to South Korea. I think that diagonal cumulation is involved in the rules of origin in respect of the CARIFORUM trade agreements.
These are areas where it seems that time is running out, the clock is ticking, and a solution needs to be found if British business and British consumers are not to face a large cliff edge in March 2019.
Anastassia Beliakova: Absolutely. Rules of origin are a headache for businesses, and if we consider that there is the likelihood, in the roll-over of existing trade agreements, that they may have to comply with tougher rules of origin or that some of the benefits that they currently get by counting both EU and UK origin as single origin might be lost, that is very concerning. For about one in seven of our members, the existence of a free trade agreement is the determining factor in whether they export to or import from a country. I urge the Government to give stronger assurances for those agreements, as Mr Bain has mentioned, that already provide for, or have clauses mentioning, diagonal cumulation, but also to look at all the EU trade agreements and particularly those that have the greatest economic significance for the UK, and open up those discussions to provide for that as they are rolled over into UK-third country FTAs.
Iain Stewart
Q
Anastassia Beliakova: Not at first glance. However, the wider picture around trade data is that trade data is imperfect. It is particularly lacking when it comes to services, of course, and when it comes to intra-EU trading data. That is where we currently have significant gaps. If, in the future, there can be a more robust collection of data and stronger assessments of UK-third country trade, that would be helpful.
Stephen Jones: I have nothing to add.
Edward Bowles: Obviously, the collection of data is largely in respect of goods that cross borders. It is very difficult to do that for services, so I would have thought that a way of more robustly measuring cross-border flows of services would be quite an important thing to look at, so that you can get a better grip on revenue as much as anything else. Largely, it is more on the goods side than it is on the services side.
Faisal Rashid
Q
Edward Bowles: The great thing about having economists is that they are independent of those of us who do jobs outside of research. Razia is an expert in her own right and would be the best placed person to speak to those issues.
In fact, they are not really trade agreements; they are economic partnership agreements that the EU has with most African, sub-Saharan and, indeed, subcontinent markets. It is certainly true that they have undergone a high degree of revision under the current Commission’s administration. I am not aware, frankly, of any overwhelming dissatisfaction. I attended a recent meeting only two months ago between quite a lot of these markets and Cecilia Malmström, so things do seem to be moving in a good direction. The question is what the UK’s approach would be to that and how much it might be minded to depart, if at all, from the approach. The starting point must be simply to mirror the current arrangements, as was said on Second Reading and in the Government’s response to the consultation on the Trade Bill.
Faisal Rashid
Mr Jones, would you like to add anything?
Stephen Jones: No, I have nothing specific to add in relation to Africa in general.
On a more generic point in relation to the Trade Bill, it is obviously focused on existing trade agreements and economic partnership agreements. From a services perspective, we need to look beyond that and reflect on arrangements that exist beyond that, which are critical to the cross-border flow of trade in services, because there are very few provisions and services agreements in trade treaties that relate to services. There are lots of mutual recognitions and memorandums of understanding that relate to infrastructure, to recognition and co-operation between supervisors, to the flow of data and to the recognition of exchanges, but which do not exist within the context of a trade agreement. They nevertheless facilitate cross-border trade in services that already exists between the EU—including the UK—and other jurisdictions. It is very important that we do not lose sight of those specific provisions, but seek to mirror them so far as the financial services industry is concerned, simply because the existing trade treaty provision is so poor in services.
Bill Esterson
Stephen Jones, you are the UK Finance representative. Sorry, it has been a long day. Can I ask about the written evidence you gave to the Procedure Committee, where you indicated the benefits of a triage or sifting process and stated how you might apply those when looking at new trade agreements? For the purposes of the phrase “new trade agreements”, given some of the evidence we have heard today, can we include anything that changes the agreements that are part of this Bill? Can you explain what you think the merit of such an approach would be, how you might apply it, and the importance of such a sifting process?
Stephen Jones: Given the time available in the context of Brexit, from the perspective of the financial services industry, clearly continuity, speed and the correct process and scrutiny to transpose the existing trade arrangements that the EU has with the rest of the world to the UK are incredibly important for continuity. That does not directly benefit the financial services industry. It benefits mostly the customers of the financial services industry, but in that context it is very important.
To the extent that your question relates to prioritising whether one should seek to amend the agreements in order to ensure more robust coverage of services within the context of those agreements, I think that in the first phase that is unrealistic. There is not enough time. What we need is as much certainty as we can get. Business in general needs as much certainty as it can get in terms of the transposition of the existing EU arrangements.
In terms of the ongoing amendment of those treaties to seek to extend them and prioritise what should be done—the sifting process, if you like, for services—we can develop a modus operandi in terms of markets that are important. However, as I say, there are significant factors beyond trade agreements that influence the ability to conduct cross-border business between the UK and the rest of the world. Those are a susceptibility to inward investment; strong regulatory and supervisory co-operation; aspects of data protection and the willingness to mutually recognise the cross-border sharing of data; and infrastructure, with the recognition on a cross-border basis of critical market infrastructure in each jurisdiction, such that member firms in each place are able to access and utilise the infrastructure in the other country. To the extent that that can be captured within a trade agreement, that is great.
To date, that has failed and our focus very much is on an ambition for the UK with the EU to seek to build an ambitious free trade agreement that has not been attempted in services anywhere else in the world. But we believe it should be attempted in the current context, simply because of the importance of the cross-dependencies that already exist and the fact that we are starting with a fully converged rulebook, which is extremely unusual in a trade negotiation context. So we believe that there is the prospect of an ambitious mutual recognition-based trade agreement in services between the UK and the EU and that potentially should be the first focus, to the extent that we are talking about prioritisation of negotiation of trade agreements.
Bill Esterson
Q
Stephen Jones: I think we are talking about beyond transition. From a transition perspective, the only realistic thing that we believe can be achieved is a prolongation of the acquis, which is a full adoption of the existing rule book lock, stock and barrel. The chances of seeking to amend or renegotiate that in the time that is available are wholly unrealistic, and what is far more important is certainty through the transition period. The only way you can deliver that certainty is simply to take forward the existing rule book.
Bill Esterson
Q
Stephen Jones: In terms of the prolongation of the acquis—that is, the adoption of rules on day one—in a sense those rules are already on for the purposes of transition. Those rules have already been adopted by the UK. I recognise the sovereignty of Parliament and the importance of scrutiny, but to the extent that the rules are not being changed we are simply extending arrangements that continue to exist. The Bill’s provisions relating to Ministers’ 10-year power to use secondary legislation to renegotiate those rules strike me as pretty broad-brush, and they potentially should benefit from greater parliamentary scrutiny than is currently contemplated.
Bill Esterson
Q
Stephen Jones: Broadly, I do not think it is realistic to expect changes. In that context, the secondary legislation ministerial power provisions are broadly acceptable, but beyond that, to the extent that arrangements are adapted to the UK as an independent country with its own trade policy, I would suggest that they merit parliamentary scrutiny.
Bill Esterson
Q
William Bain: The nature of the transition impinges on terms in the Bill, and the retail industry is keen to have a standstill transition in all elements—in terms of the current customs rules, the current tariff rules and the current SPS rules—but it also applies to the trade facilitation that we get from the bilateral trade agreements, which fit into part 1 of the Bill. I cannot stress how important it is to the retail sector, which imports products from countries like Chile, Peru, South Africa and Turkey, that we do not have a discontinuity in our trading arrangements at any stage after 29 March 2019. There are some connections and points of commonality with the kind of transitional deal that is done, but in a sense this is a slightly separate question. It really demands clear attention from the Government in order to get the job done by 29 March next year.
Barry Gardiner
Q
We are talking about 100 separate agreements between the EU and Switzerland alone, some of which include free movement of people. There are going to be some major changes, such as those we talked about with Turkey and the customs union, and with Norway, free movement of people and the four freedoms. Do you not think, given that you have already recommended a sift Committee in one form, that a similar sort of mechanism for trying to distinguish between what is and what is not vital, and what should have parliamentary scrutiny, is a sensible way to proceed?
Stephen Jones: Yes, sorry; forgive me for the lack of clarity. My reference was really to the existing provisions between the UK and the EU in relation to financial services. In my assessment, for the purposes of transition and of business services in financial services, the chances of change, and therefore of the need for sift, are zero. There just is not the time. In the context of other areas, where there is an assessment that change is possible, the sift Committee strikes me as a very sensible mechanism to prioritise and assess those changes and the degree of scrutiny that is required.
Mr Prisk
Q
Anastassia Beliakova: It is absolutely critical. Our members are operating on the assumption that during a transition period there will be continuity in our trading arrangements not just with the EU but with all the other markets with which we have a trade agreement of some sort. The working assumption is that they should not be making any changes currently or planning for significant changes in trading conditions in March 2019. Of course we are still waiting for greater clarity from the EU on this over the coming months, but I cannot stress enough that in the immediate future the continuity in our trading relationship with the EU during transition is critical. Our continuity, looking further ahead, with the other markets, is also something that our members want to count on.
Mr Prisk
Q
Stephen Jones: Continuity is very important, particularly through the transition period and on an ongoing basis. We believe that there is an opportunity for a free trade agreement in services between the UK and the EU that prolongs many of the existing arrangements, which are beneficial on a cross-border basis, particularly in markets for wholesale financial services and markets affecting professional counterparties and market-based counterparties, where cross-border provision, passporting and mutual recognition are important to the efficient working of trade not just in financial services but in goods—not just in the UK but in the EU as well.
The economic case for maintaining much of the existing arrangement is significant, but we are, as you know, working with a negotiation envelope as far as the EU is concerned that appears to require change—to require the UK to have less access than previously, in a visible sense. So we need to be seen, I guess, within the context of that envelope, to prioritise what is important for both sides in financial services. In our assessment it is more of the capital, derivative, centralised clearing and—outside my remit but clearly very important—insurance and reinsurance markets, which are professional-to-professional markets operating on a seamless and cross-border basis across Europe, the disruption of which would be quite significant. In those circumstances maintaining as much as we can of the existing establishment regulatory supervisory arrangements around those business activities will be important for the UK economy, but equally for the continental European economy as well.
Mr Prisk
Mr Bowles, is that your take as well?
Edward Bowles: There are two things I want to say. One is that the lead time involved for change for a regulated industry—and it is not just financial services but, my guess is, pharmaceuticals and manufacturing, among others—is so long that, to give you an idea, to create a subsidiary where you do not have one, even in a market where you may have a branch, is a minimum 18-month project plan timeframe from beginning to end, and in some cases longer depending on the breadth of products you are dealing with and the number of regulatory approvals involved. Therefore, a degree of clarity around the future timeframe and the continuity in that timeframe is critical. Otherwise you end up creating a high degree of uncertainty, not just for the regulated entities but for all their clients—thousands of clients who would be forced, with scrambling and redocumentation, to look to a different legal entity and to price and measure risk in a different way from the way they are used to doing it with the current entity.
Continuity is key, but the working assumption, as Stephen said, is that there will be change. The question is when that change will come, and whether it will be in one step or more than one step. Will we have sufficient clarity that when we deliver the end state it will be the final end state? That is why the transitional period is critical to get us to the point where the framework gives us a high degree of visibility over what the end state might be.
Mr Prisk
Q
Stephen Jones: I defer to Mr Bowles on this—given his experience with TTIP and equivalent regimes.
Edward Bowles: Obviously a high degree of dialogue is done regulator to regulator, so we are a supervised entity not merely in the home state where we may have our domicile and headquarters but in all markets where we have operation. In fact, your first point of call would be the nature of the relationship in terms of supervisory co-operation between those two entities, and what it is that you are permitted to do, and where any disputes may arise about what you are doing in those markets. In fact, the TRA is probably much less relevant to a highly regulated and supervised industry like financial services than to some others, in which there are fewer regulator-to-regulator forums that would determine the methods and modes of operation.
Stephen Jones: I would just add that the concept of dumping in financial services is, therefore, not strictly relevant.
Nick Smith (Blaenau Gwent) (Lab)
Q
Edward Bowles: Thank you for the question. Standard Chartered has been UK-headquartered for the last 155 years, but 85% of our revenues are from Asia, Africa and the middle east. In respect of most of those countries, there are no FTAs, either with the UK or, indeed, with almost any other markets. I was quite involved in my 10 years at Standard Chartered with the negotiations between the EU and Korea, the EU and Singapore and the EU and Vietnam and, most latterly, with those on TTIP, and on India in between times—that has been a slightly less successful product in negotiating terms. The fact is that we have FTAs with some of those markets and some of them are incredibly advanced. Korea and Singapore are incredibly advanced markets. You are dealing with very sophisticated regulators, politicians and others. They completely understand what the UK would be seeking to achieve in any renegotiation post the roll-over of the current FTAs.
There is certainly scope, I think, in some of those FTAs for tweaking, shall we say, and data offshoring would be one of the issues that I am sure the UK would want to look at. The negotiations take a long time. Korea was seven years. Singapore is not yet in force but we have just had a European Court of Justice ruling in relation to one aspect of it that will enable it to come into force soon, but it has been eight years overall. We can cut and paste them, but then the question is, “What are the incentives on each side—which will probably be asymmetric in terms of interests—for tweaking, and what will be the appetite and the timeframe over which you could do it?” My guess is that you would want to do it expeditiously, but the degree of consultation and engagement with other interested industries, politicians, civic sectors and so on, would inevitably build in a longer time.
For other markets that are rather less developed perhaps than Singapore and Korea, it would take longer, because if there is no existing FTA you are looking at a degree of transparency around their regulatory framework and around the concessions they inevitably will be asked to make, and the question is: “What is the quid pro quo for them?” India is a classic example. You have visas, and immigration is one of their core demands. It has always been one of the core issues that has bedevilled the EU-India FTA negotiations and that will be no less the case, I am sure, with the UK than it is with India.
Judith Cummins
Q
William Bain: Indeed. There is a good quantity of imported fish, from Norway and Iceland, that UK consumers buy. In particular, there is South Africa in terms of products like wine and some citrus, Chile and Peru in terms of soft fruits, and Morocco in terms of fruit, vegetables and some clothing. And there is principally Turkey in terms of clothing. There are many members of the BRC that source clothing in Turkey, which can be given to consumers for sale in this country on good terms. One of the fundamental issues is that, at the moment, that is under a customs union: is there going to be a functioning customs union between the UK and Turkey on 30 March 2019? I think that speaks to some of the process issues that come up in part 1 of the Bill. We know that there will be an interaction between the CRAG process of bringing a concluded treaty before this House, then interacting with the processes that have to be gone through in part 1 of the Bill.
Unless we have things like letters of intent ready to be signed at 11.1 pm on 29 March 2019, and unless we have the EU involved—what seems on the face of it to be bilateral is, in many cases, a trilateral negotiation—we will have a gap. That gap will cause uncertainty for business. Ultimately, it could cause gaps on the shelves and a lack of choice and availability. It is a serious issue for investment and for consumers.
Barry Gardiner
Q
At the moment, we may not be in control of that process. We know that we would like it to be very simple, but it may not be. Given that, should the scrutiny not be in place for Parliament either to assist procedure or, using some other mechanism, to say, “Yes, this is important, and we need to make sure that we, as Parliament, deal with it in the appropriate democratic way”?
Edward Bowles: I would say be careful what you wish for, and I do not say that completely comedically. It would very much depend upon the scale of the market that you are interacting with, and the significance of it. The experience that I had of TTIP was one where the lack of initial transparency, of engagement with civic sector societies, and of disclosure of the mandate for the first 15 months of the negotiations very much allowed the debate to be run by outside interests that felt disenfranchised. Effectively, that stymied the political will to take the negotiation further forward even before the new President was elected.
It was absolutely clear that there are lessons to be learned from a negotiation of that scale, ambition and impact for the UK’s economy, to make sure that you have the right level of engagement, transparency, scrutiny and so on in an ongoing manner. For a much smaller market, I dare say that, given the time involved, it may not necessarily warrant a full-scale similar application of scrutiny because, frankly, the relative impact for the UK economy, and therefore for consumers, healthcare and so on, would be much less. Judge each of them on their merits.
Anastassia Beliakova: To follow up on what Mr Bowles said, the TTIP example certainly shows us how critical it is to have appropriate stakeholder engagement mechanisms. At the moment, the Bill is meant to deal just with continuity of existing agreements that have already had the relevant scrutiny from the European Parliament and have passed through the European Scrutiny Committee here. However, if there are very substantial changes or if we are talking about completely new agreements, provisions certainly need to be made for appropriate scrutiny in Parliament, and for stakeholder engagement for business, civil society and non-governmental organisations. It might make sense for that to have some form of statutory underpinning so that there is input that is not contingent on the political environment, which may change. As has been said, negotiations take a long time, sometimes even up to a decade, and during those negotiations you still need to be able to test both the public views and the impacts. I would urge for these kinds of mechanisms to be put in place where new agreements are implemented.
Faisal Rashid
Q
Anastassia Beliakova: Consultation is absolutely critical. If there are changes through these agreements that would alter the benefits that businesses currently see, our members would want to be consulted. At the moment, there is a question as to how the UK will set out on having an independent trade policy. We are conducting a study with the London School of Economics on that topic, which I would be happy to share once it is published.
There is a balance of interests between continuation—ensuring that there is no gap between the current benefits and some new measures that will be implemented—and appropriate scrutiny. That has to be considered on a case-by-case basis when it comes to the existing agreements. For any new negotiations, however, there needs to be a more clearly set out process.
William Bain: There are two important points to make. First, if we look at the guidelines adopted by the European Council on 15 December and the drafts that are circulating in Brussels for the draft directive to be adopted next Monday, it is very doubtful that the EU will permit the UK to vary these agreements at all. It will basically be small changes that will require the UK to still be subject to its current obligations under these agreements. That is all that the EU will be prepared to accept.
Another important point is that if the mechanism for the transition is that the UK is under the common commercial policy and the EU common external tariff, the UK will be applying all the EU’s external tariffs vis-à-vis third countries. That means that Canada and South Korea will get the advantage of relatively low-tariff trade into the UK market, but unless we get the EU on board to help us with the transitioning process, we will not get the advantages of access to the Canadian and South Korean markets. That is the absolute imperative of why this task has to be completed—so that we can have certainty and continuity for business.
The Chair
The imminence of another Division tempts me to think that we ought to finish, unless it is a very short question.
Faisal Rashid
Q
Stephen Jones: It is a rhetorical question, I think.
The Chair
A rhetorical question that Hansard will have noted. I thank our four witnesses very much for your evidence. You were very good value for money considering you were not paid to be here. Thank you for taking time out—it was most useful for the Committee.
Ordered, That further consideration be now adjourned. —(Craig Whittaker.)
Trade Bill (Third sitting)
Thursday 25th January 2018
(6 years, 10 months ago)
Public Bill CommitteesRead Full debate Trade Bill 2017-19 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 25 January 2018 - (25 Jan 2018)
The Chair
I welcome our witnesses. Before calling the first Member to ask a question, I remind all Members that questions should be limited to matters within the scope of the Bill, and that we must stick to the timings in the programme order. We therefore have until 12.15 pm for this session. Will the witnesses please introduce themselves for the record?
Gary Stephenson: I am Gary Stephenson. I am the global regulatory affairs director for Devro, which is a collagen casing manufacturing company based in Scotland that exports to more than 100 markets. I am also chair of the Food and Drink Federation Scotland, which is a member-funded organisation that looks after manufacturers in Scotland. Its main focus is EU and UK regulatory influencing.
Sarah Dickson: I am Sarah Dickson. I am the international director at the Scotch Whisky Association. We represent 68 Scotch whisky manufacturers, producers and bottlers. Whisky is the UK’s largest food and drink export: whisky exports were worth £4 billion in 2016, and Her Majesty’s Revenue and Customs figures coming out soon should show an increase in that. We export to 180 different markets, and have done so for the past 150 years.
The Chair
We only need brief introductions. We do not need the full life story of every company.
Elspeth Macdonald: I am Elspeth Macdonald. I am the deputy chief executive of Food Standards Scotland.
Barry Gardiner (Brent North) (Lab)
Thank you, Mr Davies. May I wish everyone a very happy Burns day? So that our Welsh colleagues do not feel left out, I understand that it is also St Dwynwen’s day—I hope I pronounced that correctly—so let me say a very happy St Dwynwen’s day, too.
Barry Gardiner
Q
Sarah Dickson: For us, transparent and participative trade policy is really important. As an exporting organisation, we have been dealing with trade policy decisions in countries around the world for many years. We find that the best way to make trade policy is to involve people, consult them in that process and gather views, because you will find that some people will do better out of an agreement than others, and decisions will need to be made. Only by having a wide consultation on that and involving people in the process do you really get to a good outcome that it is then possible to implement and pass.
The Trade Bill as written at the moment—we do not know if there is more legislation to come—does not really cover that point in a statutory way. Of course, you do not have to consult and use statute to do that, but it concerns us that trade policy has been with the EU for many years and the UK has not done it. When it comes to having confidence—it is about confidence, rather than trust—in what the process is and when you would get input into that to have your say, we would be encouraged if we had more detail in a statutory instrument.
Barry Gardiner
Q
Sarah Dickson: Not at the moment.
Gary Stephenson: I see the Bill as a sort of framework for future implementation of more specific regulations. I think the challenge is in the detail. If we look at key sectors such as animal-derived products, which represent 70% of the food exports from Scotland, there are some specifics there that will be required, on, say, animal health, protection and regulations in regard to which countries are permitted to export to different markets. There is registration for different markets. There are export health certificates and border inspection posts for imports of those materials. All that is fairly complex and detailed. We would hope that we would be consulted on any more specific legislation. It is difficult at this stage to say whether it is heading in the right direction or not. It depends on that ability to consult. There will need to be consultation in the devolved Governments, as well as with the UK.
Barry Gardiner
Q
Gary Stephenson: I am an optimist, so I would like to think that I have confidence that we would be engaged in consultation, yes.
Elspeth Macdonald: From Food Standards Scotland’s perspective, the part of the Bill that engages most with us relates to implementation of trade agreements going forward. If current trade agreements between the EU and third countries are carried over in their current form, that may not change matters significantly. If those trade agreements down the road start to change, or there is a desire or a wish to start to change them, the transparency on how that would happen is not yet evident. Overriding all of that, of course, in the devolved context, is the issue about the constraints in competence that the Bill would bring on Scottish Ministers and the Scottish Parliament, and therefore on ourselves, to be able to provide assurances to consumers in Scotland about standards, and assurance in relation to international trade.
Craig Whittaker (Calder Valley) (Con)
Q
Gary Stephenson: It is difficult to tell with the Bill as it stands, because the devil is in the detail. There are 40-plus EU free trade agreements. Some are very small—economically they are not too important—but there are some very big free trade agreements within those. Clearly, we cannot do them all at once, and the key bit will be whether there is some sort of Government prioritisation of those agreements, perhaps from the standpoint of size of markets. There are some very big ones in there: Japan, Mexico, South Africa, South Korea, Ukraine, Turkey and Egypt are very large markets that are certainly important for UK-Scottish producers.
Craig Whittaker
Q
Gary Stephenson: There is uncertainty, because of the transitional phase within those discussions. If we are in a transitional phase, we are out of the EU but we are still controlled by the customs requirements. It very much depends. If there is good will on both sides, then things should progress acceptably. If any of these markets want to change the agreement with the UK, that puts us in a difficult position, because we have certainly got a fairly weak position during the transition period, where we are bound not to agree any future agreement but are still tied to the European requirements, though we are outside the EU. I am not sure how that will be resolved, and it is not detailed in the legislation.
Sarah Dickson: We are probably in a slightly different position, in that we think this Bill has the basics that you would need to carry over existing agreements. Also, because of the time pressure, we could understand that with existing agreements there may not be time for the sort of consultation and other discussion that you would want with new agreements, or if these agreements were to be changed. For an existing agreement, where the terms are to all intents and purposes similar, we can see that this Bill has the basics to do that.
For new agreements, or agreements that were changing, as Gary has mentioned, you would need a much more detailed consultation process, with scrutiny, and that is probably the bit of the legislation that it feels like the Trade Bill is missing. What happens with future deals or if deals change? How would that process work?
Craig Whittaker
Q
Elspeth Macdonald: No. As I understand it, this Bill provides for the carry-over of those existing trade deals between the EU and other countries. I think there is also—
The Chair
Could you speak up, please?
Elspeth Macdonald: Yes. This Bill provides for carry-over from existing trade agreements between the EU and third countries. I think that the European Union (Withdrawal) Bill has some influence on this process, too.
Bill Esterson
Q
“the proposed new international trading arrangements…may be on disadvantageous terms compared to the current conditions.”
Could you say what your concerns are about the trade agreements covered in this Bill, and where you see the possibility of them being included on disadvantageous terms?
Gary Stephenson: I assume that refers more to the EU situation, in that in Scotland, a large proportion of our exports are to the EU, and we are clearly looking potentially at more challenging conditions from the standpoint of, “Will the UK be added to the EU list of approved countries?”, and registration of approved establishments. At the moment, it is probably the sheer volume of materials having to pass through customs and border inspection posts and so on that is likely to cause increased trading challenges, unless we get that right, and that is a critical piece.
Bill Esterson
Q
Gary Stephenson: For the EU free trade agreements, I do not necessarily see them being as challenging. The only issue would be—take Korea. We used to export to Korea before the free trade agreement. The free trade agreement came in and basically removed the tariff, so the only difference, hopefully, would be that we are back to a tariff situation, which we did not have during the free trade agreement.
Bill Esterson
Q
Gary Stephenson: I think the issue here is that the EU will still have a say in this. To what extent do we want to negotiate bilateral agreements with these free trade association countries? Or do we want a trilateral-type agreement, which would be a sort of joint EU-UK-third country negotiation?
Bill Esterson
Q
Gary Stephenson: My view would be that a trilateral would be a better option, because you are not looking at changing anything.
Bill Esterson
Q
Elspeth Macdonald: Certainly, in relation to regulatory standards—technical standards—for food, industry and consumers are generally fairly confident and satisfied with the standards in the current EU regulatory framework. Certainly, when we talk to businesses and the public about the regulatory standards governing the food that they eat, and the food that they buy and use in their businesses, in Scotland, there is a generally high degree of satisfaction with EU standards. Any changes in future that began to change those regulatory standards away from those that currently provide a high degree of public health protection and consumer protection would be of some concern.
Bill Esterson
Q
Elspeth Macdonald: My organisation’s perspective on this is probably more around the non-tariff side. Certainly, businesses that we regulate in Scotland will be concerned to ensure that they have as little disruption as possible to their access to markets.
Bill Esterson
Q
Gary Stephenson: That is probably more in the food manufacturers’ area, because how the tariff rate quota is divided up is obviously for negotiation between the UK and the EU. I know that the World Trade Organisation has some influence on how it is divided up. This is where the specific industry sector should be consulted on what it believes would be the fair quota. Any of us is probably not in a position to set out a position on any specific quota. Take lamb as an example: what is a suitable quota that the UK would take back from the EU? It is a complex area, and I think it is best to ask that question of the sector responsible.
Hannah Bardell (Livingston) (SNP)
Q
Gary Stephenson: Wow, that is a big one. There are a number of elements to this. My company is in a fairly unique position in the food industry, in that we already import product into the EU, so we understand the complexities of that process. It is about whether the region you are from is authorised on the EU legislation side. Is your business registered within the EU as a registered business to produce that product? Other countries have similar issues. The US has similar legislation, which requires overseas suppliers to be registered with the Food and Drug Administration.
There is an additional piece: the export health certificates, which are not needed for the EU at present, but will be. Each one of those costs the business. It is not just the cost of the certificates—the vet must come to inspect. Have we got enough vets in the UK to provide that service? That is an additional challenge.
Hannah Bardell
Q
Gary Stephenson: Yes. Every single shipment requires a certificate, which we get from Carlisle, from the Animal and Plant Health Agency. You would have an official vet come in to sign that certificate. For example, in our case, if we need four times more certificates after Brexit than we are currently using, that is four times the cost. I am not saying that the vet would come four times more often, but he would certainly be in there twice as often, so you would be looking at twice the cost. Some businesses have not yet been exporting and will need an export health certificate. All this is going to be new for them. They are going to need a new certificate, and they are going to need to pay the vet to come and sign that certificate.
The additional piece involves shipping agents and border inspection posts. If you are using a shipping agent to export your product, in order to get all the paperwork right and so on, that is going to cost you. As you mentioned, most businesses have not exported in a way that requires customs declarations and so on, so that is an additional cost to businesses that they are probably not very aware of. I cannot give an exact figure for how much more, but it is an extra cost.
Hannah Bardell
Q
The Chair
I remind witnesses to speak up. Some of those at the back are finding it difficult to hear. Please speak up as best you can.
Elspeth Macdonald: Gary makes some really valid points about the increased burdens and bureaucracy for business, but it is also important to be reminded that the additional level of checking and assurance that may be required in future is also likely to have a significant impact on local authorities, for example. They have an important function in providing assurance about standards and compliance with legislation in food businesses that export to other countries. There is absolutely the potential for a significant impact of a new requirement for veterinary checks and so on, but also, should more checks be needed in future than now, there could be significant impacts on local authorities.
Sarah Dickson: From a Scotch whisky perspective, we may not need the vets, but we benefit from the tariff reductions, the intellectual property protection and the non-tariff barriers given to us by the agreements. About 10% of our exports go to a country covered by an EU free trade agreement. One thing that we have been talking to Department for International Trade officials about is how business can help. We would be more than happy to see if there is any contribution we can make to make sure these agreements are carried over.
Gary Stephenson: There is an additional piece from Elspeth’s comments. Currently, importing countries’ manufacturing sites are visited by an EU vet to assess their suitability and whether they are meeting European standards. When we are outside the EU, that will become a UK responsibility. We do not have the resources available today to conduct those checks.
Hannah Bardell
Q
Sarah Dickson: I am working on the basis that, because we will have the carrying over of all EU legislation into the UK, we will not lose the GI and an intellectual property system will be there to protect protected names such as Scotch whisky. We use it in all markets all over the world to make sure that people do not copy our product and produce lookey-likey fakes and that kind of thing. That is very important to our industry. We are working on the basis that that comes across lock, stock and barrel.
The Chair
We have a maximum of 20 minutes left and at least six people still wanting to ask questions. If we have short questions and concise answers, we can get as many people in to ask a question as is possible.
Iain Stewart (Milton Keynes South) (Con)
Before I ask my question, can I just point out an important error in some of the official documents? Whisky is spelled with an “e” on some of the documents, and that is a very different product from Scotch whisky. On Burns night, I thought it was appropriate to point that out.
Iain Stewart
Q
Sarah Dickson: For us, 10% of our exports go to those countries and benefit from them. I cannot give you an overall figure, but obviously, if you are not paying the tariff, you are not paying the tariff and you do not have that cost. It would make a difference to about 10% of our exports, and our exports were £4 billion in 2016.
Elspeth Macdonald: I do not have figures in front of me, but I think the document the Scottish Government published recently, “Scotland’s Place in Europe”, about business, jobs and the economy, touched on exactly those issues and put some economic analysis around some of that in terms of trade.
Gary Stephenson: All I can say is that I think about 37% of exports of food from Scotland are to non-EU countries, but we have not quantified exactly what the impact would be and how much of that is going to countries with a free trade agreement. I cannot give an exact answer, but it will have an impact.
Matt Western (Warwick and Leamington) (Lab)
Q
Gary Stephenson: There has to be deep consultation. The people with the expertise are the ones shipping the products, so they need to be consulted in detail on those provisions, which are very specific. You mentioned phytosanitary; obviously seed potatoes are a big product for Scotland, and they are highly dependent on phytosanitary requirements.
Matt Western
Potatoes are?
Gary Stephenson: Yes.
Sarah Dickson: Our experience is that we are often the ones working with the EU to draft the provisions on whatever it might be—labelling, or other requirements that would be needed for a mutual recognition—so we currently work closely with the EU negotiators to provide them with the advice and support that they need.
Elspeth Macdonald: There is a more fundamental issue from my perspective. There are specific exemptions from reservation through the Scotland Act that make it a devolved function for technical standards to be set in relation to food. There is a fundamental question above: it is about not just the Government, but Governments having those discussions with businesses.
Alan Brown (Kilmarnock and Loudoun) (SNP)
Q
Gary Stephenson: I think it is critical, particularly looking at some sectors, that the devolved Governments consult with sectors, and that there is a unified approach. This is too important to get parochial about. It is an important issue for the whole UK, but there is a higher impact in some sectors, particularly in Scotland and Wales; I am thinking of hill farming products and that type of thing.
Alan Brown
Q
Gary Stephenson: It would help.
Alan Brown
Q
Elspeth Macdonald: The principal issue with the Bill that causes us great difficulties is the way in which it constrains the ability of the Scottish Parliament and Scottish Ministers, and consequently our ability, to act and regulate in ways that are considered appropriate for businesses and the public in Scotland. The fundamental issue is essentially the same as in the case of the constraints imposed through the European Union (Withdrawal) Bill; it is a similar matter of high principle that overarches the Bills.
Anna McMorrin (Cardiff North) (Lab)
Q
Sarah Dickson: When the EU negotiates a trade agreement, it always looks to protect geographical indications. It does that in different ways. Not every agreement has exactly the same provisions, but it is always what they call an offensive interest of the EU to make sure that geographical names are protected. Where we think that an agreement with that intellectual property protection—that is basically what a geographical indication gives us—does not exist anymore, we will have to find other means, which means spending time and resources trying to work the country’s system. All countries, via their TRIPS—trade-related aspects of intellectual property rights—agreement, should have intellectual property; it is just that the easiest, clearest way to do this is through a free trade agreement.
We have already started work, in countries where there is an EU trade agreement, on making sure that we double up, so to speak, and work through the Government system to try to make sure that there is no intellectual property gap.
Anna McMorrin
Q
Sarah Dickson: Looking at future trade agreements, I would hope not, because I would assume that the UK Government would give the same priority to protecting its geographical indications, like Scotch whisky.
Faisal Rashid (Warrington South) (Lab)
Q
Sarah Dickson: I think the engagement with the UK Government is the missing piece of the puzzle, but we assume that it will happen at some point, and that we will have more detail on it. The market access advisory committee is a great way for us, the industry, to feed in our views formally to all the member states. We regularly attend it. It has a spirit-specific working group that we are able to contribute to. It feels very much like a partnership. We explain the problems we face in markets around the world and the EU then works out how it can respond to that. It has to prioritise, but because you have all the sectors contributing in that way and it is quite an open, transparent process, you know that you are at least being listened to and included in its strategies.
Faisal Rashid
Q
Sarah Dickson: We would feel more confident at the moment to have that laid out formally by the Government, in terms of what they are planning to do and how it will work. Ad hoc can work where you have developed personal relationships. We used to know everybody who did trade policy in the British Government, but that is not true anymore. Now there are 500, 600 or 700 people across Government doing it. When there used to be 40, it was much easier. As that grows and changes, having a very clear structure, so we know how to feed in and when and how, would be very helpful for us.
Faisal Rashid
Q
Elspeth Macdonald: I do not think I am equipped to answer that question. It is almost more of a legal question, in terms of how the Bill would apply.
Faisal Rashid
Q
Elspeth Macdonald: Certainly, in terms of being able to provide the public with assurances that the trading relationships that the UK will have in future when it leaves the EU will provide the same degree of public confidence and public health protection, scrutiny is critically important.
Faisal Rashid
Mr Stephenson, can you comment on that?
Gary Stephenson: I was going to jump in there anyway. It is an optimistic view that it is just a lift and shift. If you go for trilateralism, you are more likely to get there; if you go for bilateral agreements, you are more likely to get some differences.
Judith Cummins (Bradford South) (Lab)
Q
Sarah Dickson: It would be very similar to what the US does. It has cleared advisers. When you are into a negotiation, I know one thing that this House has talked about before is how you talk about a negotiation while it is ongoing and how you consult on those provisions without revealing what is a moving target. What the US does is to have cleared advisors in statute; they are people it is able to talk to to work out how to make a success of a provision within a negotiation. We can see that there might be a role for legislation in this area, where you want to be able to talk to people on a formal basis about what is essentially a Government-to-Government discussion.
Judith Cummins
Q
Sarah Dickson: We believe that the more open and transparent trade policy is, the better. That means wide consultation. So we are not just talking about business in this—you need a wide range of stakeholders involved. We think you will need to define what that looks like, because there are going to be time limits and speed limits in doing the negotiations when you are trying to get something achieved. The wider and more comprehensive you can make that, the easier it will then be to pass and implement afterwards. We think it is very important that those principles are part of UK trade policy going forward.
Judith Cummins
Q
Elspeth Macdonald: Our interests in terms of geographical indications are that consumers know what they are buying and that, whatever system is in place—the Government’s stated intention is that things will be the same after exit—people can have confidence that products are not being misdescribed in terms of their geographic origin. There is confidence in the current system because it is a robust and well-regulated system that is set out in statute. Our particular interests are ensuring that, when businesses trade and when people buy products that are advertised and described in a particular way, those claims, whether they are about origin or anything else, are accurate.
Barry Gardiner
Q
I want to marry that up with what you said, Ms Dickson, about the roll-over of terms. When you were asked about South Korea, you did not actually narrate the history of your association’s difficulty with South Korea, which of course was very resistant to the geographical indicator when you presented it on behalf of the Scotch Whisky Association. Do you think there is a possibility that South Korea might use this opportunity to reverse the progress that was made? There is one question for each of you.
Sarah Dickson: I would love to be in the head of the South Korean Government and to know quite where they will take this process. The conversation between the EU, the UK and the South Korean Government will have to be for them. Is it impossible that third countries might try to use this opportunity to reopen agreements? It is not impossible, but I hope that is not the case. When the UK has left the EU and is having its own bilateral trade policy conversations with third countries, we will undoubtedly get into these conversations about what they might want to change.
Barry Gardiner
Q
Sarah Dickson: The flipside is what South Korean businesses are saying to them about the benefits they gain from the trade deal. That is the judgment in all trade deals: who is benefiting, how much they are benefiting, and whether the things they do not benefit from outweigh the benefits they get. As I said, that is really a judgment for the South Korean Government. That is partly why we are trying to protect our GIs as best we can in addition to agreements.
Gary Stephenson: I will build on that. You are exactly right: there is an opportunity for them to renegotiate, and the UK, given the set-up it will be in, will be in a weaker position to defend against that. It would be ideal if the transition were just an extension of article 50, but we know it will not be. We will be out of the EU and trying to negotiate in a transitional period in which we are not supposed to be negotiating and are not supposed to have a final agreement, we want to get things delivered on time, and we do not have all the necessary resources. How do we prioritise everything? I think there are a lot of things rolled into your scepticism, but I share that scepticism.
The Chair
Order. That brings us to the end of the time for questions. May I thank the witnesses, on behalf of the Committee, for your evidence? We are very grateful.
Examination of Witnesses
Gordon MacIntyre-Kemp, Jonathan Hindle and David Scott gave evidence.
The Chair
I remind everyone that we have until 1 o’clock at the latest for this session.
Mike Wood (Dudley South) (Con)
I declare an interest as a vice-chair of the all-party parliamentary furniture industry group, for which the British Furniture Confederation provides the secretariat.
The Chair
Thank you. Would the witnesses introduce themselves for the record, starting from our left?
David Scott: I am David Scott, senior director of Tepnel Pharma Services.
Jonathan Hindle: I am Jonathan Hindle, chairman of the British Furniture Confederation—coming from the industry.
Gordon MacIntyre-Kemp: I am Gordon MacIntyre-Kemp, chief executive of Business for Scotland.
The Chair
Can I also ask the witnesses to speak up? We seem a long way away back here. I invite Barry Gardiner to begin.
Barry Gardiner
Q
Jonathan Hindle: I certainly do not feel qualified to be commenting on devolved Administrations—it is not part of my remit or where our industry is particularly clustered, so I do not feel qualified to answer that. I defer to the two gentlemen beside me, who probably know more.
David Scott: I am not convinced I am able to answer either, but the consultation is definitely a good thing. There is a voice that needs to be heard and various parties look for representation, not necessarily to veto anything, but certainly to ensure that the best interests of all parts of the UK are represented.
Gordon MacIntyre-Kemp: Business for Scotland was founded in 1996 to campaign for devolution and to set up the Scottish Parliament, so protecting the powers of devolution is one of our key remits. It is an area we have been investigating. This is one part of the whole Brexit process. The European Union (Withdrawal) Bill centralises about 100 Europe-influenced powers in Whitehall after Brexit, even though many of those cross over with the responsibilities of the devolved Parliaments and Assemblies. The deadline to amend clause 11 of the withdrawal Bill was missed, and that means we are sitting here without proper protections in place. The Trade Bill seems to suggest that it puts the power to act almost unilaterally in the hands of a single Minister—a single Minister who has what has been labelled a “hard Brexit agenda”—without clear protections on the public right to consult, scrutinise or stop trade deals.
At best, that means that a great deal of confusion remains over how trade negotiations will be handled where they overlap with the devolved Assemblies and Parliaments, and that is damaging to business. At worst, it looks like a deliberate attempt to delay the transfer of EU-held powers in particular to the devolved Parliaments until after the UK Government has had free rein to agree deals that you could say run roughshod over the devolution agreements that currently exist in these islands.
To give a key example, if we are going to do an instant trade deal, which we want to do with the Americans and which has to be the highest priority, the Transatlantic Trade and Investment Partnership is a great guide to what we can do with them. It is quite progressed; the key reason that TTIP did not make progress in the EU was that the EU wanted to put in protections to allow Governments to maintain public services such as the NHS, and our NHS is something that the United States is very likely to want to have access to.
I do not know much about trade negotiations, but I was trained in negotiation by a FTSE 100 company and by an American top 500 company, and the very first rule of negotiation is, “Make sure the person you’re negotiating with has the ability to say yes to the deal you’re presenting.” If we have devolved Parliaments who have control over the NHS, the Americans will look at that and say, “Well, you don’t have the ability to agree a trade deal with us,” so devolution is ipso facto incompatible with rapid trade deals, especially done under a World Trade Organisation agreement. I see that as being a problem and potentially creating constitutional issues not just in Scotland, but particularly in Northern Ireland.
Barry Gardiner
Thank you. That was an extremely interesting response, and I am sure one that will help our deliberations this afternoon, when we come to the first set of amendments. You have raised a number of very serious constitutional questions. It may be that the Minister has clear answers to them, but I think we will all be keen to hear what they are.
Martin Vickers (Cleethorpes) (Con)
Q
“the government is committed to maintaining the existing trade relationships, effectively preserving the status quo.”
You go on to say:
“It therefore seems that there is the potential to spend a significant amount of time, effort and expense to deconstruct the current processes”
and introduce a new process to bring us back to the same place. The way I read them, those two statements are somewhat contradictory. Surely what we are looking at in the Bill is the provision to ease that transition to provide the status quo?
David Scott: From my perspective—I speak for my company, which has 60 individuals in Scotland working in the pharma services sector—there are established regulations and ways in which we currently work with the European Union and with global pharmaceutical companies. The Bill would suggest that, while we seek to maintain those, we reserve the right to deconstruct them and come back to the same position. That is how I read it; I may be wrong, and I do apologise if I have misconstrued that. It is important, from my business perspective, that we maintain our relationship as it currently is, because that is a major way in which we trade with European countries on behalf of the pharmaceutical industry.
Martin Vickers
Q
David Scott: I appreciate that, but I do not believe that we can. I think the current system works in the best interests of the UK. The Medicines and Healthcare Products Regulatory Agency is regarded as a powerhouse within the regulatory sphere. If we tried to set up a secondary or different regulatory system, it would not be to the benefit of the UK in terms of how we operate in the global marketplace for some pharma services.
Bill Esterson
Q
Gordon MacIntyre-Kemp: Yes, and I think there is a great deal of confusion around it. I do not believe that there is sufficient clarity in the Bill about what is defined as a free trade agreement, for instance. If you do a deal with a nation that has multiple elements including an element of free trade, does that mean that the Minister would have full powers to do a deal that runs contrary to or overruns devolved powers? What is a specific trade deal? That needs to be defined, so as to limit the scope of the regulatory powers being granted by the Bill. A lot more clarity needs to come through in terms of the legal writing of it.
Bill Esterson
Q
David Scott: From my perspective, it would be good to engage with Life Sciences Scotland, the industry leadership group there, to understand the concerns and any wishes likely to be put forward. There is also the Scottish Lifesciences Association. There are a number of bodies in Scotland that should be spoken to and asked to come provide evidence from that perspective, so you can get a wider perspective on how Scotland’s life sciences community feels, not just in pharma and chemical but in animal health and across the broad remit of research and all these sorts of things, and get some information from the whole body of Scotland that is representative of the wishes of industry and business from that perspective.
Jonathan Hindle: I do not have a particular Scottish perspective on this. Generally speaking, the furnishing and furniture industry is keen to achieve what I am hearing from a lot of other industries: stability and consistency, equivalence and mutual recognition across the process. We are keen to advocate dialogue wherever we can have it to achieve that transition as smoothly as possible.
Bill Esterson
Q
Jonathan Hindle: I cannot say that our industry is concerned at the moment that there will not be consistency; in everything that we are reading, we are told that attempts are being made to make that transition as smooth as possible. We do not currently endure any significant issues. There are some issues with policing and surveillance of some of the standards that we have mutually agreed; that is a current scenario and a problem now. I am hoping that the formation of the Trade Remedies Authority will allow for some more robust investment in policing and surveillance of the standards where we currently endure problems, but I would not say that we are suffering from dumping in the fullest sense of its description in this context, although we are a very substantial net importer. There is a big trade gap that we as a nation endure in our industry.
Gordon MacIntyre-Kemp: You have raised an important point. Business for Scotland represents mainly small and medium-sized enterprises in Scotland. We surveyed 758 businesses and asked for their opinions on how the trade deals in Brexit have been processed and handled. There were 199,000 employees, half of the companies exported, and 41% had at least one non-UK-born EU national on their staff. We found that only 8% of Scottish business owners trusted the UK Government to deliver a deal that works best for Scottish business. Interestingly enough, 76.81% to 77% thought that calling a halt to Brexit would be beneficial to the Scottish economy. I think you have got an issue there: business does not really understand what is going on and there is a great deal of uncertainty. There is more uncertainty and more negativity towards Brexit in Scotland because Scotland voted to remain, and therefore there is less confidence in business as a direct result of that; so you will see that follow through.
I think the period between the point where we are still talking about deals and the point where we can actually start looking at trade deals has to be used for a massive consultation exercise with all the sorts of bodies that David mentioned before, but right across the UK. If we are going to do that we need to be preparing for it now. We need to be talking about it now. We need to be saying, “How are we actually going to deliver this?” Business for Scotland will be able to help, from a Scottish perspective, as much as we possibly can.
Bill Esterson
Q
Gordon MacIntyre-Kemp: Yes.
David Scott: Can I echo that? I think uncertainty is a killer at this point, specifically for my customers, whom I trade with on a global basis. They have a global supply chain and have to make contingency plans to ensure that whatever medicines they make are available to patients. Those contingency plans cannot wait until the eleventh hour or the last minute of any negotiations of any sort. I can tell you that they are starting to put those contingency plans in place now, and that they will have a massive effect on companies such as mine, and companies across the UK that support pharmaceutical R&D and the development and release of products on to the European market.
Hannah Bardell
Q
Perhaps I can start with you, David, and pick up on what has been said about confusion. The way I read your comments was that you were talking about concerns about legislative change under the Bill, and the ability to make changes in primary legislation. As we know, the Law Society of Scotland has raised issues concerning the timescale that that might mean for your organisation and sector. Could you talk about that a bit? Also, I notice from your photograph that you are MHRA and Food and Drug Administration approved. On the impact of leaving, and potential disjoint—we have already lost the European Medicines Agency to Amsterdam—can you talk about the impact on your sector and company?
David Scott: Yes, the potential impact is massive. The whole of the medicines regulation is about harmonisation and working under one single set of standards, which are beneficial and mean that the speed to market of life-saving medicines is reduced. If we try to come up with a different set of regulations or way of working, and have duplication of effort, which is what would happen under the current proposal if we became a third country outside the EEA, pharma will look at us and think, “Is the market big enough?”
We are now a net exporter of pharmaceuticals into the European Union and have a trade surplus. We want to avoid anything that puts us into a deficit. If we cannot get some harmonisation and cannot stick with the current harmonisation, I am concerned that we will lose our reputation—or not our reputation, because the MHRA is one of the best in the world, as far as I am concerned, but the ability to get joined-up connectedness. That would have a massive impact on my industry and my company, without question. I would then be forced, contingency-wise, to say “What do I do? I can’t serve some of my customers’ needs in a different regulatory system.” It is a massive thing for us.
Hannah Bardell
Q
Gordon MacIntyre-Kemp: For sure. In the survey we did, we did not just want to survey our members; we surveyed companies across Scotland. The feedback was surprising to us as an organisation. We had sensed that Scottish business was not happy with how this was being handled, but we have some quotes from non-members of Business for Scotland. A director of a FTSE 100 company said:
“When the virtually inevitable car crash happens the Scottish end of the business will most probably be moved to Europe which is a crying shame as the expertise at home is unsurpassed in our market segment. However with no likelihood of stability it will be a logical step to move.”
A director of a New York stock exchange limited company with 800 employees in Scotland said:
“Stop now and ask the people, do they want to continue with this process, knowing what they know now?”
A director of a UK bank left a pithy statement. He just said: “Absolute bloody shambles.” That was the sort of feedback we were getting. Some 79% want a second EU referendum after the deal is done.
In terms of the Trade Bill itself, what I am finding is that Scottish business is not engaging with the detail of Bills such as this. The information they are being asked to understand is so confusing that the only answer they have psychologically is to keep their heads down and hope that it will all be okay. That is why I suggested that through the whole process there has to be a lot more consultation.
In terms of fisheries, food standards and health, which I mentioned before, there are lots of areas where promises have been made. There are issues around tariffs and protections. For instance, I was told during one debate that it is far better to do a trade deal with India because it is so big and so on, but the wages in manufacturing in India are about 79p an hour, and we are approaching £8 an hour here. If a trade deal is done that opens up markets without the right level of consent from devolved Parliaments and industry groups, that will not be a trade deal but a bonfire of manufacturing in the United Kingdom. There have to be checks and balances in that. Multiple sectors will have to feed that in, because if we do not know that, we are going to be signing trade deals that will have unforeseen consequences, and I think that will be very damaging to the UK economy.
Hannah Bardell
Q
Jonathan Hindle: We have made recommendations to the Department for Business, Energy and Industrial Strategy for some updating of and amendments to the flammability regulations in particular. On a more broad basis, I understand that the British Standards Institution is looking to remain a member of the European Committee for Standardisation and the European Committee for Electrotechnical Standardisation, for example, to keep that continuity. That is what the industry is looking for. By and large, those standards, if they remain in place, are adequate. It is our ability to police, surveil and properly address transgressions that has much more been the issue for the industry. A plethora of products are making their way into the country that do not meet our stringent standards.
Hannah Bardell
Q
Jonathan Hindle: That would be a big concern for the industry. It already is under the current regime, and we are looking for improvements.
David Scott: To Gordon’s point specifically, there is a complexity here that we do not really understand. As you said, my company knew nothing about the Trade Bill or these sorts of things until we were asked to look into this. We focus on our bits. I think that Gordon is absolutely right: if we put in a trade Bill, there will be unforeseen consequences for certain sectors that you cannot foresee at this point in time.
Part of that is the safety element. Regulated drugs are there for a reason. If we start to loosen those regulations to make trade easier, then we open ourselves up to all sorts of problems, in terms of the fitness for purpose of the products that are brought into this country for use by patients.
Craig Whittaker
Q
David Scott: We would always want to comply with the highest standards of good manufacturing practices—GMP—for the pharmaceutical industry. What we do not want is to see any easing-up of the requirements of that to make trade easier with other parties. That is what I was trying to say. We need to be part of a harmonised system that works on a global basis, because if we have our own system then it becomes much more—not difficult to trade with us or to get things regulated, but we would set up an extra set of barriers. Currently, 60% of all medicines that are used in Europe are released from the UK.
Craig Whittaker
Q
David Scott: No, absolutely—it is not a trade issue. We would continue to work to the highest standards, but I would be concerned that things being imported into the UK might not meet the same standards as we would look to use ourselves.
Craig Whittaker
Q
Gordon MacIntyre-Kemp: The Bill itself does not supply sufficient detail to be safe to pass, in my view. The evidence that I am offering is not based on any nationalistic principles; in fact, I think Brexit is also a nationalistic principle, but that is not what we are here to talk about, as you say.
There is one particular thing about standards, in that it is not really defined which ethics and standards will constrain trade Bills. You talked about pharmacy. I worked for Scottish Enterprise for many years and led a mission out to the States to look at poultry processing over there, and chlorine-washed chicken is one of the issues. Everyone was focusing on the fact that there was going to be chlorine-washed chicken as though that is a bad thing. Actually, it is not that bad a thing; it is just that their process is completely different.
If you wash chicken at the end of the process with chlorine, then you do not actually have to have all the high standards in every single process right through, until you get to the point that you have finished. You have then got a product that is a lot less expensive to create. If that is allowed to be imported into the United Kingdom, it will destroy poultry jobs, and therefore we have to think about this question: “Does this Bill actually have sufficient protections to mean that the unforeseen consequences will stop the loss of jobs in the UK as a result of the free hand that has been given?” I do not think it will.
Craig Whittaker
Q
Gordon MacIntyre-Kemp: Except the wording of one of the points—I am sorry, but I do not have it in front of me—is that the Minister and the devolved Administrations will have the ability to act, where appropriate. That gives a huge free hand without the right level of scrutiny and professional input. That in itself is the danger of the Bill. That is very specific to this Bill, and the point is about what it allows and how it can be read.
Craig Whittaker
Q
Gordon MacIntyre-Kemp: I understand that this is largely about rewriting—or, if you like, cutting and pasting—from European rules into British law, but elements of the Bill are ill-defined and could, like the Henry VIII powers, direct too much power—
Craig Whittaker
Q
Gordon MacIntyre-Kemp: Inasmuch as I have read about them and have written newspaper articles about them, but I am not a lawyer, if that is what you are getting at. Am I able to give you a complete legal run-down of them? No, but I do not think you would have the time if I were able to.
Craig Whittaker
Q
Gordon MacIntyre-Kemp: Yes, I do.
Faisal Rashid
Q
Jonathan Hindle: A very quick answer from the furniture industry point of view is that we would want to see as much scrutiny as possible. You referred to parliamentary scrutiny; whether that is the most effective form of scrutiny is another matter. We would certainly want the TRA to be made up of appropriate individuals to provide good-quality scrutiny.
Faisal Rashid
Q
David Scott: As I said at the start, consultation is absolutely essential. You have to start with the industries and then bring it to yourselves from that point of view. If it being in the Bill would force that to happen, I would certainly say that that is a good thing from my perspective. I guess that what we do not want is one or two people making a decision for the populous.
Gordon MacIntyre-Kemp: Very quickly, that was my point in response to Mr Esterson’s question. Yes, it should be in the Bill.
Faisal Rashid
Q
Gordon MacIntyre-Kemp: I am not an expert on other nations. For almost all my life, we have been in the EU. We did not need to study what other people did. We are just making it hard for ourselves now.
Mike Wood
Q
Gordon MacIntyre-Kemp: You are talking specifically about it not allowing anyone to do a deal to do with chicken, but I was using that as an example to point out that the actual wording of the Bill seems to allow a significant amount of power in one particular place and to not have sufficient levels of consultation. Basically, afterwards, it would indeed be applicable across many different sectors, food being one of them.
Mike Wood
Q
Gordon MacIntyre-Kemp: In my opinion, what it allows is too free a hand post-Brexit to do deals without the right level of consultation. Sorry if that has not been clear, but I have said it four or five times.
Mike Wood
Q
Gordon MacIntyre-Kemp: Right. I understand what you mean now.
Alan Brown
Q
David Scott: Absolutely. I would refer you to the Industry Leadership Group position paper written by Dave Tudor, the chair of the Industry Leadership Group for Life Sciences Scotland. There are four key points. One is regulation, which we have talked about already: maintenance of regulation on a harmonised basis. There is trade and supply, which we are obviously talking about today. Access to talent is a key thing. In Scotland, we are a diverse community. Research and development are best done using a diverse set of people, so that freedom of movement and the ability to attract people not just into Scotland but into the UK is fundamental for us. That is not to downplay our abilities, but a mix of different people helps us bring the best ideas to the table.
Again, from a Scottish point of view, we have a heritage of innovation in the medical sciences that we are very proud of, and we want to continue to use our talent base and other talent to help us achieve that.
Alan Brown
Q
David Scott: In my opinion, we are too late. People are starting to put processes in place and to make contingencies. We need some clarity on the issue as soon as possible.
Alan Brown
Q
David Scott: Again, as much clarity as possible on that is good. I have some European nationals who work for me. They are concerned about their position and whether or not they will continue to work for me as we go forward. As soon as we can get clarity on that, an agreement would be fantastic. If that were within the powers of the Scottish Government, I would welcome it, but it is about understanding as quickly as possible how to get clarity so that we can allay the fears of our own people and go out to our customer base to allay their fears and stop any potential actions before they happen.
Alan Brown
Does anyone else want to add to that?
Jonathan Hindle: The furniture industry has a similar exposure to migrant workers. We have a high degree of Polish migrant workers in the industry, particularly with sewing and upholstery skills. The unknown quantities about all of this have meant that some of them are leaving, so there is concern in the industry to provide some clarity, once again, about how we would deal with migrant issues for industry.
Gordon MacIntyre-Kemp: Again, some of our members have expressed concerns. In particular, highland hotels are saying that 65% to 70% of their staff during the summer are EU nationals and so on. There are significant issues in Scotland. I think that this shows, in terms of the overall remain vote, that immigration is seen radically differently in Scotland in terms of an opportunity to engineer the age of our society and bring skills to Scotland.
Matt Western
Q
“Make provision about the implementation of international trade agreements”.
To elaborate on the point you were making earlier, what do you understand that to mean?
Gordon MacIntyre-Kemp: What do I understand the “international trade agreements” to be?
Matt Western
Q
Gordon MacIntyre-Kemp: Sorry. What do I understand “international trade agreements” to mean? They are basically agreements between countries that facilitate trade, such as TTIP and CETA and so on, and they have significant impacts on the different sectors, in terms of what sectors are opened up to particular trade deals. Now, regarding the EU, it already has trade deals with South Korea, Canada and so on. I think that is kind of basic.
However, there could be difficulties if there is not an exact definition in the Bill of what a trade deal is; I refer to evidence from legal experts on this issue, as well. It could mean that deals that are not specifically seen as trade deals can come under the remit of the Bill.
Matt Western
Q
Gordon MacIntyre-Kemp: More open than it possibly should be; not as restrictive as it—
Matt Western
It could be open?
Gordon MacIntyre-Kemp: Yes. It could be seen that way. I am just asking for it to be tightened up a little bit.
Matt Western
Q
Jonathan Hindle: Fairly limited, inasmuch as when most people look for certificates of origin in tendering processes and evidence of supply chain in that regard, they ask for either an EU reference or a UK reference. If we were to devolve to a UK reference as a source of origin, it would carry equal weight in the minds of those in the particular markets that I am familiar with who often require that evidence.
Regarding the quantities coming out of the EU versus the UK, normally we are asked to make a judgment on a split and err towards the country of origin being where the majority of the material originates or where the bulk of the manufacture occurs. There are some guidelines that we tend to follow, along those lines. I am not hearing any concerns from our industry that that will present any problems. We continue to adhere to the current remit for declaring origin.
Matt Western
Q
Jonathan Hindle: Offhand, I cannot see it impacting the ability to trade effectively, or our competitiveness, or how we are perceived in any way; no, I cannot see that and I am not getting anything from our industry, as we poll it, to suggest any specific concerns on that particular point.
Of course, we have all the problems that we have had with a weak currency and all the inflationary impact that that has had, because most of our industry relies for a large part of its materials on continental Europe and elsewhere in the world. Weak sterling has had an impact and countered, if you like, the benefits that we might otherwise have enjoyed as an exporter from having a weaker currency on the other hand. It has been a double-edged sword in that regard.
Matt Western
Q
Jonathan Hindle: Very much so, yes. We would certainly welcome having someone on that TRA that understands our sector and all the nuances and complexities that have been alluded to—absolutely.
Barry Gardiner
Q
Gordon MacIntyre-Kemp: Yes, exactly, and as food safety is a devolved issue in Scotland—
The Chair
Order. I apologise to the hon. Member, but we have come to the end of the time allotted to the Committee for questions. May I thank the witnesses on behalf of the Committee for your evidence today? The Committee will meet again at 2 o’clock this afternoon in Committee Room 12.
Ordered, That further consideration be now adjourned. —(Craig Whittaker.)
Trade Bill (Fourth sitting)
Thursday 25th January 2018
(6 years, 10 months ago)
Public Bill CommitteesRead Full debate Trade Bill 2017-19 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 25 January 2018 - (25 Jan 2018)
The Committee divided: - Ayes: 2 / Noes: 9 - Question accordingly negatived.
The Chair
We now begin line-by-line consideration of the Bill. The selection list for today’s sitting, which is available in the room, shows how the selected amendments have been grouped for debate. Grouped amendments generally deal with the same or similar issues. Please note that decisions on amendments take place not in the order they are debated, but in the order they appear on the amendment paper. The selection list shows the order of debate; decisions will be taken when we come to the clause an amendment affects.
I will use my discretion to decide whether to allow a separate stand part debate on individual clauses and schedules following debates on relevant amendments, but it will certainly help if right hon. and hon. Members, including Ministers and shadow Ministers, stand if they wish to speak on clause stand part.
Clause 1
Implementation of the Agreement on Government Procurement
Hannah Bardell (Livingston) (SNP)
I beg to move amendment 33, in clause 1, page 1, line 15, at end insert—
“(1A) No regulations may be made under subsection (1) by a Minister of the Crown, so far as they contain provision which would be within the devolved competence of the Scottish Ministers (within the meaning given in paragraph 7 of Schedule 1), unless the Scottish Ministers consent.
(1B) No regulations may be made under subsection (1) by a Minister of the Crown, so far as they contain provision which would be within the devolved competence of the Welsh Ministers (within the meaning given in paragraph 8 of Schedule 1), unless the Welsh Ministers consent.”
This amendment would ensure that the consent of the Scottish Ministers or Welsh Ministers is required for any regulations that deal with matters within the competence of devolved authorities in Scotland and Wales.
The Chair
With this it will be convenient to discuss the following:
Amendment 34, in clause 2, page 2, line 40, at end insert—
“(7A) No regulations may be made under subsection (1) by a Minister of the Crown, so far as they contain provision which would be within the devolved competence of the Scottish Ministers (within the meaning given in paragraph 7 of Schedule 1), unless the Scottish Ministers consent.
(7B) No regulations may be made under subsection (1) by a Minister of the Crown, so far as they contain provision which would be within the devolved competence of the Welsh Ministers (within the meaning given in paragraph 8 of Schedule 1), unless the Welsh Ministers consent.”
This amendment would ensure that the consent of the Scottish Ministers or Welsh Ministers is required for any regulations that deal with matters within the competence of devolved authorities in Scotland and Wales.
Amendment 36, in schedule 1, page 7, line 24, at end insert—
“(4) This paragraph does not apply to regulations made under section 1(1) or 2(1) by the Scottish Ministers or the Welsh Ministers.”
This amendment would give the Scottish and Welsh Ministers power, by regulation, to amend direct EU legislation that forms part of domestic law on and after exit day in devolved areas.
Amendment 37, in schedule 1, page 8, line 5, at end insert—
“(4) This paragraph does not apply to regulations made under section 1(1) or 2(1) by the Scottish Ministers or the Welsh Ministers.
Requirement for consultation in certain circumstances
3A (1) No regulations may be made by the Scottish Ministers or the Welsh Ministers acting alone under section 1(1) or 2(1) so far as the regulations are to come into force before exit day unless the regulations are, to that extent, made after consulting with a Minister of the Crown.
(2) No regulations may be made by the Scottish Ministers or the Welsh Ministers acting alone under section 2(1) so far as the regulations make provision about any quota arrangements or are incompatible with any such arrangements unless the regulations are, to that extent, made after consulting with a Minister of the Crown.
(3) In sub-paragraph (2) ‘quota arrangements’ has the same meaning as in paragraph 3.”
This amendment would replace the requirement for the Scottish and Welsh Ministers to obtain the consent of the UK Government when acting alone under section 1(1) or 2(1) with the need to consult before making such regulations.
Hannah Bardell
It is a pleasure to kick off what I think we all agree is a hugely important debate. We are pleased that the amendments were selected.
It is important to say at the outset that our amendments to clauses 1 and 2 would ensure that the principles of devolution are safeguarded in the Bill as the UK leaves the EU. Just over 20 years have passed since devolution, and it is important to pause for thought. There has been a lot of discussion—on Second Reading and in the public discourse—about how the cross-party agreement that brought us devolution and the Parliaments and Assemblies of the devolved nations of the UK all those years ago is threatened. Much in the Bill drives a coach and horses through the cross-party agreements that brought huge changes to the devolved nations of the UK. I say to fervent defenders of the United Kingdom that by threatening devolution and devolved powers—the Scottish National party has set out 111 areas in which they are under threat—the Bill threatens to undermine the Union.
We agree with the provision in clause 1 that aims to ensure continued access to Government procurement markets after the UK leaves the EU, but we believe that UK Ministers should have to seek consent, not just to consult. During our debates on the European Union (Withdrawal) Bill, the Prime Minister promised that the devolved nations of the UK would be consulted. As we know, it has not been possible to seek proper consultation in Northern Ireland because of the situation there; we look forward to seeing what happens in Northern Ireland and what threat that poses. However, I think it is fair to say that the devolved nations do not really feel that consultation has happened. For us, consultation and consent are absolutely the bottom line.
Amendment 33 would ensure that the consent of the Scottish Ministers or the Welsh Ministers is required for any regulations made under clause 1 that deal with matters within the competence of devolved authorities in Scotland or Wales. The Library briefing for the Bill states:
“If responsibilities for much of procurement law move from the EU to the UK with Brexit, there are questions about who takes on these responsibilities. At present, responsibilities for procurement are generally either devolved or set at the EU level.”
The devolved legislatures in Scotland and Wales implement EU directives directly.
Let me draw on a specific example. Procurement is probably quite a dry and technical subject to many people, but it is very important. Back in 2008, we had a big challenge with superbugs and sickness in hospitals in Scotland, as did much of the UK. Through Government procurement measures, we were able to take contracts with private firms back under Government control. That was absolutely vital. If our amendments are not agreed to and we are unable to guarantee our procurement rights, there is a risk that they will be lost in the 111 areas I mentioned.
My Labour colleagues should think very carefully, given that it was their party that was instrumental in devolution. Labour should be congratulated on that. Labour Members must reflect on the impact of the Bill and the opportunity presented by the amendments, which have been laid with a degree of cross-party consensus and support. If we choose to push the amendment to a vote—obviously we will listen to the full debate—it would be excellent to have their support, and perhaps that of some Government Members. They might deem the promises made to Scotland in the past to lead not leave the UK, to be an equal partner—all those words and rhetoric—to be not rhetoric, but something that Members actually stand by.
On amendment 34, we agree with the provision in clause 2 that aims to provide continuity to existing trade deals that the UK is part of by virtue of its EU membership. There are about 40 trade deals, with more than 60 countries. We have heard a huge amount of evidence from a number of different organisations, including today from Devro, a company that makes sausage skins—we might argue that there will be no breakfast after Brexit if Devro is not able to produce the skins for sausages. We also heard from Hologic, a company I visited some time ago that operates in my Livingston constituency. Its representative spoke about the importance of consultation and consent and the involvement of the devolved nations.
We believe that UK Ministers ought to seek the consent of devolved Ministers when amending the law in devolved areas. The amendment would assure that the consent of Scottish or Welsh Ministers is required for any regulations made under the provisions of clause 2 that deal with matters within the competence of devolved authorities in Scotland and Wales.
I ask colleagues on both sides of the Committee to think about when trade deals are being negotiated. I know the Bill is about transferring current deals across, but it is also about what happens beyond that; it is about the framework that is put in place and ensuring that that framework is good and robust for everybody in the UK, wherever their business is and wherever they live. It is incredible to think that we would not get support, particularly from our Labour colleagues, on ensuring that the devolved Administration in Wales, whoever that may be, would have a say and would be able to give consent on the decisions that are made for those businesses.
Mr Mark Prisk (Hertford and Stortford) (Con)
Let us say a major treaty was going forward that was in the interests of Scottish whisky, for example. Is it the hon. Lady’s position that Welsh Ministers should be able to veto that?
Hannah Bardell
Those are things that can be discussed. I am not going to draw on particular areas—if it were Welsh lamb, for example, should we have a veto?—and say that we should be interfering. I would like to think that if it came to that situation, the Welsh Government—whoever was in power in Wales—would take a sensible approach and realise it was the right thing that the Government in Scotland, whichever colour they may be, should be able to consent and be consulted on the products of their nation. We should have an even hand across the UK.
Mr Prisk
I note that the hon. Lady said no to that. In other words, as it stands, what she is saying about consent means that the treaty in question could not go forward. I put the question to her again: what if there was a major interest in Scotland that, under her amendment, was vetoed by Welsh Ministers? Is that what she intends?
Hannah Bardell
No, that absolutely is not the intention. We all live in a world at the moment where we can put scenarios forward and say this or that might happen.
Hannah Bardell
And the point of the amendments is that in relation to goods coming from whichever part of the UK, we do not create a democratic deficit. That is what the Bill creates. The amendment rectifies that.
Bill Esterson (Sefton Central) (Lab)
I am proud of the Labour Government’s role in delivering devolution to Scotland and Wales, and I appreciate the hon. Lady mentioning that role. Can she set out when she sees there is a need for the consent of the devolved Administrations and when there is a need to consult them? Perhaps she could give some examples to demonstrate the difference.
Hannah Bardell
To be honest, the point is that we have the powers and we can have that discussion on an issue-by-issue basis. We have many examples of where we have worked well with the UK Government on trade and on rights, but we can consider other things—workers’ rights, for example. I know that when the Bill that became the Trade Union Act 2016 came to Parliament, many Members in the hon. Gentleman’s party and in other parties had huge problems with it, and it was hotly debated and discussed. Unfortunately, what we have seen is a rolling-back, despite the fact that there was opposition.
If we turn that on its head and say, “Could there be vetoes from other parts of the UK?” or, “Could we be in a position where one country is blocking a trade deal on a particular product over another within the United Kingdom?”, I would like to think that people will not use those powers in the way that the UK Government have often used their powers to impose legislation on devolved nations against their will. The whole point is that the rights, protections and opportunities, the access to and membership of the single market and the customs union are so vital to Wales, Scotland and the rest of the UK that we must not row back on those things and not give the devolved nations the opportunity to consent and be consulted. We could pick any particular issue and we could all have a discussion about whether there should be consent or consultation. The point is that we have the powers and they are powers for a purpose, and we should not have powers taken away.
Amendment 36 would amend schedule 1, which provides that Scottish and Welsh Ministers have
“No power to modify retained direct EU legislation etc.”,
such as EU regulations, or to make regulations that would create inconsistencies with any modifications to retained law that the UK Government have made, even in devolved areas. However, those restrictions are not being placed on UK Ministers. We believe that, as a matter of principle, devolved Ministers should have the same power in respect of matters falling within devolved competence as UK Ministers are being given. That is not is an unreasonable request. We are in a Union and we have devolved powers and devolved Governments; Ministers in each of those countries should have the same power as any UK Minister. Amendment 36 would remove the restrictions placed on the Scottish and Welsh Ministers’ ability to amend directly applicable EU law incorporated into UK law, bringing the powers into line with those being given to UK Ministers.
Amendment 37 would replace requirements imposed on Scottish and Welsh Ministers to seek UK Ministers’ consent when
“acting alone under section 1(1) or 2(1)”
with a requirement to consult UK Ministers before making those provisions. We have heard from stakeholders on this matter. I am sorry I was not here at the earlier evidence sessions; I was at the Council of Europe, but I have watched and read the contributions that were made. As we know, stakeholders were invited to give evidence and discuss their concerns. Chris Southworth from the International Chamber of Commerce UK said,
“Overall...I would be concerned if I were in the devolved Administrations. There is specifically no opportunity for the devolved Administrations—or the regions, I have to say—to feed into decisions on trade. I would be very concerned about that, particularly in the devolved Administrations, where there are vulnerabilities on a whole range of different industries.”––[Official Report, Trade Public Bill Committee, 23 January 2018; c. 35, Q80.]
That is not SNP Members or Members of other parties just making political points; it is what we have heard in the Committee.
Today, we heard Elspeth Macdonald from Food Standards Scotland say that one of the reasons her organisation is supporting the Scottish Government on withholding a legislative consent motion is that it feels there could be a lowering of food and drink standards. Given that Scotland’s food and drink industry has grown at twice the rate of that of the rest of the UK and is a leading light of our exports, that is something.
Alan Brown (Kilmarnock and Loudoun) (SNP)
It is a pleasure to serve under your chairmanship, Mr Davies. I will make a few remarks on the principle of devolution and the amendment that has been tabled.
During one of the evidence sessions the hon. Member for Corby threw out the proposition that Opposition Members should not have voted against Second Reading of the Bill, even though we believed it to be flawed. He suggested that we should have voted for it and tabled amendments in Committee. Well, the proof will be in the pudding now. How many amendments will the Government back? Will we be back at square one and left with a flawed Bill?
The blunt reality is that both the Welsh and Scottish Governments have said they will withhold their legislative consent motions if the Bill remains as it stands, so it certainly needs amending if it is to get buy-in from the Scottish and Welsh Governments. Our amendments were drafted in agreement with the two devolved Administrations. That is why, as my hon. Friend the Member for Livingston said, it is slightly disappointing that Labour MPs have not backed an amendment that was drafted by the Welsh Government.
We also heard in the evidence sessions a number of witnesses agree that the Bill in its current format excludes input from the devolved Administrations. As a result, agreements could be forced on devolved Administrations. The UK Government can legislate and make regulations that affect devolved competences. During the witness sessions we heard about tariff rates and quotas, which could be an issue; the subdivision of quotas within the UK will need to be considered, as will rules on origin. That is why it is critical, in the spirit of co-operation, that the devolved Administrations have to give consent to agreements or regulations that the UK Government put forward.
We are constantly told that the Scottish Parliament is the most powerful devolved Parliament in the world, but that is incorrect. We heard during our evidence sessions about the devolved Government of Wallonia in Belgium, which was able to veto the entire comprehensive economic and trade agreement with Canada. That is a devolved Parliament with real power. It is vital that we hold on to and do not allow any erosion of the powers of the Scottish Parliament and the Welsh Assembly.
We were promised that clause 11 of the European Union (Withdrawal) Bill would be amended to protect the devolved nations. That did not happen. That is why we need to amend this Bill and to get agreement from the UK Government that they are willing to work with the Scottish Parliament and the Welsh Assembly. It is essential that their competences are protected.
I think that is all I need to say in support of the amendments. I am interested to hear what the Minister has to say.
Barry Gardiner (Brent North) (Lab)
It is good to have you back in the Chair, Mr Davies. I look forward to the Committee making progress under your guidance.
The Labour party brought forward and delivered the devolution settlements when it was in government, so we absolutely support the rights and powers that are conferred on the devolved Administrations by their respective devolution settlements. Matters of devolved competence must not be subject to overreach by Ministers of the Crown who seek to amend or overrule the will of the people, as expressed through their devolved Governments. For Labour, that is absolutely the starting point of this debate. We believe that the powers of those devolved Governments must be enforced and, indeed, reinforced where appropriate.
That said, we have real concerns about some of the implications of this group of amendments in the context of implementing our legally binding obligations under international law. The amendments might, in effect, create a veto power, which in turn might result in the UK failing to deliver on its binding obligations under a treaty. We have a conundrum. Often in Committees like this we have what are, in effect, set-piece debates, but this is a real debate about a profoundly complex constitutional issue, which I do not think will be easily resolved. Let me try to set out what I think is at the heart of it.
I pay tribute to the hon. Member for Hertford and Stortford, whose question went to the heart of the matter. Interestingly, the spokesperson for the SNP, the hon. Member for Livingston, used the words consult and consent in the same sentence as if they were interchangeable. The difficulty is that, in law and in effect, they are not.
Barry Gardiner
I will happily give way after I have made a little more progress. I do not seek a point-scoring debate, because we have to get to the heart of some extremely technical and complicated issues, but I will of course give way in due course if the hon. Lady wishes me to.
In respect of the devolution settlements, trade agreements and the negotiation thereof remain exclusively reserved to the UK Government. International treaties are also the exclusive reserve of the UK Government. I have no doubt that the devolved Governments recognise that and supported that approach when the relevant devolution Acts were passed. Our membership of the European Union has meant that the competence for trade has been exercised by the EU under the common commercial policy—in effect, it has been taken up a level from the UK Government to the EU. That relationship has meant that no devolved Government—nor, indeed, the national UK Government—has been able to legislate in any way that contravenes EU law. In respect of trade agreements, that has meant that we have amended our domestic legislation where required to align it with the terms of agreements concluded on our behalf by the European Union. No devolved Government therefore has any effective veto on the implementation of those agreements, nor have they ever had such a veto.
Of course, the Bill prepares us for life outside the European Union, when that common commercial policy will no longer apply and the competence for trade will be returned to the United Kingdom. Similarly, the obligation on the devolved authorities to ensure compliance with EU law may also no longer apply. That, in effect is the crux of the issue.
The amendments would, in some respects, extend upwards powers of devolved Governments that they might not currently have in respect of international trade agreements. It was telling to hear from the gentleman from Business for Scotland this morning—I am delighted that you managed to squeeze me in to ask my question at the last minute, Mr Davies. In his response to whether the Scottish Government or a devolved Assembly should, in effect, have the right to consent regarding the content of the trade agreement, with reference to his chlorine-washed chicken example, he said that, yes, he thought there should be a consent power at that level.
Whether the Bill is about an agreement with America is completely by the bye. That was a thought experiment to show the sort of situation that could arise. If we want to bring it slightly closer to home, we could talk specifically about one of the agreements the Minister proposes to have a corresponding agreement with through the good offices of the Bill: CETA. Of course, one of Canada’s main objectives when negotiating with the European Union was to be able to get chlorine-washed beef and chicken into the European market. It failed in that endeavour, because that was not agreed to by the European Union in the eventual treaty. However, it is not beyond the wit of any of us—we heard this on many occasions from our witnesses—to construct a situation in which Canada might do what other countries at such a juncture might do, which is seek to reopen the negotiations in a particular way to its advantage, to try specifically to achieve with the European Union that which previously it had not been able to.
That brings the example much closer to home, and to the Bill in particular. The key point is that, as was said by Business for Scotland’s witness, the Scottish Government’s view is that they should have the power of consent to the substantive measures of the international treaty. We recognise that there are clear implications for what might be set out in the international trade agreements on matters of devolved competence. Agricultural policy, food safety, fisheries, the environment and so on are all areas that are touched upon by modern trade agreements. They are all areas where trade agreements will of course have an impact.
Hannah Bardell
I take on board the hon. Gentleman’s point. The notion of consent is an interesting one. Let me just expand a little on my take on it. The idea of consent—not just consultation—for us is that we cannot have certain aspects of our regulatory framework, or deals done, that go against the principle of devolution.
The memorandum of understanding concordat from devolution was binding
“in law, but promises cooperation on exchanging information, formulating UK foreign policy, negotiating treaties and implementing treaty obligations.”
In our view, the Bill goes across that.
For the sake of argument, say that Scotland or Wales could not give consent to a trade agreement. That would force the UK Government to go back and look at why consent could not be given, and hopefully bring something forward. If we only have the power of consultation—we could argue that consultation is not really a power—we are at the mercy of whatever the UK Government of the day do. It could be argued that the power of consent is absolutely vital in negotiating trade deals.
Barry Gardiner
It is not that I do not understand the force of the position the hon. Lady is taking and the way in which she is trying to express it, but of course those powers are powers that the devolved Administrations do not currently possess vis-à-vis the European Union. That is why, as I said, the levels at which we consider this, and the change in those levels, are absolutely material to the discussion we have today.
The hon. Lady is absolutely right to say that if the substance of a trade agreement or any of the corresponding agreements that the Minister is seeking to roll over from our existing EU trade agreement is substantively changed, it may well have an impact on areas that are devolved competences. But that is the substance of what is agreed at the international level. Trade is a reserved matter. Treaties are a reserved matter. Therefore, the question of the implementation comes in two ways. I do not want to depart from my notes too much, but I am seeking to respond to the hon. Lady’s intervention in the spirit in which she made it.
The difficulty is that our legislative language is poor. We talk about implementing an international agreement in UK law and we also talk about implementing the terms of the agreement within the devolved competence. It is very easy to have a confusion about which implementation we are talking about. I will progress the argument, because it seems to me that it is not cut and dried. There are serious issues here that we need to consider as a Committee.
I cannot say that I normally say this, but I very much look forward to listening to what the Minister says on this occasion, because I trust he has had the benefit not only of parliamentary counsel, but of constitutional legislators, who will have looked at the matter very carefully when they saw the amendments. I look to what the Minister is going to say in the Committee to guide us on these matters.
Picking up from where I left off talking about the substantive changes, new institutions may be required—institutions that might otherwise be within the devolved competence of the Scottish and Welsh Governments. That simply arises from the changes that will be made to the free trade agreements, because they might specify the European Food Safety Authority and that would need to be changed. New institutions may have to be established to fulfil the competences that the European Food Safety Authority or any other such agency had, and they would have to be designated in the roll-over Bill.
Of course, it may be that the Minister specifies the Food Standards Agency in England as the body that will now make the specifications. It might be better to use Food Standards Scotland, which we heard from earlier today. It is absolutely right that there is a process of consultation between the devolved Administrations and the Minister at that point to say, “You’re proposing to specify that body, but actually there are far more relevant skills in this other body.” Consultation is absolutely essential to try to ensure that they get this right.
Barry Gardiner
In one moment. I hope the hon. Lady will intervene in a moment, because this is the question I think she may wish to respond to. Imagine a situation where Wales said, “We believe our agency should be the certification body,” Scotland said, “No, it should be our agency,” and because both had the power of consent and not simply the right to consultation, the Minister and the UK were unable to fulfil our international obligations under an international treaty.
The hon. Lady may say, “Surely no devolved Ministers would be so pig-headed as to say, ‘It’s got to be ours.’” The Westminster Minister may well be the one who is being pig-headed—who knows? However, I cannot imagine that it is right for the Committee to pass an amendment that could give rise to a situation in which we were unable to fulfil our international treaty obligations.
Hannah Bardell
I guess the simple answer is that they would have to consult each other. I argue that what is proposed drives a coach and horses through many aspects of devolution, and others also have serious concerns. If the hon. Gentleman believes that there is an overreach in the amendments, what answers does he propose? Given the supposed “consultation” that was part of the European Union (Withdrawal) Bill process, does he really have faith in that aspect of today’s legislation? I know that I do not.
Barry Gardiner
I said at the beginning that I was not going to engage in point scoring, so I will not take up the hon. Lady’s invitation to beat the Minister over the head about the lack of consultation. The witnesses have amply displayed their dissatisfaction with the consultation process, but she has, in effect, made my point for me. She said, “Well, they would have to consult.” Of course they would; that is why I believe that it is vital that consultation with the devolved Administrations is statutorily required, in a way that is not transparent on the face of the Bill. Consent, however, which could bring about the sort of impasse I referred to, should not be built into the legislation.
It is one thing to imagine legislation working in a benign, perfect scenario where people have good will, are engaging with each other and want to come to an agreement. Sadly, that is not always the case, and we must make our legislation such that it survives not only when things go right, but when things go wrong and a way through an impasse is necessary. The danger in the amendments is the reaching upwards into what would currently be seen as the competence and the rights of the European Union to negotiate the substance of those trade agreements. That is why I am fearful of the route down which the amendments would take us.
Alan Brown
Has the hon. Gentleman discussed this with the Welsh Government, and explained that his concerns about the devolved Administrations “reaching upwards”, in his description, outweigh his concerns about the UK Government being able to impose regulations on them?
Barry Gardiner
Yes, of course I have. I went down to Cardiff just last Friday to meet the Minister there and some political advisers. We talked through precisely these issues, and I have done the same with Welsh colleagues here. On Monday, I even met the special adviser from the Scottish National party group here. I have also spoken with my own Scots colleagues. I think that there is a recognition that we are dealing with genuinely difficult constitutional matters. That is why we have a difficult job as a Committee.
Barry Gardiner
I will give both scenarios, and then the hon. Lady can choose.
Our fictional country, Xanadu, has very relaxed laws about the rearing and sale of chicken for consumption. In Xanadu, chickens may be hormone-fed, genetically modified or chlorine-washed prior to slaughter for consumption. In the UK, one of the devolved Governments may have a particularly robust animal framework code, coupled with robust agriculture and food standards regulations, which would not allow for the production or consumption of such chickens. What happens if the UK agrees terms with this country that ultimately liberalise trade in chickens between our nations, such that hormone-fed, genetically modified, chlorine-washed chicken is allowed to be imported into the UK and sold on the shelves of our supermarkets for consumption by British citizens?
The devolved Government would argue, “These are matters of devolved competence, and we have right of consent regarding the implementation of the agreement, especially as it conflicts greatly with our standards.” They might also think, “There is no way we are allowing these products on to our shelves, and we will not give our consent.” In that example, I would probably be cheering and saying, “Good for them. We don’t want those chickens on our supermarket shelves.” However, the point is that if the agreement had been made, we would be bound by the obligations under it, whichever way they went—whichever example we use.
Failure to implement would result in remedial action being pursued by Xanadu. Indeed, many such countries might not even come to the negotiating table if they had significant concerns about potential consent reserve functions distorting their access to the market on terms that had been agreed at state-to-state level. When we heard from the witnesses this morning, the example of Canada was used. We have already seen that the provinces in Canada are brought in at the beginning of the process precisely to get round countries’ reluctance to engage in trade agreement negotiations without certainty that devolved Administrations cannot veto what is agreed.
The hon. Member for Livingston asked me whether I had spoken to my Welsh counterparts and I explained that I had, as well as to two of my Scottish counterparts. We have also spoken with the House of Commons constitutional law experts. They explained to us that they cannot answer the question. They do not know. They have recognised that this is a problem, and that neither the Bill nor the amendment address the issue in a way that would prevent our reaching the situation that I have tried to articulate.
We have spoken with House of Commons trade experts, and have similarly drawn a blank. They advised us that the matter has not been considered because it was not an issue before. They said they had just not come across it. What everyone has recognised is that there must absolutely be consultation in advance, to ensure that no trade agreements come unstuck if a veto is exercisable at a later stage. Also, how will the UK Government ensure that the provisions of a concluded trade agreement are implemented across the United Kingdom, as they are bound to by their obligations under international treaties?
The Bill fails to set out how the Government intend to resolve the issues. It does not define what implementation frameworks will be constructed to mitigate the extent of conflicts between the powers of the UK Government and the devolved competence of the devolved authorities. It does not differentiate between the incorporation of the terms of the agreement into UK law and how that might be considered to be separate from implementation at a devolved level. It does not set out what consultation processes will be instituted to address those issues early on, and to ensure that the interests and experience of the devolved Administrations are represented at the negotiation stage to avoid any conflict at implementation stage.
Of course the devolved Governments must have a say in the process. They must have the capacity to scrutinise it to ensure that it is compatible. The Government’s approach to consultation has not been what it should. Ad-hoc meetings between the Secretary of State and representatives of the devolved Governments cannot be considered a formal consultation process, even if the Secretary of State donned his President of the Board of Trade hat for them.
It is our view that a formal consultation role must be established for each of the devolved authorities and, indeed, for a much wider group of stakeholders with an interest in the outcomes of any trade agreement. Their views are essential in ensuring not only that any future implementation issues are addressed up front, but that their constituent interests, be they commercial or public, are properly considered before negotiations begin and as negotiations progress. It is our view that the Government must be obliged formally to consider and respond to representations made through that stakeholder engagement process, whatever those might look like.
The Minister for Trade Policy (Greg Hands)
Let me start by saying what a pleasure it is to serve under your chairmanship, Mr Davies.
The UK Government have made clear their commitment to working closely with the devolved Administrations to deliver an approach to future trade agreements that works for the whole UK and reflects the needs and individual circumstances of England, Scotland, Wales and Northern Ireland. We have been clear that we will continue to engage with the devolved Administrations as we transition our current agreements, and that we will work together to prevent disruption to UK business and consumers. The Department for International Trade engages regularly with the devolved Administrations: DIT Ministers and senior officials visit the devolved nations frequently and engage devolved Governments and stakeholders right across the UK.
Let me turn to amendments 33 and 34. The concurrent powers in the Bill that allow either devolved Administrations or the UK Government to implement in areas of devolved competence will ensure that, where it makes practical sense, it is possible for regulations to be made once for the whole UK.
Judith Cummins (Bradford South) (Lab)
What does the Minister think are the best examples of things under the government procurement agreement that would be matters of devolved competence?
Greg Hands
If I understand the hon. Lady correctly, she asks about signing up to the GPA and the schedules to the GPA. I might add that, contrary to what the hon. Member for Brent North said, the UK’s joining the GPA will actually be subject to a separate process in Parliament. There might be a question about which authority within these islands has a right to administer a particular part of the GPA. For example, the relevant Scottish body might be the right body in Scotland, the relevant UK body in England, the relevant Welsh body in Wales, and so on.
The approach I described is essential for providing continuity to UK businesses, workers and consumers. As set out in our recent trade White Paper—this is the nub of the argument—we will not normally use these powers to amend legislation in devolved areas without the consent of the relevant devolved Administration, and we will certainly never do so without first consulting them. It is crucial to understand that.
Bill Esterson
My hon. Friend the shadow Secretary of State made the point that there is nothing in the Bill about a formal consultation. Does the Minister accept that point, and does he accept the need for such a formal process in the Bill?
Greg Hands
It is crucial to draw out what we are talking about. This is about transitioning existing agreements that are already in effect right across the United Kingdom. As I have already laid out, the Secretary of State and I have met the devolved Administrations in different capacities and in different ways. Our officials have certainly exchanged a lot of views on that.
I will come on to where we are with future trade agreements in a moment. Our intention is to involve fully devolved Administrations, devolved Parliaments and so on in that process.
Bill Esterson
On Second Reading, the Minister acknowledged that there may well be changes to those existing agreements. In the case of Norway and Turkey, can he confirm that that would almost certainly have to happen? Otherwise, they would cross the Government’s red lines. What consultation does he anticipate in those situations?
Greg Hands
As you know, Mr Davies, perhaps better than anyone, it certainly it is not for me to suggest what may or may not happen as part of the ongoing negotiations with the European Union. Clearly, aspects of the European economic area agreement will be dependent on those. It is our intention for there to be no substantive changes in those agreements as we go forward and transition. It is very important to understand that.
Hannah Bardell
Is that not at the heart of the issue? The Minister does not know what may happen in the future, or what may have to be traded off so that we can tread water and stay where we are. The power of consent is, in some ways, a negative power and a threat, but it means that a negotiation and an agreement have to be reached by all the devolved Administrations. Until now, consultation has not been a very positive experience for Scotland and the other devolved Administrations.
Greg Hands
We made a commitment in the trade White Paper to not normally use these powers in areas of devolved competence without consultation. I repeat that commitment to continuing that consultative process as we go forward. That commitment can be heard loud and clear.
Hannah Bardell
I try to speak on behalf of my constituents and others in Scotland. “Not normally” is, quite frankly, not good enough. The Minister might be as good as his word, but what about future Governments and future Ministers?
Greg Hands
I know that the hon. Lady takes up issues for her constituents—she and I have meetings about particular issues in her constituency. I repeat that we would not normally use these powers, and we would never do so without consultation. I will refer to some of the other reasons, which have been alluded to by my hon. Friend the Member for Hertford and Stortford, and by the hon. Member for Brent North, why we will not go down the road of requiring consent. We would not normally use the powers, but it is very important that we do not require consent to use them. That is a very serious commitment, which should offer the hon. Lady reassurance.
Amendment 36 seeks to remove the restriction on devolved Administrations amending direct retained EU law. Some EU law applies directly and uniformly across all EU member states without needing to be implemented in domestic legislation. On the day that we exit the EU, that type of EU law will be converted into what will be called retained direct EU law.
As the Government’s guiding principle is that no new barriers to living and doing business in our own Union should be created on exiting the EU, it is right that there should be only a co-ordinated set of changes made to that type of law, in order to maximise continuity and certainty for businesses and consumers. We are committed to consulting the devolved Administrations on the most appropriate way to legislate in areas of retained direct EU law that have effect in otherwise devolved areas.
Regarding amendment 37, we also consider it right that where measures affect the whole UK, such as quota arrangements or the use of powers in clauses 1 and 2, before we exit the EU, decisions are taken at UK level before the devolved Administration can take the measures.
Let me turn to some of the individual points raised. The hon. Member for Livingston asked whether a proper consultation could not be sought in Northern Ireland. It is important to recognise that, for reasons of arithmetic, there is not a Northern Irish Member on the Committee, but I will try to answer her point. We are working hard, as she will know—I think she will agree—to restore devolved Government in Northern Ireland as soon as possible. We are committed to working to ensure that Northern Ireland’s interests are represented in the meantime. The Department for International Trade engages with officials in Northern Ireland on a regular basis.
The hon. Lady also asked whether the GPA allows Governments to nationalise or privatise anything, whether for procurement or any other purposes. The UK Government will be bound to open up procurement markets only to the extent they have committed to do so in the new schedule to the government procurement agreement as lodged with the WTO. That will preserve the present position in relation to procurement in areas such as the NHS.
I think the hon. Lady asserted that procurement is devolved. This is a complicated area. The UK Government accept that some procurement is devolved, and the Scottish Government have made some regulations about procurement. However, the UK Government’s position is that procurement is an activity for devolution purposes rather than a subject matter. In other words, whether a procurement is devolved or reserved depends on the functions of the public body carrying it out. I think the saying is that if the public body answers to part of the Scottish Government, it might be devolved, but if it is a UK body of Her Majesty’s Government that operates in Scotland, it is likely not to be devolved.
The hon. Member for Kilmarnock and Loudoun referenced the power that Wallonia has. I am familiar with such arguments: I think the hon. Member for Brent North debated that at some length in relation to CETA in February last year. To be clear, I expect he knows that the UK and Belgium have very different constitutional arrangements. Foreign relations are the responsibility of the UK Government under each of the devolution settlements.
The hon. Member for Brent North made some interesting points. For the first third or so of his speech, I thought I was coming close to being in complete agreement with him—at least in his thrust that the proposal in the amendment to have in effect a veto power for the devolved Administrations would make the whole endeavour unworkable. He is right. He made reference, as I will, to the short, succinct intervention by my hon. Friend the Member for Hertford and Stortford about the potential for a Welsh Government veto over something that was felt to be particularly important in Scotland. That, or vice versa, is a very real example. Our approach is best: not normally to use the powers to amend legislation in devolved areas without consent, and never without consultation with the devolved Administration.
I was surprised by the approach taken by the hon. Member for Brent North. It was my impression that the amendments were drafted by the Scottish and Welsh Governments together. Therefore, much as I welcome him saying that he will not vote for the amendment, it surprised me a little that he seems to be at odds with the Welsh Government viewpoint. Anyway, I am glad that he may be joining us on this occasion.
In terms of the GPA and rolling over the existing schedule, yes, that is the intention, but—I repeat—the terms on which the UK enters the GPA in our own right will be subject to a separate vote in Parliament. The Constitutional Reform and Governance Act 2010 applies to the terms of the UK’s new membership of the GPA —in other words, it is possible to bring a vote in Parliament on the terms under which the UK will join the GPA.
Barry Gardiner
The Minister just assured the Committee that there will be a vote on accession to the GPA. I am surprised that he says he can assure the Committee of that, because the procedure of the Constitutional Reform and Governance Act 2010 does not ensure that there will be a vote at all. CRAGA procedure is precisely the statutory instantiation of the Ponsonby rule of 1924, which means that all the Government need to do is lay the text of the agreement before Parliament for 21 days. Unless Her Majesty’s official Opposition, or any of the Opposition parties, raise that as an objection in an Opposition day debate, it goes through—that is if they are granted an Opposition day motion within that 21 sitting days, which is by no means guaranteed. You will recall, Mr Davies, that between 27 January and September 2017, the Government did not grant the Opposition a single Opposition day debate. Even if they were to object through an Opposition day, the Minister would simply have to acknowledge it, re-table the text, and it would lie on the Table for another 21 days. Unless we went through the same process, there is no process for the Opposition to amend or vote unless we are given an Opposition day debate.
Greg Hands
I know the hon. Gentleman has a particular fascination with the Ponsonby rule of 1924, but I remind him that that rule was made otiose by his own party’s legislation—the Constitutional Reform and Governance Act. I went back and checked. Mr Davies, you and I were in Parliament at that time as Members of the Opposition—
Greg Hands
In 2010. The hon. Gentleman supported that Act. That is why I was careful to clarify that it is possible to bring forward a vote on the UK’s terms of entry into the GPA. For all those reasons, I ask the hon. Member for Livingston to withdraw her amendment.
Anna McMorrin (Cardiff North) (Lab)
The UK Government must have meaningful engagement with devolved Administrations about the shape of the UK’s future customs and tariff regime post-Brexit. That has not been the case so far. Just like the EU (Withdrawal) Bill, the Trade Bill puts restrictions on the Executive capacity of the Scottish and Welsh Governments, while placing no restrictions on the capacity of the UK Government.
Essentially, under the Bill, UK Ministers will be able to legislate in devolved areas without consent from Welsh or Scottish Ministers. That is an overt power grab and a rolling back of devolution. I am proud to have played a part in bringing devolution about in Wales 20 years ago. It is vital that we maintain what devolution was set up to deliver: a proud and confident nation.
It is also disappointing that there is no provision for the Trade Remedies Authority to have any input from devolved nations. It is important for it to be an independent and impartial body, separate from the Government, but it must also represent all parts of the UK, including Wales and Scotland.
It is important to remember that in the trade White Paper, the UK Government stated that the Bill would have provisions for UK Ministers to seek consent from Welsh and Scottish Ministers when making secondary legislation under the Bill, but that has now disappeared.
In 2016, First Minister Carwyn Jones told the Welsh Assembly’s External Affairs and Additional Legislation Committee that it was “hugely important” for devolved Administrations and legislatures to have a say in the negotiation of future agreements that would have an impact on Wales. He gave the specific example of a free trade agreement with New Zealand:
“The impact of that might be to remove the current controls that exist on the import of New Zealand lamb. If they were to go, that would clearly be a great difficulty for Welsh lamb producers. That issue might not be as apparent in Whitehall as it is in Wales, and that’s one example there of why it’s important that the views of the devolved Governments are understood and the interests of the devolved nations are respected.”
It is not new. We are not advocating new devolved powers. It is not even about extending devolution. It is about preserving devolution. It is important to remember that there are restrictions on competence. The devolved settlements of both Wales and Scotland ensure that both Welsh and Scottish Ministers cannot legislate in ways that interfere with UK international obligations. That comes under the Government of Wales Act 2006, specifically sections 82 and 114. It simply cannot legislate to interfere.
Hannah Bardell
The hon. Lady is making an excellent speech and highlighting the importance of the devolution journey we have travelled. Particularly on the devolution settlement, does she agree that there might be challenges if this amendment passes—it is about consent? As she says, it is written into the devolution settlements and that agreement would have to be reached to ensure that that legislation is passed. Does she agree that it would be absolutely in the interests of devolution, and in the interests of Scotland, Wales and Northern Ireland, that those amendments pass today?
Anna McMorrin
It is absolutely about consent, agreement and consultation. Essentially it is about not rolling back on the devolution settlement. Amending the Bill to explicitly ask for the consent of devolved Administrations for secondary legislation under the Bill would therefore not interfere with that, nor would it amount to a veto power.
As I already said, what was already drafted in the UK Government’s White Paper should be in the Bill. Consent and consultation are at the very heart of devolution. If there is secondary legislation being made within an area that is currently within devolved competence, the devolved Administrations and Welsh Ministers must give consent and ensure the democratically elected Welsh Assembly or Scottish Parliament is able to debate it. That is why I agree with the principle underlying the amendments, as agreed by both the Welsh and Scottish Governments.
Professor Jones, a Welsh political expert, told the Select Committee on Public Administration and Constitutional Affairs:
“We see the UK Government in effect reintroducing a kind of conferred powers model where it will decide which bits of the powers returning from Brussels will be conferred on the Welsh Government… That—in the context of this constant churn and change—looks one-sided and objectionable.”
The most disappointing aspect of this Bill’s disregard for devolution is that the UK Government know it is completely unacceptable.
Mr Prisk
It is excellent to have a Member from Wales speaking. Naturally we have heard from the hon. Member for Livingston, the Scottish Member who is moving this amendment. Do I take it from what the hon. Member for Cardiff North is saying that she supports the principle and therefore will be supporting the hon. Lady’s amendment?
Anna McMorrin
As I said, I absolutely support this principle, which has been agreed jointly with the Welsh Government and the Scottish Government.
Ministers, Conservative MPs and civil servants privately acknowledge how extremely ill-advised it is to remove the power of devolved Governments over devolved areas. Clearly the issue is one of trust: trust to exercise devolved powers responsibly; trust to carry out measures that represent the people of Wales and Scotland; and trust to provide meaningful scrutiny of legislation. As it stands, under this Bill, and after Brexit, the devolved Governments will be at the mercy of Whitehall, which will have complete control of all areas, including those which are currently devolved. That is called rolling back devolution. As set out in the Government’s White Paper, devolved Governments must have the right to give consent to secondary legislation in areas of devolved competence.
Hannah Bardell
I have listened carefully to hon. Members. I am not saying that there are not areas of concern, and I understand that we are in unchartered territory. I am sure when we look back, when the history books are written, how we have handled this matter will probably not reflect well on politicians, but we have had a good and detailed discussion.
I pay tribute to the hon. Member for Cardiff North. She has been extremely brave in standing up to say what she has said. She has stood up for her country and for the devolution settlement and the devolved nations. I commend her for that, and for her point about conferred powers and the evidence given in the Brexit Committee. That is really about protecting and preserving devolution.
I understand that the UK Government might have concerns about losing their grip on power, but they have to understand that for generations the people of Scotland, Wales and Northern Ireland have had power wielded over them at times by the UK Government, and devolution sought to move forward from that to create a more consensual approach across the UK. That has been absolutely vital in the development of our society and of how we see ourselves as nations and as the UK. As a result, internationally, we have been looked on as a world-leading model for how different nations in a union can share power.
I believe in Scottish independence and that we could sort all this out if Scotland had all the powers of a fully devolved nation. I appreciate that that is not necessarily going to happen straightaway. However, if the UK Government and the Conservatives continue on this road by stopping and encroaching on the devolved powers of Scotland and the other nations, Scottish independence is increasingly likely. They should bear in mind as we leave the EU the creation of a situation in which consent is required.
I understand the point made by the Labour spokes- person, the hon. Member for Brent North, about Xanadu, chickens and so on. I would make a point in return that UK Ministers will have power that Scottish Ministers and those from other devolved Administrations do not. Why should they be allowed to wield those powers and encroach on the powers of devolution? If we have the power of consent and there is a concern that something may not be agreed to, surely instead of being concerned about not adhering to our international obligations, it would not be beyond the wit of those Ministers and that Government to go back to the devolved nations to ask, “What will it take for you to give your consent and reach an agreement?” I am sure that that is entirely plausible.
I appreciate that we are in uncharted territory, but unfortunately those in government have got too used to having power over the other nations. If they are not willing to listen to and concede the points being made not just by us politicians but by people outside—organisations, trade bodies, law societies—who say that that is encroaching on the powers of devolution, that will be at their peril. That is absolutely something that will befall them. I will not withdraw my amendment and will press it to a vote.
Barry Gardiner
I beg to move amendment 4, in clause 2, page 2, line 7, leave out “subsections (3) to (5)” and insert “subsections (2A) and (5).”
This is consequential upon Amendment 3.
The Chair
With this, it will be convenient to discuss the following:
Amendment 3, in clause 2, page 2, line 12, at end insert—
“(2A) Regulations under subsection (1) to make provision for the purpose of implementing an international trade agreement may only be made if—
(a) the provisions of section [Parliamentary scrutiny of free trade agreements before signature] were complied with before the United Kingdom had ratified the agreement;
(b) the requirements under subsection (3) and under paragraph 2A of Schedule 2 have been met;
(c) the requirements under subsection (4) have been met; or
(d) the requirements under subparagraph 2(1A) of Schedule 2 have been met.”
This would expand Clause 2 to include international trade agreements that do not correspond to a prior or existing EU trade agreement. Sub-paragraph (d) would link to Amendment 20.
New clause 4—Parliamentary scrutiny of free trade agreements before signature—
“(1) The United Kingdom may not become a signatory to a free trade agreement which does not meet the criteria under section 2(3) unless—
(a) before entering negotiations on the proposed agreement, the Secretary of State has laid before Parliament a sustainability impact assessment carried out following consultation as prescribed by section [Sustainability impact assessments];
(b) both Houses of Parliament have passed a resolution authorising the Secretary of State to enter negotiations on the proposed agreement as prescribed by section [Parliamentary consent to launch of trade negotiations];
(c) during the course of negotiations, the text of the agreement as so far agreed or consolidated has been made available as prescribed by section [Availability of agreement texts];
(d) the Secretary of State has, within ten sitting days of the close of each round of negotiations on the proposed agreement, laid before Parliament a statement detailing the progress made in each area of the negotiations and the obstacles still remaining at the close of that round;
(e) the text of the agreement in the form to which it is proposed that the United Kingdom should become a signatory has been made available to Parliament for a period of 21 sitting days; and
(f) a resolution has been passed by the House of Commons approving the Secretary of State’s intention to sign the agreement.”
This would establish a procedure for parliamentary scrutiny before signature of free trade agreements that do not correspond to a prior or existing EU free trade agreement.
New clause 5—Sustainability impact assessments—
“(1) A sustainability impact assessment laid before Parliament under section [Parliamentary scrutiny of free trade agreements before signature](1)(a) shall be carried out following consultation.
(2) A consultation under subsection (1) shall—
(a) be carried out in line with any guidance or code of practice on consultations issued by Her Majesty’s Government, and
(b) actively seek the views of—
(i) Scottish Ministers,
(ii) Welsh Ministers,
(iii) a Northern Ireland devolved authority,
(iv) representatives of businesses and trade unions in sectors which, in the opinion of the Secretary of State, are likely to be affected by the proposed international trade agreement, and
(v) any other person or organisation which appears to the Secretary of State to be representative of interests affected by the proposed international trade agreement.
(3) The Secretary of State shall ensure that public bodies, non-governmental organisations and the public may be made aware of the consultation by circulating and publishing details of it prominently on relevant government websites.
(4) A sustainability impact assessment under subsection (1) shall be conducted by a credible body independent of government and shall include both qualitative and quantitative assessments of the potential impacts of the proposed trade agreement, including as a minimum—
(a) the economic impacts on individual sectors of the economy, including, but not restricted to—
(i) the impacts on the quantity and quality of employment,
(ii) the various regional impacts across the different parts of the UK,
(iii) the impacts on small and medium-sized enterprises, and
(iv) the impacts on vulnerable economic groups;
(b) the social impacts, including but not restricted to—
(i) the impacts on public services, wages, labour standards, social dialogue, health and safety at work, public health, food safety, social protection, consumer protection and information, and
(ii) the government’s duties under the Equality Act 2010;
(c) the impacts on human rights, including but not restricted to—
(i) workers’ rights,
(ii) women’s rights,
(iii) cultural rights and
(iv) all UK obligations under international human rights law;
(d) the impacts on the environment, including but not restricted to—
(i) the need to protect and preserve the oceans,
(ii) biodiversity,
(iii) the rural environment and air quality, and
(iv) the need to meet the UK’s international obligations to combat climate change;
(e) the impacts on animal welfare, including but not restricted to the impacts on animal welfare in food production, both as it relates to food produced in the UK and as it relates to food imported into the UK from other countries; and
(f) the economic, social, cultural, food security and environmental interests of those countries considered to be developing countries for the purposes of clause 10 of the Taxation (Cross-border Trade) Act 2018, as defined in Schedule 3 to that Act and as amended by regulations.
(5) The elements of the sustainability impact assessment to be undertaken under (4)(f) must be sufficiently disaggregated so as to capture the full range of impacts on different groups of developing countries, and must include both direct and indirect impacts, such as loss of market share through trade diversion or preference erosion.
(6) A sustainability impact assessment under subsection (1) shall include recommendations for possible action to maximise any positive impacts and to prevent or offset any negative impacts foreseen, including the possible limitation of the negotiating mandate so as to exclude those sectors most at risk from the proposed trade agreement.”
This would establish the process of consultation for, and the required content of, sustainability impact assessments for free trade agreements that do not correspond to a prior or existing EU free trade agreement.
New clause 6—Parliamentary consent to launch of trade negotiations—
“(1) The Secretary of State shall not commence negotiations relating to a free trade agreement which does not meet the criteria under section 2(3) unless all provisions of this section have been satisfied.
(2) A Minister of the Crown shall lay before Parliament a draft of a negotiating mandate relating to the proposed international trade agreement.
(3) The draft mandate under subsection (2) shall set out—
(a) all fields and sectors to be included in the proposed negotiations;
(b) the principles to underpin the proposed negotiations;
(c) any limits on the proposed negotiations, including sectors to be excluded from the proposed negotiations; and
(d) the desired outcomes from the proposed negotiations.
(4) No sooner than 21 sitting days after the draft of the negotiating mandate has been laid under subsection (2), the Secretary of State shall make a motion for a resolution in the House of Commons in respect of the draft, setting out the elements listed in subsection (3).
(5) A motion for a resolution under subsection (4) shall be made in such a way as to permit amendment of any of the elements prescribed under subsection (3).
(6) A motion to enable consideration of the negotiating mandate shall be laid before the House of Lords.
(7) The terms of any negotiating mandate authorised by a resolution under subsection (4) shall be binding upon the Secretary of State and anyone acting on his or her behalf in the course of negotiation.”
This would establish the procedure by which Parliament would agree a negotiating mandate for free trade agreements that do not correspond to a prior or existing EU free trade agreement.
New clause 7—Availability of agreement texts—
“(1) The text of any proposed international trade agreement which is being negotiated shall, so far as it is agreed or consolidated, be made publicly available within ten days of the close of each round of negotiations.
(2) Every—
(a) document submitted formally by the United Kingdom government to the negotiations, and
(b) agenda for each new round of negotiations
shall be made publicly available by the Secretary of State.
(3) All other documents relating to the negotiations and not falling within the descriptions provided in subsections (1) and (2) shall be made publicly available by the Secretary of State, subject to subsection (4).
(4) The Secretary of State may withhold from publication any document of a kind falling within the description in subsection (3) but must publish a statement of the reasons for doing so.
(5) In the case of any document withheld under subsection (4), the Secretary of State shall provide full and unfettered access to that document to—
(a) any select committee of either House of Parliament to which, in the opinion of the Secretary of State, the proposed agreement is relevant, and
(b) any other person or body which the Secretary of State may authorise.
(6) In the case of a document to which access is provided under subsection (5), the Secretary of State may specify conditions under which the text shall be made available.
(7) The Secretary of State shall maintain an online public register of all documents published under subsections (1), (2) and (3) or withheld under subsection (4).”
This would establish the procedure by which the agreed or consolidated texts of, and other documents relating to, international trade agreements would be made available during the process of negotiation.
Barry Gardiner
Earlier today, Members of the Committee may have tapped into their emails. If they are like me, they would have received 1,700 emails in less than 24 hours, because we are members of this Bill Committee.
The email was clearly a standard email. The subject heading was, “Amend the Trade Bill to protect democracy”, and it began, “Dear Trade Bill Committee Member…”, which is why I assume that most hon. Members in the Committee have received it. It has probably taken us all a great deal of time to sift through, perhaps from some of the child protection cases that have been brought before us and need urgent attention. That in itself is a concern. However, the fact that 1,700 people have emailed each one of us about this Bill shows the level of public concern that exists about its failings.
The Member’s explanatory statements make clear that these two amendments together have the effect of expanding the remit of clause 2, to include those international trade agreements that do not correspond to a prior or existing EU trade agreement. That means that they would have the effect of expanding the remit of the Bill itself, to include all the trade agreements that the UK will negotiate with its trading partners or, as we would see it, they would have the effect of restoring the Bill to its proper proportions.
On Second Reading, I mentioned that we believe the Bill to be highly negligent in restricting its focus only to those future UK international trade agreements where a corresponding EU trade agreement already exists. The Government repeatedly told us that the Bill would provide the basis for this country’s future trade policy once we had left the EU. The background notes to the Queen’s Speech of last June were unequivocal in stating:
“The Bill will put in place the essential and necessary legislative framework to allow the UK to operate its own independent trade policy upon exit from the European Union.”
Matt Western (Warwick and Leamington) (Lab)
Does my hon. Friend agree that this is a key piece of legislation? As he has been articulating, the amount of public interest in it—not just simply through the democratic process—shows that the public are seeking far greater scrutiny and visibility of the trading negotiations and legislation to be formulated and widened through the Bill. There is an expectation that it should be, and there is a void in the Bill. As was mentioned by the witness from the CBI, this is such an important opportunity and there is an expectation that scrutiny and consultation should be included.
Barry Gardiner
Yes, I absolutely concur with my hon. Friend. That is precisely what those of our constituents who wrote to us earlier today were getting at. The gentleman from the CBI who gave evidence only two days ago posed a very pertinent question to the Minister on two occasions—at the beginning and the very end of his remarks. He pointed out that the Minister and the Government have said repeatedly that they will bring forward legislation in the future to put in place what we now think should be here. They give no assurances of that though. What the CBI, supported by the International Chambers of Commerce, said was: if not now, then when?
The Minister is keen to suggest the importance of passing this Bill is that we are pressed for time, and we are. But if we are pressed for time on the need to have trade agreements that correspond to existing agreements in place by the time we leave the European Union, surely we are also pressed for time if we are to have, as the Government have suggested they could have on day one, new trade agreements in place ready to go. Where is the legislation to facilitate that? This should be that legislation and it is not.
By choosing to focus solely on providing continuity with pre-existing EU trade agreements, the Bill has gone back on the promise that the Government made in the Queen’s Speech, and in other places on other occasions. The opening words of the Bill identify its scope perfectly clearly:
“A Bill to make provision about the implementation of international trade agreements”.
My hon. Friend the Member for Sefton Central tried to elicit comment on that point from the witnesses this morning. The Bill bears no qualification to suggest that we should be focusing only on a subset of the broader whole. The issue before us is explicitly the implementation of the UK’s future international trade agreements, which is why we consider the two amendments to be essential to restoring the Bill to its correct proportions right from the outset.
It was highly revealing that several witnesses from the business community voiced their concern at the failure of the Bill to address so many essential aspects of our future trade policy, which are precisely the aspects on which their members desperately want clarity, so that they can start making the necessary investments and operational decisions on how to take on board the new realities. Was it not depressing to hear business leader after business leader in our witness sessions saying that, because there is not that clarity, businesses are now having to execute their plan B? They are being precipitated into taking decisions to make investments abroad in order to safeguard their trading future. That is not good for this country, yet in this Bill we could set out clearly how we will achieve that.
I was concerned and taken aback to hear how angry some businesses are about the Government’s mishandling of the whole process of informing them what the Bill is about and the Government’s abject failure to take on board any of the business community’s input into the official consultation. It came up time and again. It is hardly surprising when we consider that the Bill was already printed before the consultation on the White Paper informing it had run its course. The consultation closed on 6 November, and when we went into the Table Office on the morning of 7 November, copies of the Bill were available.
Hannah Bardell
I absolutely agree with what the hon. Gentleman is saying. Does he share my concern that when it comes to involving businesses, trade bodies and organisations in trade agreements, the Government have huge lessons to learn from the mishandling of the process and the anger? The British Retail Consortium was absolutely infuriated by how the process had been done. Businesses, individuals and trade bodies had been asked to spend staff time, effort and money feeding into a consultation, but there was no space. As he said, the Bill was printed before the consultation had even finished. That is an appalling way to treat businesses and trade bodies, and an appalling way to govern.
Barry Gardiner
I absolutely agree. It was shameful. The Cabinet Office circulates principles of Government consultation that make it clear that, when they consult, they should take notice of the responses. Nobody can persuade me that between 12 midnight on 6 November last year and 8 o’clock the following morning, all the consultation responses had been sifted, considered, documented and incorporated into the ministerial view that emerged in the Bill as printed. That is not consultation.
In that regard, we should all commend the representative of the CBI who spoke to us and gave the understatement of the year in his answer to my question during the second witness session on the Government’s mishandling of the consultation process. When he ventured his verdict, he said after much thought and deliberation that
“the optics were not ideal.”––[Official Report, Trade Public Bill Committee, 23 January 2018; c. 34, Q79.]
They really were not.
I confess that I was not prepared for the level of anger from business in our oral evidence sessions, as industry representatives lined up alongside trade unions, civil society, legislators and academics to announce—to denounce, actually—the Government’s failure on every aspect of this Bill.
Matt Western
Does my hon. Friend agree that it is not simply the failure to consult that has frustrated and angered so many in the business community? As we heard earlier, many businesses are so worried and uncertain about the future that they are having to take out extensive warehousing facilities. We have seen that across the southern part of the UK, where warehousing is now at a super-premium because they do not know what is happening, what is going on or what is around the corner. That is coming at a great cost to UK businesses.
Barry Gardiner
Of course, my hon. Friend is absolutely right. As was stressed this morning in our latest evidence session, in what I think were the witness’s words, businesses say, “We want clarity.” At every turn, that is what the Government have denied them. We see the reports that businesses, industry and sectoral organisations are producing. We have read of the disconnect between the Administration and the business community. Many individuals have made the same point to me in private meetings, but it was quite remarkable to hear in this public forum just how deeply business feels betrayed as a result of the Government’s determination to do it their way and go it alone.
Government Ministers have promised, in the least convincing way, that the UK’s future trade agreements will remain to be talked about at some unspecified point in the future. I think the Scotch Whisky Association said that the “missing piece of the puzzle” was when that would happen. It was instructive to hear the evidence from the representative of the International Chamber of Commerce UK, who pointed out just how inadequate the Government’s commitments in that regard have been. He noted that the Government have given no indication of whether this mythical debate over our future trade policy will be a random chat, a formal consultation or a second piece of legislation. We do not know what it will be, and we do not know when—or if—it will be.
Given the Government’s record leading up to the publication of this Bill, it is small wonder that no one is prepared to give Ministers the benefit of the doubt. Since the consultation here was so bad, why should people trust that the Minister will do what he has suggested—I would not say promised—he will do? That is why we need to talk about the implementation of all the UK’s international trade agreements now, when we have the Trade Bill in front of us, not in some future world that the Secretary of State might imagine—
Barry Gardiner
I will give way to the Minister if he can give a promise or commitment from the Government to this Committee, and a date by which such legislation will be introduced.
Greg Hands
I understand the thrust of the hon. Gentleman’s argument, but does he not agree that if we were to agree to these amendments and new clauses today, we would be effectively pre-empting the ongoing consultation on what Britain will do on future trade agreements? That is the key thing to understand. On future trade agreements, we would wish to consult further; passing these new clauses and amendments today would be cutting that process short.
Barry Gardiner
Mr Davies, I have long admired this Minister’s chutzpah. The chutzpah of somebody to say, “Although I, as the Government, have completely abrogated my responsibility to get this Bill right, and you the Opposition have decided to fulfil my role for me, to try to put it right and get the stuff in place, if we passed your amendments we would not have consulted on them”! What complete, spurious nonsense. Let us have a grown-up debate, because that is not one; it really is not. It trivialises the work of this Committee and the important work that Government must do in scrutinising our future framework for trade negotiations. Mr Davies, I will calm down and try to get back to the essence of what we are doing here.
Barry Gardiner
I am grateful to the hon. Gentleman for giving me the opportunity to lower my blood pressure after the Minister’s intervention.
Mr Prisk
I will do my best, but he may not take that view when he calms down and the blood pressure starts to ebb. My understanding on Second Reading and in earlier debates was that the crux of Labour Members’ worries—on this Committee and in the House generally—was that the Bill’s problem is that it reaches far too wide. Why, then, propose amendments that extend its remit even further? Do the Opposition want a narrow or a wide Bill, and if it is too wide, why extend it?
Barry Gardiner
A plausible case. Elements of the Bill go far too wide, including the Henry VIII powers, which we will come on to later. We believe that the way in which the Government have sought to use Henry VIII powers in this legislation is too wide and unacceptable. The hon. Gentleman is right: that was one of the subjects of debate in our Second Reading deliberations. One other key criticism made by many Labour Members in that debate was that the Bill not only did the few things that it did badly, but failed entirely to do the one thing that it should have done properly. That is, to quote the Queen’s Speech policy paper, to
“put in place the essential and necessary legislative framework to allow the UK to operate its own independent trade policy upon exit from the European Union.”
There are many deficiencies in the Bill. Some relate to the widening of powers that it gives to Government, whereas others relate to the narrowness of the Bill.
Matt Western
Are we not simply taking the opportunity to ensure that this important legislation is comprehensive? It is about widening the remit of the Bill as regards the coverage of trade agreements without widening the powers of a select few.
Barry Gardiner
I am very grateful to my hon. Friend for saying incisively what I was trying to convey to the hon. Member for Hertford and Stortford. My hon. Friend is entirely right. We want a comprehensive Bill that is fit for purpose and does the job that business expects it to do. This Bill does not do that. We want it to do what the Queen’s Speech promised it would, but we do not want the Government to use the Bill to abuse their powers and widen the powers available to them.
Let me speak first to amendment 3, so that what we seek to achieve through it is clear. The amendment expands the Bill through paragraphs (a) to (d) to include new trade agreements that do not correspond to any prior or existing EU agreement. Paragraph (a) relates to free trade agreements as defined in the Bill under clause 2(7): namely, agreements that are notifiable under the relevant articles of the principal WTO goods and services agreements—that is, article XXIV of the general agreement on tariffs and trade and article V of the general agreement on trade in services. Paragraph (d) relates to international trade agreements that the Bill leaves undefined as being
“other than a free trade agreement.”
Dr Lorand Bartels, a witness on the first day of the Committee, noted in his oral evidence the Bill’s failure to define that second category. We will certainly endeavour to address that failure through a subsequent amendment to the Bill. For both categories of trade agreement, our amendments point ahead to the requirements of parliamentary scrutiny that will pertain to them. Let me say at this juncture that we consider the two types of trade agreement to be materially different in that regard.
As we heard from numerous witnesses, the modern generation of free trade agreements are comprehensive in scope. They range far beyond the narrow focus on mutual tariff reduction that characterised the multilateral trade agreements negotiated under the auspices of GATT in the 40 years after the second world war. They reach behind the border to address regulatory issues at the heart of our society, including issues of public health, social standards, labour rights and environmental standards, among many others. Those were precisely the reasons why we had such a comprehensive debate on the amendments proposed by the hon. Member for Livingston.
These are international treaties that introduce binding obligations on future generations and thus cannot be repealed as domestic legislation can be repealed. That is why in all our interventions we have proceeded according to the principle that there must be maximum parliamentary scrutiny and democratic oversight of free trade agreements to ensure that we get them right, rather than storing up the prospect of irreparable harm at a later date.
The other international trade agreements covered by the Bill, to use its phrase—that is, the ones that are not free trade agreements—include such ancillary agreements as mutual recognition agreements, according to the explanatory notes. There are many more such agreements, and they tend to be far more narrowly focused than free trade agreements, so we have proceeded on the assumption that they will not require the same level of parliamentary scrutiny. That is a deliberately pragmatic approach I have adopted to ensure that future Administrations can make progress in agreeing such deals where necessary, but we will ensure that there is sufficient potential for scrutiny in all cases to guard against any potential harm from those other agreements.
As well as drawing in the new UK trade agreements that do not correspond to a prior or existing EU trade agreement, amendment 3 speaks to the new UK trade agreements that correspond to a prior or existing EU trade agreement—that is, the ones that the Government would like to restrict us to in this Bill. Again, let us agree from the outset that they will be new trade agreements, even if they correspond to agreements that the EU had previously negotiated with the third country in question. Ministers have done their level best to suggest that the new UK agreements will just be rolled over or grandfathered from the pre-existing EU deals. The delegated powers memorandum issued alongside the Bill by the Department for International Trade is unequivocal: these will be new agreements, on two counts. First, the agreements will be legally distinct from any pre-existing trade deals the EU may have negotiated—that was underlined by witnesses to the Committee, such as Dr Holger Hestermeyer—and secondly, and even more important, these new trade agreements may include
“substantial amendments, including new obligations.”
It is vital to read the Bill on this point. To qualify for the waiving of scrutiny foreseen in the Bill, a UK trade agreement need bear no resemblance whatever to the EU agreement it seeks to replace. Do I think the Government are likely to waive that scrutiny? No. Is the legislation effective in allowing the Government to do that? Yes. Under clause 2(3) and (4), there is no requirement for the UK agreement to match or mirror the EU’s existing agreement in any way, shape or form. It can be a wholly new departure with wholly new obligations, since all the Bill requires is that the other signatory and the European Union were signatories to a free trade agreement—not a corresponding one or a similar one, but “a free trade agreement”—before Brexit takes effect.
Matt Western
If I recall correctly, Dr Holger Hestermeyer talked about not only scrutiny, but the importance of having impact assessments alongside the consultation, as these are, as my hon. Friend was explaining, essentially new agreements being put in place.
Barry Gardiner
Again, my hon. Friend makes a very important point. We heard from our witnesses about the importance of understanding what we are doing before we rush out and do it. My remarks on this afternoon’s legislation have been extremely cautious in many respects, because I think that legislation is important. It is particularly important in this area, because we are talking about internationally binding obligations that are extremely difficult for us, as a country, to reverse. That is precisely why my hon. Friend’s point is so essential. We need proper impact assessments before we have our mandates established and before negotiations are concluded.
We heard in the first evidence session that there is every likelihood that the UK’s trading partners will regard the negotiation of new trade agreements as an opportunity to re-open the provisions that they had previously negotiated with the EU. Those agreements were designed to meet the interests of all 28 member states of the European Union, and the relative weight of the EU in the negotiations that informed them means that the third country in question would have been pressed into making sacrifices that it might not choose to make when acting alone in forming a bilateral relationship with the UK.
Discussions on those countries’ new agreements with the UK are taking place now. I know that the Government are respectful of the EU treaties and are not trying to negotiate at the moment, but they are having fairly detailed discussions. The Minister, in his sedentary position, remains immobile but a smirk is creeping across his face. Those discussions are taking place behind closed doors, so we do not know what the Government have already said, and what they have said they would be prepared to trade away. Make no mistake: the Government are keen to ensure that they get deals done. This whole endeavour is a different way of approaching our trading future, and the credibility of the Government’s position politically relies on being able to conclude deals swiftly. We must be very wary of negotiations done in secret in order to achieve quick results for political convenience to save the Government’s blushes.
We know that we are talking about new agreements, which could well include substantial new obligations on the part of the UK. That is why the Government’s suggestion that they should be granted the powers to smuggle the implementing regulations past Parliament with no provision for scrutiny is so outrageous. The need for a proper parliamentary oversight process for such agreements was alluded to by our witnesses, Jude Kirton-Darling, the rapporteur on the EU Trade Committee, and Dr Brigid Fowler from the Hansard Society. They stressed that point repeatedly in their oral evidence to the Committee, as did so many other witnesses. To that end, paragraph (b) in amendment 3 looks ahead to the enhanced scrutiny procedures that we will propose under schedule 2 to replace the negative resolution procedure envisaged by the Bill as it currently stands.
Amendment 4 is consequential on amendment 3 and would require any regulations made under clause 2(1) of the Bill to be subject to the provisions not of subsections (3) to (5), as at present, but of subsection (2A), which would be introduced via amendment 3, and subsection (5), which speaks across to the Treasury’s powers to set tariffs under the Taxation (Cross-border Trade) Bill currently going through Committee in parallel with this Bill.
Together with amendments 3 and 4, I would like to speak to the four new clauses that they bring into play, namely new clauses 4 to 7. New clause 4 is the top-line clause, because it outlines the stages of what we consider to be a proper parliamentary procedure for scrutiny and oversight of free trade agreements before signature. Once again, let me underline that the procedure is designed to apply to free trade agreements, not to other international trade agreements referred to in the Bill under clause 2(2)(b).
Equally, let me emphasise the importance of the words “before signature” in the title of the new clause. We have deliberately designed a procedure so that Parliament has the opportunity to debate and direct trade negotiations in the early stages, rather than protesting once it is too late. We will surely be supported by the Government in that, given how publicly the Secretary of State has rued the loss of legitimacy that led to the failure of the TTIP negotiations between the EU and the USA. Nick Dearden from Global Justice Now touched on exactly that point in our first evidence session.
Our aim in bringing forward the maximum possible scrutiny and oversight before signing is to ensure that Parliament can amend and improve free trade agreements where they are found to be wanting. That is infinitely preferable to a system whereby Members are presented with negotiated agreements on a “take it or leave it” basis, thus risking the loss of an entire agreement and all the vital export opportunities that go with it simply because there was no possibility of excising or amending one or two of the offending provisions.
In oral evidence, Dr Hestermeyer referred to the system in Germany, where Parliament is involved early on in the proceedings precisely so that it can direct the federal Government in respect of trade negotiations, even though their negotiations are carried out by the European Commission. We want a constructive procedure that focuses on the best possible outcomes for our future trade agreements, not one where the whole ship is spoiled for a ha’p’orth of tar.
I will run through, in plain English, the six stages we have set out and then expand on them as necessary as they have been placed in the amendments, as subsequent new clauses hang off the overview clause. The first is the need for a sustainability impact assessment before the launch of negotiations towards a free trade agreement. The second is the need for Parliament to be involved in setting the mandate for the objectives of the negotiations. The third is the need for transparency—and, in particular, access to negotiating texts—while the negotiations are being conducted. The fourth is the need for regular progress reports to Parliament after each round of negotiations. The fifth is the submission to Parliament of the full text of the agreement as negotiated before its signing. The sixth is a resolution from the House of Commons to give the Secretary of State the green light to sign the agreement.
The first step in any proper procedure towards negotiating a free trade agreement is to undertake a sustainability impact assessment to identify the opportunities and risks that the agreement might present. Nick Ashton-Hart spoke of the importance of that in his oral evidence to the Committee. Carrying out a sustainability impact assessment is already a standard requirement for every new set of EU trade negotiations, and the methodology for conducting such assessments has been developed considerably over the years. Our new clause 5 provides basic instructions as to what a sustainability impact assessment should include at a minimum. For those who want to take the methodological issue further, the European Commission published in 2016 the second edition of its “Handbook for trade sustainability impact assessment”, which I refer the Minister to and is freely available online.
Crucially, our blueprint for what a sustainability impact assessment should include relates not only to the content of the assessment, but to the process that lies behind it. Any impact assessment must incorporate consultation with the devolved Administrations and with representatives of all those businesses and trade unions that are likely to be affected, as well as offering the opportunity for all other bodies to contribute to it.
We have also written into the new clause that the consultation must be in line with the existing code of practice for Whitehall consultations—something that we might usually consider unnecessary to include in legislation. Given the extraordinary mishandling of the consultation prior to this Bill, there obviously needs to be a reminder that every consultation should follow the rules.
The assessment needs to cover the economic impacts of any trade agreement, and importantly those impacts need to be disaggregated both geographically and by sector. The consequences for jobs, small and medium-sized enterprises and vulnerable economic groups are particularly significant, as free trade agreements have sometimes been to the disadvantage of all but the most powerful economic actors.
Alan Brown
Apologies, but I just want to take the hon. Gentleman back slightly. I agree with his suggestion that sustainability impact assessments should be carried out and should seek the views of the devolved Governments. What does he suggest happens if a sustainability impact assessment shows a negative impact on one of the devolved Administrations? Given that there is no requirement for consent, how would that be resolved?
Barry Gardiner
I am very happy to take that comment on board, but I do not want to get sucked back into our previous debate—I know that you would not let me anyway, Mr Davies.
That is precisely what an economic impact assessment is there to do: to show up those areas of the economy that might benefit and those that might be losers from an international trade agreement. It is then a matter for the Government, and a responsible Government should be trying to balance the interests around all of the United Kingdom to spread wealth and prosperity throughout all of the parts of these islands.
The other day, I was deeply affected to see a graph that I had not seen before and is specifically relevant to the hon. Gentleman’s point. In the top right-hand quadrant were those countries where both GDP and average income are growing. In the bottom left-hand quadrant were those countries where both GDP and average income are declining. In the top left-hand quadrant were those countries where GDP is declining but average income is growing. In the bottom right-hand quadrant were those countries where GDP is increasing but average income is declining. There was only one country in that bottom right-hand quadrant: the United Kingdom. That is a disgrace. That is a shame. It shows precisely why we need economic impact assessments. As many trade agreements have shown over the years, it is possible to increase the GDP of a country through a trade agreement while the people of the country become poorer. That is why we must take these deliberations so seriously. That is why putting these strictures in place is a vital part of what a responsible Government must do in relation to our future trade policy.
Greg Hands
I think that the hon. Gentleman is saying that he is very satisfied with the current system of EU scrutiny in relation to EU trade agreements.
Barry Gardiner
I am pointing out to the Minister, in response to his earlier remarks, the reason I voted for CRAGA then. I think I am right in saying that while his party voted against CRAGA, which it is now relying upon so heavily—there is an irony there—he did not turn up for the vote. I turned up for the vote and I voted for it, but because it was subject to all the scrutiny procedures that were already in place from the EU. The situation has changed.
Mr Prisk
I have listened very carefully to the six stages of assessment. I do not have a problem with the principle that there should be a thorough process, but the amendments and new clauses ignore one tiny detail: next March, we leave the European Union. All business representatives, particularly of businesses in my constituency, have said that they need to know what happens on 1 April. How will it be possible for any of these existing trade agreements, which is what the Bill is about, to be transferred across under his proposal? How many years will businesses have to wait?
Barry Gardiner
In fact, they would not have to wait. I have great respect for the hon. Gentleman and I know he speaks with real experience in these matters, having been a trade Minister. I ask him to look at what we have proposed: we have tried to introduce the bifurcation at a high level in the legislation. We have put the proposals in at that point. Of course, they would have an impact on all the new free trade agreements. We are trying to ensure that for new free trade agreements, this is the proper process of scrutiny that will come into place. On the corresponding agreements—where the EU already has an agreement—there will be a streamlined procedure, but one that is still subject to appropriate parliamentary scrutiny, particularly where those agreements have been substantially amended.
Let me conclude this section of my remarks by repeating that we have tabled the amendments and new clauses to establish a procedure for new free trade agreements that do not correspond to any prior EU agreement—that is the point I just made to the hon. Member for Hertford and Stortford. I was struck by how forcefully the representatives of business made the case to the Committee in our final oral evidence session on 23 January that there needs to be substantially greater consultation on the new trade agreements that the Government are negotiating, which correspond to prior EU agreements. Wherever those EU agreements are modified to incorporate new obligations, those obligations must be highlighted and presented to Parliament, to business and to the country as a whole, for proper debate, proper scrutiny and proper accountability. We will precisely return to the issue of scrutiny for these new replacement UK agreements as we go through the rest of the Bill.
Greg Hands
The Government have been clear that we do not seek to renegotiate existing trade agreements. In leaving the EU, we seek to maintain continuity in our existing trade and investment relationships. As such, we seek no change in the effects of our existing agreements as we leave the European Union. Therefore, special review procedures, as proposed in new clause 8, for example, are unnecessary.
The powers in the Bill will be used only to transition the existing trade agreements that the EU has signed up to prior to exit day. The Bill does not relate to the negotiation, signature or implementation of future free trade agreements. We have taken that approach for a specific reason: we want Parliament to play a vital role in the scrutiny of future trade agreements, as it always has done. In the trade White Paper, we made it clear that our future trade policy must be transparent and inclusive, and that Parliament will be engaged throughout the process. We will continue to respect the role of Parliament when agreeing the terms of future trade agreements.
Bill Esterson
Is the Minister giving us an undertaking that there will be an affirmative or super-affirmative scrutiny process in Parliament on the new trade agreements?
Greg Hands
All that will be considered in due course. We will bring forward proposals in the coming months on how Parliament will interact with future trade agreements.
Hannah Bardell
Will the Minister give a definition of “due course” and say what his vision is? Many external organisations and hon. Members have expressed about the structures in this place and Delegated Legislation Committees. I have sat on those Committees and I know they are not sufficient to allow proper scrutiny of the thousands of statutory instruments and regulations that will have to be dealt with, or to allow Parliament and its Members to have a say on them and be confident that they will be able to scrutinise what has been decided.
Greg Hands
We want a clear and significant role for Parliament in the scrutiny of future trade agreements. Returning to my intervention on the hon. Member for Brent North, the amendments and new clauses would pre-empt those arrangements before we have been able to consider properly what we are doing and to consult on that.
On 5 January, the Government published a response to the trade White Paper, which covered a number of things—of course, not everything that was in the White Paper is in the Bill. We will consider the views expressed in that consultation as we develop proposals regarding the role of Parliament in respect of future trade negotiations.
Hannah Bardell
A number of deficiencies have been highlighted. Does the Minister think that some of the deficiencies in the Bill, and the fact that he is having to tell us that some things will come later—I appreciate that he has great integrity and the best intentions—relate to the fact that the Bill was published before the consultation period ended? Is that the reason why some aspects of the Bill are so deficient?
Greg Hands
As I have stressed, consultation on future trade policy is ongoing. It is not dependent solely on the trade White Paper. We are consulting by speaking with partners, businesses, the devolved Administrations and other stakeholders constantly as we seek to bring forward proposals on our future trade policy. However, as I have explained, we consciously decided to make this Bill about our current trading arrangements and ensuring that they can be transitioned properly into UK law.
Therefore, these amendments pre-empt the full consideration of the 7,429 responses received during that consultation and of the views expressed inside and outside the House. It is right that we take the appropriate amount of time to develop a range of proposals that ensures that Parliament, the devolved Administrations, devolved legislatures and a wide range of stakeholders, including business and civil society, are engaged throughout the negotiating process.
The hon. Member for Brent North made a fascinating speech on what the UK’s future trade policy might look like, but that is not what we are deciding today. He said that Government can smuggle new trade agreements through Parliament without a vote. No. The implementation powers in clause 2 are exercisable by negative procedure statutory instruments. These are subject to a vote in either House of Parliament, if the regulations are objected to by parliamentarians. Parliament has the right to vote on the implementation of transitionally adopted trade agreements, if it so desires.
Barry Gardiner
The Minister must be more straight- forward with the Committee. We have already been over this ground. He knows that the negative procedure does not make provision for anything but the grace and favour of the Government in giving Her Majesty’s Opposition an opportunity to object. There is no necessity at all for a debate or vote on the Floor of the House. He must be straightforward about that.
Greg Hands
Again, I stress that Parliament has the right to vote on the implementation, but we also must remember that these will be agreements that are substantively the same as the current agreements. The reason I intervened on the hon. Gentleman—when I think he confirmed he was quite content with the existing EU scrutiny procedures—is that of course all of those agreements have been through the existing EU scrutiny procedures. I was not necessarily with him in the Chamber or upstairs each time one of those EU trade agreements went through, I think he was satisfied with those procedures at the time.
Bill Esterson
Is the Minister categorically saying that there will be no changes to the agreements that we are describing as corresponding agreements before they come through?
Greg Hands
I refer the hon. Gentleman to the evidence of the International Trade Committee, if that is in order. We had a good round about this at the Select Committee yesterday—some of the members of the Select Committee are here or are at least members of the Bill Committee—and we are quite clear that 70-plus partners have been engaged in this process. All 70-plus have agreed in principle; none has raised objections in principle to doing this. There is no reason that they necessarily would want to change the substance. They need continuity in their trading arrangements in the same way that we do.
The hon. Member for Brent North claimed that a wide range of stakeholders provided oral evidence calling for greater scrutiny mechanisms for future approved trade agreements. I think that was a fair comment. There were a number of views on how our future scrutiny arrangements might be, but I think the evidence session showed just how varied and complex the views on this matter are. It is right that we take the time to think through our options carefully. Let us not rush ahead and put in place arrangements that may not be fit for purpose. That is why we will be returning to future trade agreements in the future.
We will return to Parliament with proposals on future free trade agreements, on which we will seek views in due course. Accepting these amendments and new clauses would frustrate our ability to fully consider all of the issues and options in the round. I therefore ask the hon. Member for Brent North to withdraw the amendment.
Barry Gardiner
I will try to extract the crumbs of comfort from the Minister’s remarks. He has said that he recognises that there is a role for greater parliamentary scrutiny of our trade arrangements and that these are matters to which we should return in due course. He has also suggested that we should be able to have a proper consultation on the future trading arrangements. Those are things that I take as good will on the part of the Minister.
I propose not to press these amendments, but I make it clear to the Minister that, at a later stage in the passage of this legislation, he should table his own amendments to do what the Bill says it is about and what Her Majesty in the Gracious Speech to Parliament said it was going to be about. If he does that, I will be very happy. I will see him as a man of his word, and will be looking forward to going through what I assume will be a very similar text to the one I have tried to present to the Committee today.
I will not press these amendments today, but I put the Government on notice that it is time for them to act and to come forward with their own proposals. If they do not, these Opposition measures will return at a later stage. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Ordered, That further consideration be now adjourned. —(Craig Whittaker.)
Trade Bill (Fifth sitting)
Tuesday 30th January 2018
(6 years, 9 months ago)
Public Bill CommitteesRead Full debate Trade Bill 2017-19 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 30 January 2018 - (30 Jan 2018)
The Committee divided: - Ayes: 9 / Noes: 10 - Question accordingly negatived.
The Committee divided: - Ayes: 9 / Noes: 10 - Question accordingly negatived.
The Committee divided: - Ayes: 9 / Noes: 10 - Question accordingly negatived.
Barry Gardiner (Brent North) (Lab)
I beg to move amendment 5, in clause 2, page 2, line 13, leave out subsections (3) and (4) and insert—
“(3) Regulations under subsection (1) may make provision for the purpose of implementing a free trade agreement only if—
(a) the other signatory (or each other signatory) and the European Union had ratified a free trade agreement with each other immediately before exit day, or
(b) where the regulations are made before exit day, the other signatory (or each other signatory) and the European Union have ratified a free trade agreement with each other on the day the regulations are made.
(4) Regulations under subsection (1) may make provision for the purpose of implementing an international trade agreement other than a free trade agreement only if—
(a) the other signatory (or each other signatory) and the European Union had ratified an international trade agreement with each other immediately before exit day, or
(b) where the regulations are made before exit day, the other signatory (or each other signatory) and the European Union have ratified an international trade agreement with each other on the day the regulations are made.”
This excludes from the scope of section 2(1) those international trade agreements agreed between the UK and a third country where the corresponding agreement between the European Union and that third country has been signed but not ratified.
The Chair
With this it will be convenient to discuss the following:
Amendment 9, in clause 2, page 2, leave out line 33.
This would remove the Henry VIII power allowing for the modification of primary legislation that is retained EU law.
Amendment 10, in clause 2, page 2, line 40, at end insert—
“(7A) An ‘international agreement that mainly relates to trade, other than a free trade agreement’ means a strategic partnership agreement or mutual recognition agreement that is ancillary to a free trade agreement as defined in subsection (7).”.
This would define international trade agreements that do not fall within the category of a “free trade agreement” as defined under subsection (7).
Barry Gardiner
I am delighted to see you in the Chair, Ms Ryan. I look forward to the Committee proceeding at a rapid pace under your guidance. I am tabling amendments 5, 9 and 10, in my and my colleagues’ names, as on the amendment paper.
We are now talking about the implementation of the new international trade agreements to be negotiated between the UK and those third countries that already have an agreement with the European Union. The Government are seeking to appropriate to themselves the power to make regulations to implement those new agreements without any scrutiny by Parliament. I cannot state it better than the House of Commons Library briefing paper, which states that the Bill
“seeks to minimise Parliament’s role”
in this regard, in that it will make all secondary legislation under clause 2(1) subject to a negative resolution procedure only.
The rationale behind this attempt to sidestep due democratic process is that the trade agreements that the EU had previously negotiated with the third country in question had already undergone scrutiny when they were prepared for ratification—that is the argument the Minister used last week when we debated this. By the Government’s sleight of hand, he would say there needs to be no parliamentary scrutiny of any new UK trade agreement because that job will already have been done on the earlier agreement negotiated by the EU.
The Minister was particularly keen to point out that we were suggesting that all the levels of scrutiny that took place at the EU would be done away with. I think he thought he was trapping us when he asked us to agree that a good level of scrutiny had taken place, and that we should allow these measures to go through on the nod because that scrutiny had already happened. We reject that argument, and we were pleased to register that business representatives who gave oral evidence to the Committee agreed with us. The Committee will recall that.
The new trade agreements are not only legally distinct, as the Government have admitted, but may well include substantial new obligations, which will have been through no process of scrutiny whatever. That is why we demand a new approach to these agreements in subsequent amendments to schedule 2, where scrutiny is addressed. However, the provisions of clause 2(3) and (4) go even further, in that they allow the Government to sidestep scrutiny of not only those new UK agreements that are set to replace existing ones, which have been through the full scrutiny process prior to ratification, but UK trade deals that replace EU agreements, which have not even been through the process of ratification. Our amendment speaks to that extraordinary attempt to undermine democracy still further, the significance of which might be demonstrated if I give the Committee an example.
The economic partnership agreement between the EU and Japan was finalised last month. Negotiations were concluded on 7 December last year, and the text of the agreement is currently undergoing the double process of what is called legal scrubbing and translation into the official languages of the EU, so that it can proceed to signing in 2018. The agreement will subsequently undergo the due process of ratification by Japan and within the EU, including parliamentary scrutiny by the European Parliament. However, that process will not be completed until later in 2019, if experience is any guide, and therefore after the point at which the UK is no longer a member of the EU.
Japan is also one of the countries with which the Government have established a trade and investment working group. That working group held its first meeting in Tokyo during November of last year, and is tasked with advancing the trade and investment relationship of the two countries, with the eventual aim of signing a UK-Japan trade agreement at some point in the coming years.
According to the Bill, any future UK trade deal with Japan will be counted as a roll-over agreement, and will therefore escape parliamentary scrutiny altogether, because the EU and Japan will have signed a trade agreement during 2018—that is, before the UK leaves the EU. Note that that will be the case even if the future UK-Japan deal bears no resemblance to the EU-Japan economic partnership agreement. As stated earlier, the Bill makes no requirement for the future UK deal to match the EU’s agreement in any way, shape or form; the Bill requires only that the other country and the European Union were signatories to a free trade agreement before Brexit takes effect. The regulations to implement those new obligations will be subject to a negative resolution procedure, which is the effective negation of parliamentary scrutiny, as the Government would have us consider the new UK-Japan deal simply to be a roll-over or a grandfathered agreement.
I would like to draw attention to the oral evidence provided last Tuesday by Dr Lorand Bartels of the University of Cambridge, who spoke to exactly that issue. Dr Bartels drew particular attention to the forthcoming trade agreement with Japan, and pointed out that
“there is a fundamental difference in international law between a signed and provisionally applied agreement and a ratified agreement.”—[Official Report, Trade Public Bill Committee, 23 January 2018; c. 42.]
The Government would do well to heed that distinction. I hope that the Minister might accept our amendment and that he will see it, in a friendly spirit, as one that might improve the Bill.
Without the amendment, we are in danger of effectively granting the Government carte blanche to do what they like to secure a new UK-Japan deal. That would be a major concern to businesses and workers up and down the UK. Japan is a major player on the world stage, and Japanese companies are important investors in our economy, so the obligations that we, as a nation, undertake in relation to those companies are critical to the future of some of our most dynamic industries. Are the Government really telling us that we, as parliamentarians, should have no right to scrutinise those obligations?
Faisal Rashid (Warrington South) (Lab)
Despite the fact that the Government have continued to argue that there is no need for parliamentary scrutiny in the Bill because existing deals have been subject to sufficient scrutiny in the European Union, does my hon. Friend agree that that is not the case here and therefore that it is vital in the interests of the British people that we secure such an amendment?
Barry Gardiner
I am grateful to my hon. Friend for his intervention because he reinforces the very point that I am trying to establish. Despite the processes that are currently in place for scrutiny of trade deals as they proceed through Europe, and ultimately through the European Scrutiny Committee and through the House under the Constitutional Reform and Governance Act 2010 procedure, we have here a situation in which a deal that was going to be concluded between the EU and another country can proceed to be signed, but not implemented. Then, in the lacuna—that is, the space between that signature and our leaving the EU—we could be confronted by the Government with a completely different set of trade relations. The trade agreement could be totally different, yet, under the Bill, the Government would have the power to sign and implement it simply because they had already signed a previous agreement before we had left the EU. That cannot be the right procedure for what could be completely new issues under that future agreement.
In one sense, the amendment is a modest one, given the seriousness of the issue it addresses. It merely seeks to exclude from the antidemocratic provisions of the Bill any regulations stemming from treaties such as a future UK-Japan trade agreement, where the correspondent EU agreement will have been signed but not yet ratified, along with all the scrutiny that ratification requires.
Other EU trade agreements could fall into this same category: the EU-Vietnam free trade agreement, the text of which is also being prepared for signing at some point this year; the EU-Singapore free trade agreement which has been initialled but held up by internal EU discussions as to whether it is a mixed agreement or exclusive EU competence, leading to the European Court of Justice ruling on this issue in May last year; and, potentially, some of the economic partnership agreements still to be finalised between the EU and different groupings of African, Caribbean and Pacific states, which were criticised so trenchantly by Professor Alan Winters of the UK Trade Policy Observatory in his oral evidence to the Committee last week. Also in this category is CETA, the comprehensive economic and trade agreement between the EU and Canada, which has been signed but not yet fully ratified, as it is a mixed agreement requiring ratification in each of the EU member states, in addition to the centralised EU institutions of the Council of Ministers and the European Parliament.
Finally, the amendment tightens up the language of subsections (3) and (4) by requiring not just that the EU and the other signatory or signatories should have ratified trade agreements, prior to Brexit, but that they should have done so with each other. The Bill as it stands simply says that they must have signed “a” trade agreement; it does not say that they have to have signed it with Japan—with the corresponding party. This is ridiculous. The Minister is looking confused. If he wants to intervene, I would be happy to give way to him on this point because it is material.
The Minister for Trade Policy (Greg Hands)
I thank the hon. Gentleman for allowing me to intervene. I am a little confused about his position on CETA. If CETA is not yet ratified by all the EU28 countries, the amendment, if it became law, would effectively prevent the UK from transitioning CETA to be a UK-only agreement. I know that the hon. Gentleman is opposed to CETA, and he represents a minority view within his party. However, the great majority of Labour MPs welcome CETA and voted in favour of it. It is also something that has already taken effect, so the effect of his amendment would be to take us out of the provisions of CETA that have already been in place and been provisionally adopted since September.
Barry Gardiner
The Minister, of course, chose not to respond to the point I allowed him to intervene on because of his confusion.
Barry Gardiner
I am happy to address the Minister’s point and have set out the Labour Front-Bench position very clearly. He should know that the provisions of the amendment do not do what he has claimed they do. What it says is that there must be proper parliamentary scrutiny. He is denying precisely the opportunity for that to happen when a treaty has been signed but not yet ratified. The point of the amendment is to ensure that proper scrutiny can take place and that ratification can have taken place to ensure that.
Faisal Rashid
On the point about CETA, does my hon. Friend share my concerns about the implications of bringing in certain provisions of the deal and not ratifying—for example, the investor-state dispute settlement provisions? The key point is that there will not be sufficient scrutiny or consultation or an impact assessment carried out.
Barry Gardiner
My hon. Friend pre-vents me—I think that is the sort of Latin term: he goes before me. He picks up a theme I was about to come to. The ISDS procedures have been a major concern of not just parliamentarians but many other people in this country and across Europe. Any hon. Member who says that his postbag and email have not reflected that has simply not been examining them carefully enough.
On my point about the requirement to sign “a” trade agreement, clause 2(3) states:
“Regulations under subsection (1) may make provision for the purpose of implementing a free trade agreement only if—
the other signatory (or each other signatory) and the European Union were signatories to an international trade agreement immediately before exit day”.
It does not specify that it must be the same agreement, and stating the need for a treaty “with each other” would clarify that, which is what the amendment seeks to do. There is no great confusion, but there might be some because the clause is ambiguous.
Amendment 9 speaks to the first of two Henry VIII powers. Those powers are the most egregious example of the power grab that characterises the Bill, despite the extraordinary spectacle of the Secretary of State using the letters page of The Guardian to claim the opposite—a travesty I detailed on Second Reading and which, for reasons of time, I do not wish to reprise here. For the record, though, I draw attention to paragraph 2 on the very first page of the delegated powers memorandum that accompanies the Bill, which states, in plain English:
“The Bill contains 6 individual provisions containing delegated powers. Two of these, clauses 2(1) and 7(3), include a Henry VIII power.”
I am still waiting for the Secretary of State to correct the record that he so carefully muddied previously. Amendment 9 simply seeks to remove the first of those two Henry VIII powers.
Ms Ryan, I am glad that your grouping of amendment 9 with amendment 5 has enabled me to speak to it now, because it follows nicely on from my comments on the UK-Japan trade agreement. It is bad enough that talks towards a trade agreement should have been initiated behind closed doors by a secret working group—no agendas, no minutes, no access to any documentation, no website to keep Parliament or the public abreast of what was being decided in our name—but at the end of that charade, a set of formal negotiations, still in secret, determined what obligations we as a country might or might not be saddled with for a long time.
Faisal Rashid
Does my hon. Friend agree that if the Government are certain of their ability to roll over existing agreements, there is surely no need for the Henry VIII powers?
Barry Gardiner
My hon. Friend is entirely right. The Henry VIII powers show that the Government also realise that it is not simply replica provisions that are being rolled over but, in fact, new agreements that may contain substantially different clauses. Because of that, they need powers to be able to progress those agreements. The Committee tried to address that during its sitting last Thursday afternoon but the Minister has been reluctant to take the matter on board, even when pressed on how he thought, given the Government’s red lines, he would be able to roll over our current agreement with Norway on the free movement of people, and that with Turkey on the relationships we have through that country’s agreement with the EU customs union. The Minister has failed comprehensively to address those points. It would be interesting if he were to do so when he responds to this group of amendments, but I fear my hon. Friend might languish in hope rather than expectation of the privilege of hearing such a response.
Greg Hands
It is a pleasure to serve under your chairmanship, Ms Ryan. Let me reassure you that, by exit day, the Government aim to have ratified all EU mixed free trade agreements that are currently provisionally applied. They include, for example, the EU-Canada CETA agreement and the Southern African Development Community co-operation in accreditation.
Barry Gardiner
If it is the Minister’s intention, as he says, to do what the amendment asks him to do, namely to apply these clauses only to agreements that have been ratified—and he says that they will all have been ratified—what problem does he have with accepting the amendment?
Greg Hands
The answer to that is straightforward. Although it is our intention to have ratified the agreements, that does not necessarily mean that they will have been ratified by the other EU27 countries. That is the important thing. I will come on to why the hon. Gentleman’s amendment would put at risk agreements that the UK is already party to and that UK businesses are already benefiting from.
We must remember that EU free trade agreements that contain areas of shared or member state competence must be ratified by all 28 member states before they come into force. As we know, that process can take considerable time. We drafted the clause 2 power so that signed EU free trade agreements fall within its scope. That will ensure that it can be used to implement agreements to replace those that have been signed, and which may have been provisionally applied but are yet to be ratified by the EU or the partner country.
Many such agreements are benefiting businesses and consumers as we speak. In other words, they have already taken effect. I know that the hon. Gentleman is opposed to CETA, for example, but we believe that it has benefited UK businesses considerably since it was provisionally applied and took effect in September. I know that he wants to throw away those benefits, so I remind him that most of his party sensibly sees the merits that CETA provides this country. Under his amendment, we would be unable to implement a free trade agreement that falls within this category, which would risk a cliff edge in any trading relationships covered by such an agreement.
To take another example, the UK ratified the EU’s Andean FTA with Colombia and Peru in 2014. In 2016, UK trade with those countries had a value of more than £2 billion. However, that FTA is still awaiting ratification by both the European Union and a number of EU countries. If that is still the case by exit day, the amendment would prevent the clause 2 power from being used to implement a transitioned FTA with Colombia and Peru, resulting in a likely reduction in trade flows between the UK and the Andean countries.
Let me turn to a few points that the hon. Gentleman raised elsewhere. He asserted that the agreement has to be signed by both parties. Clause 2(3), which relates to free trade agreements, states that in order for the Government to be able to use the power when implementing an agreement with a partner country, both the EU and that country must have signed a free trade agreement before exit day. In other words, both must have signed the same agreement.
Greg Hands
I think the hon. Gentleman said it was ambiguous, but the Government’s intention is clear. We have all laid it out frequently: to transition the effects of the 40-plus EU FTAs, not to renegotiate new agreements. He mentioned the cases of Norway and Turkey. As I laid out at considerable length at the Select Committee on International Trade last week—I know two of his colleagues are members of the Committee—the situation will depend largely on the UK’s future relationship with the European Union, which is a matter for the current negotiations, as Norway, Turkey and Switzerland’s relationships are very much linked to whatever our future relationship with the EU might be.
Barry Gardiner
Of course, the Minister is entirely right to say that the nature of the agreements that we conclude with those countries would depend on our future relationship as we negotiate our withdrawal from the EU, but the point is that this Bill is supposed to be simply rolling over the existing agreements. The Minister has made a great deal of the fact that we want no change and are simply rolling over what exists into what comes afterwards. That is the trap that he has set for himself, and he must extricate himself.
Greg Hands
I will just repeat what the Secretary of State said on Second Reading: the Bill is designed to be robust to the different cases of where the future UK-EU relationship might lead us following the negotiations.
The hon. Gentleman mentioned Japan. In the small number of cases where the EU seeks to establish an FTA, it might be too late to go through conventional EU scrutiny here, and there are also our agreements that will now be sole EU competence. Also, they might not necessarily happen through the current EU scrutiny process. We will consider this in due course, but we are committed to Parliament having its say. Earlier this month we published a response to the trade White Paper, and the Government will consider views as we develop proposals regarding the role of Parliament in future trade agreements.
If we are to avoid trade disruption, we need to make sure that signed EU agreements that are not yet ratified by the EU, including the examples I have given, such as CETA, the Andean agreement and the partner country agreements, fall within the scope of the Bill, otherwise we will jeopardise a considerable part of the current trading relations that benefit this country so much. Contrary to what the hon. Gentleman says, the amendment would not improve the Bill. It would actually threaten a great number of our existing trading arrangements.
It is worth remembering that a delay in ratification by another EU member state has no real relevance to the content of an agreement, or indeed to UK scrutiny of it. It is merely a reflection of that country’s domestic situation. To allow such a state of affairs as that suggested in the amendment, and to cause disruption to UK businesses, would be profoundly unsatisfactory.
Matt Western (Warwick and Leamington) (Lab)
Does the Minister agree that, as Alan Winters said in the evidence session when talking about business and concerns about continuity, the issue is not only transparency and scrutiny, but a recognition—we are calling for this in the amendment—that some changes required in any trade agreement will be technical or substantive? There is a need to understand the degree of what is substantive, and that is not determined anywhere. That is what we and the witnesses—business or academic—are calling for. There is nothing in the Bill that ensures the scrutiny of what is substantive and what changes should be allowed.
Greg Hands
I would say two things to the hon. Gentleman. By the way, I cannot remember whether he was in favour of CETA or against it, or what his individual position was within the Labour party on some of these agreements.
Greg Hands
Of course—the hon. Gentleman was not yet elected at that time.
The Government’s intention is clear. This is a technical roll-over: there will not be substantive changes to the agreement. However, that is not what this amendment deals with. The amendment talks about making sure that all deals that have yet to be ratified are outside the scope of the Bill. Our position is clear: agreements that have been signed but not yet ratified should be within the scope of the Bill.
Faisal Rashid
The Minister mentioned a few times proper parliamentary scrutiny of future trade agreements but, clearly, the provision confirming that there will be parliamentary scrutiny in future should not be in the Bill.
Greg Hands
I am absolutely clear that this Bill relates to the transition of our existing trade agreements. How we approach future trade agreements will be a matter for future consideration. I mentioned earlier that we will look carefully at the responses to the consultation. Of course, if the hon. Gentleman has views, we are keen to hear them. Indeed, we will be seeking views from across this House on what Parliament’s views on these matters might be, but that is entirely a matter for the future.
Amendment 10 would clearly create an unacceptable risk that agreements essential to trade could not be effectively provisioned. If the members of the Committee are concerned about the scope of this power, please let me reassure them that, as I referred to earlier, we have already set out in clause 2 restrictions on the scope of the power.
Given these constraints, the existing drafting of the power, and our clear and firm assurances that this power is not intended to be used for the implementation of future trade agreements, it would be strange to include this amendment, which sets out the required procedure for future trade agreements. I therefore ask the hon. Gentleman to withdraw amendment 5.
Barry Gardiner
I am not prepared to withdraw and I propose that we move to a vote.
Question put, That the amendment be made.
Judith Cummins (Bradford South) (Lab)
I beg to move amendment 6, in clause 2, page 2, line 29, at end insert—
“(4A) Regulations under subsection (1) may make provision for the purpose of implementing an international trade agreement only if the provisions of that international trade agreement do not conflict with, and are consistent with—
(a) the provisions of international treaties ratified by the United Kingdom;
(b) the provisions of the Sustainable Development Goals adopted by the United Nations General Assembly on 25 September 2015;
(c) the primacy of human rights law;
(d) international human rights law and international humanitarian law;
(e) the United Kingdom’s obligations on workers’ rights and labour standards as established by but not limited to –
(i) the commitments under the International Labour Organisation’s Declaration on Fundamental Rights at Work and its Follow-up Conventions; and
(ii) the fundamental principles and rights at work inherent in membership of the International Labour Organisation;
(a) women’s rights and are in accordance with the United Kingdom’s obligations established by but not limited to the Convention on the Elimination of All Forms of Discrimination Against Women;
(b) children’s rights and are in accordance with the United Kingdom’s obligations established by but not limited to the Convention on the Rights of the Child;
(c) the United Kingdom’s environmental obligations in international law and as established by but not limited to—
(i) the Paris Agreement adopted under the United Nations Framework Convention on Climate Change;
(ii) the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES); and
(iii) the Convention on Biological Diversity, including the Cartagena Protocol on Biosafety; and
(d) the sovereignty of Parliament, the legal authority of UK courts, the rule of law and the principle of equality before the law.”
This would ensure that international trade agreements do not conflict with the provisions of international laws or conventions on human rights and the environment, or with the rule of law.
The amendment is designed to apply to regulations implementing all UK trade agreements, of whatever sort. It is a high-level amendment that sets out our trade policy in the proper context of respect for human rights, environmental sustainability and the rule of law. I hope therefore that the Government will have no difficulty in accepting it as a friendly amendment.
The casual observer might think it bizarre that a trade agreement could endanger human rights. Luckily, help is at hand. For those members of the Committee who have not read it, I heartily recommend the comprehensive report of the United Nations independent expert Alfred de Zayas for the UN Human Rights Council, dated 12 July 2016, in which he enumerates the many ways in which trade agreements may indeed infringe on human rights and sadly have done so in the past.
I will not take the Committee through the whole report, but suffice to say that de Zayas examines the threat posed to human rights by international trade and investment across not only civil and political rights, but economic, social and cultural rights such as the rights to work, health, education and one’s own culture. In all cases, de Zayas offers examples of where international trade and investment activities can threaten the enjoyment of human rights. He warns against creating any new agreement that might exacerbate the harm that has already been done as a result of failure to pay proper heed to the nexus between trade and investment, and human rights.
I will draw out one recommendation in the UN independent expert’s report, because it is so utterly pertinent to our discussion of the Bill. His first and foremost recommendation to Parliaments around the world states:
“No parliament should approve trade agreements without exercising oversight functions and examining the compatibility of the agreements with human rights treaty obligations in the light of impact assessments.”
That sentence might usefully be read out, I suggest, at the beginning of every sitting of the Committee and at any subsequent debate on trade policy held by this House.
The amendment seeks to ensure that future UK trade agreements will never be able to undermine human rights in the ways that Alfred de Zayas describes so powerfully for the UN Human Rights Council. In particular, proposed new sub-paragraph (c) aims to establish a proper hierarchy in cases of conflict between human rights law and the treaty obligations of international trade agreements, so that human rights law will always take priority. That is in line with the Vienna declaration and the programme of action adopted by the world conference on human rights on 25 June 1993.
Sub-paragraph (c) also speaks to the basic legal principle of pacta sunt servanda, namely in this case that states are obliged to fulfil their human rights treaty obligations in good faith and should never enter into any trade or other commercial agreements that would undermine or in any other way render impossible the fulfilment of their human rights treaty obligations.
Our amendment goes further, however, in light of the fact that we have higher-order principles that are not related to human rights alone. We also require the UK’s international trade agreements to be consistent with international humanitarian law, which is the body of law governing the conduct of war, so that there can be no question of the UK entering into any agreement with a trading partner that might undermine such a critical pillar of the international order.
One obvious example of what happens when that principle is ignored can be found in the ongoing difficulty caused at European level by Morocco’s attempt to include the fishing rights of the Sahrawi people in its trade agreement with the EU. The trading relationship between the two partners has been critically undermined as a result of the European Court of Justice 2016 ruling that Morocco has no right to negotiate a fishing agreement with the EU covering the waters of the occupied Western Sahara, a territory that the UN has confirmed must be granted the right to self-determination, but where the Sahrawi population has lived under Moroccan military occupation for more than four decades.
Just this month, the ECJ advocate-general publicly stated that the EU fisheries deal with Morocco should be declared invalid because of its failure to accord with international humanitarian law. I am sure that, like us, the Government would not wish any future UK trade agreement to fall into a similar trap.
Faisal Rashid
Trade deals often impact a wide range of public policy areas. For example, a deal done with a foreign state can impact on the provision of services such as transport. The powers outlined in the Bill could potentially remove a duty on service providers to make reasonable adjustments for people with disabilities. According to Liberty, that would make access to transport more difficult for one in five of the UK population. Does my hon. Friend agree that, as we build the foundations for our future trade policy—I understand that the Minister argues with that—it is vital that the legislation contains provisions that protect such human rights, which are incredibly important for a huge number of people?
Judith Cummins
It is incredibly important to include an ethical dimension to any human rights legislation in the Bill. We also require all future UK trade agreements to be consistent with the sustainable development goals adopted by the UN General Assembly in September 2015.
The importance of those goals needs no further elaboration but may be a useful point on how the world’s poorest countries have been marginalised from the gains of global trade over the past 40 years. Although emerging economies such as China have clearly been able to use the export opportunities of a globalised economy to develop into leading actors in many fields of trade and investment, the countries that are home to the bottom billion, as the poorest have been called, have been left behind.
That is precisely what the World Bank’s former research director, Paul Collier, warned of in his best-selling book “The Bottom Billion”, where he concluded that reliance on trade is more likely to lock yet more of the bottom billion countries into the natural resource trap than to save them through export diversification.
Mr Mark Prisk (Hertford and Stortford) (Con)
I do not agree with the hon. Lady’s last argument. Millions of people have been lifted out of abject poverty because of trade. I would like to make clear that this is a friendly amendment, as the hon. Lady described it, for future trading agreements, rather than the agreements that the Minister has referred to.
Judith Cummins
It is important that we establish the principles of human rights within our trade agreements.
Mr Prisk
I entirely agree with the principle that human rights are important. I just want to be clear whether we are talking about existing agreements being transitioned, as dealt with by the Bill to which the hon. Lady has tabled her amendment, or, as her remarks indicate, about future agreements some way in the distance.
Judith Cummins
I am talking about both because human rights are the basis of principle, not a point, so my proposal covers both.
To prove the point, the world’s least developed countries saw their share of global merchandise fall still further, to under 1%, in 2015. Africa has seen its share of global trade cut by a half over the past 30 years. It is our task to ensure that the poorest countries can benefit from trade and investment. To that end, the sustainable development goals included three specific targets on trade, set out for all countries to follow, which include promoting a universal, rules-based, open, non-discriminatory and equitable, multilateral trading system under the World Trade Organisation.
Anna McMorrin (Cardiff North) (Lab)
In his speech to the World Trade Organisation in Buenos Aires, the Secretary of State reaffirmed his commitment to trade as a main tool for development, which is fantastic. The Government should therefore be keen to support the amendment, which reaffirms the UK’s commitment to the provisions of the SDGs, human rights, workers’ rights and environmental protections, which are key elements of development, growth and stability, as the Secretary of State said.
Judith Cummins
I absolutely agree. The sustainable development goals include the capacity to increase significantly the exports of developing countries, with a view to doubling the least developed countries’ share of global exports by 2020. The SDGs can also allow for timely and lasting duty-free and quota-free market access for the least developed countries, consistent with WTO decisions, including by ensuring that preferential rules of origin applicable to imports from the least developed countries are transparent, simple and contribute to facilitating market access.
The Labour party made a manifesto commitment to guaranteeing the world’s least developed countries continued duty-free and quota-free access to the UK market, post-Brexit. I am pleased that the Government agreed to match that pledge, but we need to go considerably further if we are to ensure that our trade policies really contribute to the realisation of the sustainable development goals. That is why this is such an important part of the amendment, and one that I am sure the Government will support.
One of the most powerful ways to ensure that international trade leads to poverty reduction and enhanced life chances is to ensure that working people benefit fully from the opportunities it offers. To that end, we wish to ensure that all new trade agreements are fully consistent with the UK obligations on workers’ rights and labour standards, starting with the International Labour Organisation’s declaration of fundamental rights at work, and its eight core conventions covering freedom of association, forced labour, child labour and discrimination. However, simply linking to those conventions is far from sufficient, as has been seen in so many cases where trade agreements have led to an undermining of other labour rights. We require a deeper commitment to principles and rights at work that are inherent in the UK’s membership of the ILO, to ensure that there can be no race to the bottom in labour standards as a result of the UK’s new international trade agreements.
Again, I have no doubt that the Government will share our desire to keep labour standards high. The Secretary of State for International Trade, who has not always been known as a champion of workers’ rights, made the case in a debate on exiting the European Union and global trade in the House on 6 July last year. I should be pleased to quote him at length, which is not something that I find myself doing too often:
“There are those who would make the case for a Britain with lower regulatory standards and fewer protections in place across the economy for the environment, for workers and for consumers. Let me tell the House that Britain will not put itself at the low-cost, low-quality end of the spectrum, as it would make no sense for this country economically to do so, nor morally would it give us the leadership we seek. I believe there is no place for bargain-basement Britain.”—[Official Report, 6 July 2017; Vol. 626, c. 1365.]
Encouraged by the Secretary of State’s new-found identity as a defender of high standards and workers’ rights, the Government will, I am sure, have no trouble in supporting this part of the amendment.
Equally, all new trade agreements must be consistent with women’s rights, not least because it has often been women workers who have suffered most in the international trading system.
Integration into global supply chains promised much to women workers in countries where they had not previously enjoyed other economic opportunities. In Bangladesh, for instance, formal employment in the export-oriented garment industry has provided millions of women workers with a regular source of independent income, which has in turn allowed them to enhance their social status and political participation. When done properly, trade can be a source of empowerment, yet many of those working women have found themselves trapped in dead-end jobs characterised by poverty wages and dangerous working conditions. That is a particular threat to workers at the bottom of global value chains producing goods for distant retailers that have ultimate power and control over the conditions under which their suppliers operate. The ILO has noted that all too often trade via global supply chains
“tends to generate economic benefits… (in terms of high productivity), but not necessarily for workers”.
For far too many women in the global economy, the promise of empowerment is eclipsed by the grim realities of exploitation. Trade agreements must be consistent with children’s rights, with the UK’s environmental obligations, and with the provisions of other international treaties ratified by the United Kingdom. Surely the Government will agree with us on these points. They must respect CITES—the convention on international trade in endangered species of wild fauna and flora—as well as the convention on biological diversity. None of these are idle concerns. The European Commission’s official impact assessment for the Transatlantic Trade and Investment Partnership recognises that under every potential outcome, the proposed EU-US agreement would create what it called dangers for natural resources and for the preservation of biodiversity.
Iain Stewart (Milton Keynes South) (Con)
The hon. Lady refers to TTIP and new trade deals; I am sorry for pressing this point, but they are not the point of this Bill. I agree with her on all the standards that she wishes to see in place, and I do not want Britain to race to the bottom, but that is not the point of the Bill; it is for future Bills. Please could we stick to the roll-over agreements that we are talking about in this Bill?
The Chair
Order. I remind the hon. Gentleman that it is for me to guide hon. Members on whether they are in scope.
Judith Cummins
I remind the hon. Member for Milton Keynes South that the opening line of the Bill says that its aim is to
“Make provision about the implementation of international trade agreements”
per se. It is about principle, and about the fact that the Bill is a legal entity in itself.
Judith Cummins
It is the Trade Bill. These principles, including on human rights, should be held dear; if they are not held dear by Government Members, they are at least by Opposition Members. Environmental degradation has just been dismissed as collateral damage when it comes to international trade agreements. That is no basis on which to construct a new trade policy for a United Kingdom.
Hannah Bardell (Livingston) (SNP)
The hon. Lady makes an excellent speech. Does she agree that we all have deep concerns about fair trade? There is already a creep in supermarkets looking at fairly traded products, rather than Fairtrade products, and we will see significantly more of that if the Bill passes without amendment. Given that many of our constituencies are Fairtrade towns, that should be of significant concern to all of us.
Judith Cummins
I thank the hon. Lady for that intervention. Fair trade should absolutely be a key element of any Bill that deals with trade.
Barry Gardiner
My hon. Friend quite properly reminds the Committee that the amendment is in scope—otherwise it would not have been selected; the Chair would have ruled it out of scope—because of the words at the front of the Bill. The amendment would of course have an impact on the roll-over agreements, as the Government call them, which are legally distinct, new agreements. If these provisions were put into law, they would apply to all new agreements that we completed in the future. I do not doubt that many Government Members would be happy to see included these provisions about human rights, equality and the rights of children—things that David Cameron, when he was Prime Minister, was keen to negotiate as one of the leaders on the SDGs. Would Government Members accept that the amendment is not only in scope, but could have a positive effect on future conclusions of trade agreements?
Matt Western
I thank my hon. Friend for being so generous. To amplify that point, I think it was Nick Dearden who, during the oral evidence sessions, spoke about modern trade deals and the huge opportunity presented to us. It is almost a no-brainer to include the things listed in the amendment. There is almost an assumption that they should be included, and that is why we are putting forward the amendment. These are modern trade deals. We have an opportunity to update the arrangements. This is a simple amendment.
The Chair
For clarity, when we vote, we will vote on the amendment as on the amendment paper. It is perfectly in order for the hon. Member for Bradford South to discuss the principles that she wishes to see applied in the Bill.
Judith Cummins
Finally, our amendment demands that the UK’s international trade agreements be fully consistent with the legal authority of UK courts, the rule of law and the principle of equality before the law. It does not take Sherlock Holmes to deduce that the amendment is designed to prevent the undermining of our legal system by the introduction of investor- state dispute settlement mechanisms in any future UK trade agreement.
ISDS represents an extraordinary transfer of power to foreign investors who gain exclusive rights, unavailable to any domestic investor, to sue host Governments in their own private judicial system. The investment protections they are granted go far beyond what they could be entitled to expect in any of their domestic courts. That has in turn spawned a massive industry of trade lawyers and hedge funds keen to speculate on the massive gains to be made from suing a country over any new rule or regulation that might be construed as being unfair to multinational companies operating there.
There have been more than 800 ISDS cases brought by foreign investors against their host countries. Some Governments have been forced to back down from introducing perfectly reasonable social or environmental measures. In the first ISDS case brought against Germany under the energy charter treaty, the Swedish power company Vattenfall sued in relation to its new coal-fired power plant outside Hamburg. The authorities were forced to drop the environmental conditions designed to protect the water quality of the River Elbe. In the infamous case brought against Canada under the ISDS provisions of the North American Free Trade Agreement, the US company Ethyl successfully sued the Canadian Government over their ban on the use of the fuel additive MMT. The ban had been introduced on public health grounds to guard against the inhalation of particles of manganese, which is known to be a neurotoxin. When the ISDS tribunal ruled against Canada’s procedural defence, it settled the claim by paying $13 million to Ethyl, rescinding the ban and issuing a public apology.
The prospect of being on the receiving end of such an attack generates its own regulatory chill, dissuading countries from upgrading their regulatory regime for fear of being sued for hundreds of millions of pounds in front of wholly unpredictable tribunals where the adjudicators often turn out to be working out as counsel for their corporate clients at the same time. The inclusion of ISDS or its equivalents in the most controversial bilateral trade agreements of recent years has been one of the key factors behind the loss of legitimacy and public support for international trade in general. We would do well to address that fact at this juncture.
The EU Trade Commissioner Cecilia Malmström was not exaggerating when she complained that ISDS had become the most toxic acronym in Europe. It turned her TTIP dreams into a nightmare, and it will do the same for any future UK trade agreements that seek to include it. There is absolutely no justification for the introduction of ISDS in any trade or investment agreement negotiated for the UK, and there is no need for it either. The UK holds more foreign investment stock than any other EU member state and boasts a higher score than any other European country on the index measuring the quality of judicial processes. Foreign investors can have full confidence in the UK judicial system and can rely on our domestic courts for any redress they seek as a result of unfair treatment, just as we do.
The previous coalition Government commissioned an official cost-benefit analysis of the prospect of extending ISDS rights to North American investors at the outset of the TTIP negotiations in 2013. The report they received is still well worth reading. It found that there would be no benefits to the UK economy from introducing ISDS, only costs. With that rebuke ringing in our ears, I trust that the Government will vote in favour of the amendment, as they should.
Mr Prisk
I strongly support the hon. Lady’s point about the value of human rights and the importance of workers’ rights and environmental standards, not only as we trade abroad but in how we deal with our domestic politics. That is very important. I am sorry that, at the tail end of her point, she started to suggest that one side of the House somehow does not agree with that. In fairness, there is a range of views across the spectrum, but the principles about human rights and workers’ rights and so on are there.
I cannot support the hon. Lady’s amendment, not because of the values that she talked about at some length but because, in her own words, the amendment seeks to change any future trading agreement. On a point of principle, I do not think that is something the Committee has the power, or is in the position, to do. On that principle, I will vote against the amendment, and I hope other Members do the same.
Greg Hands
I thank the hon. Member for Bradford South for her interesting and wide-ranging speech. I wholly agree with her strong comments on human rights and the UK being a leader in that space and the wide range of fields referred to in the amendment. In fact, I think all Conservative Members wholly endorse that.
However, I assure the hon. Lady that the amendment is unnecessary. The UK has always sought to comply with international law, and we will continue to uphold our strong commitments to human rights and labour and environmental standards around the world, as well as to the sustainable development goals, gender rights, disability rights, endangered species, fighting climate change and so on. The process of exiting the EU will not alter that position, and we will still be bound by our commitments under international law. Both the Secretary of State and I stated in the Chamber on Second Reading that our aim in undertaking the transition programme is to seek continuity in the effects of existing trade agreements. This is not an opportunity to renegotiate the terms of those agreements, which have already been scrutinised by Parliament.
The hon. Lady referenced least developed countries. I remind her that, despite her warm words, she voted against the Taxation (Cross-border Trade) Bill on Second Reading, which is currently being considered in another Committee and which enshrines a system of trade preferences for developing countries as we leave the EU, to make sure that those powers are in place for the UK to offer unilateral trade preferences. Unfortunately, if her vote on that Bill had been the majority view in the House earlier this month, the UK would not have a system of trade preferences for developing-world countries as we exit the EU.
The amendment is unnecessary, particularly in relation to our compliance with international law.
Faisal Rashid
The Government recently published a 25-year plan for the environment, committing the UK to:
“Leave a lighter footprint on the global environment by enhancing sustainability and supporting zero deforestation supply chains.”
Does the Minister agree that it is vital that the Bill is amended to ensure that the Government can meet that commitment, and to ensure that trade policy does not result in a reduction in environmental standards and protections or in an unacceptable, unsustainable global footprint?
Greg Hands
Let me be absolutely clear: there is no intention to reduce environmental standards. In fact, the point of the 25-year environment plan was to enshrine this country’s commitment to the environment over a very long period of time. I heartily commend that plan, but it is not part of today’s Bill. I am happy to underline that we will, of course, remain compliant with international law. On the basis of that assurance, the broader applicability of international law, and the UK’s commitments in all such areas, I ask the hon. Member to withdraw the amendment.
Greg Hands
I will, of course, take an intervention from the hon. Member for Warwick.
Matt Western
My constituency is Warwick and Leamington. They get funny about that in my area.
Based on my humble experience, I do not think we have the same kind of reputation for environmental safeguards as certain other countries—our history is weak in that area. One of the reasons for tabling the amendment was to ensure that those sorts of standards are included, and that we are putting that forward for our own protection, as well as the offensive interests of other Governments. The Minister may have a different view from mine. I understand that he has lobbied in Brazil on behalf of certain oil giants such as BP and Shell, so he will take a different stance. I believe that it is an important issue, which is why we tabled this important amendment.
Greg Hands
I thank the hon. Gentleman for that late but wide-ranging intervention. Let me try to deal with each of his points. On Brazil, it is quite clearly on the record that the discussions were to ensure a level playing field for UK companies, not to change Brazilian domestic requirements in a way that would harm the environment in Brazil.
Secondly, we have an exemplary record on the environment over the last seven years. The UK was a leader in the Paris agreement and the negotiations behind it, as the shadow Secretary of State will know only too well—he takes a keen interest in that and is even the party’s spokesperson. When it comes to recent regulations such as the banning of microbeads and efforts to prevent plastics from entering the environment, the Government have an exemplary record. On that basis, I ask the hon. Member for Bradford South to withdraw her amendment.
Judith Cummins
We will push the amendment to a vote.
Question put, That the amendment be made.
Bill Esterson (Sefton Central) (Lab)
I beg to move amendment 7, in clause 2, page 2, line 29, at end insert—
“(4A) Regulations under subsection (1) may make provision for the purpose of implementing an international trade agreement only if the provisions of that international trade agreement do not in any way restrict the ability—
(a) to make public services at a national or local level subject to public monopoly;
(b) to make public services at a national or local level subject to exclusive rights granted to private operators; and
(c) to bring public services at a national or local level back into the public sector for delivery by public sector employees.”
This would ensure that international trade agreements cannot restrict future decisions in respect of the delivery of public services.
It is a pleasure to serve under your chairmanship, Ms Ryan. Amendment 7 seeks once and for all to exclude public services from the remit of any future UK trade agreements. That nut has proved extremely difficult to crack in all of the multilateral and bilateral international trade negotiations that the UK has been involved with to date. Given the object lesson we have just been taught by the collapse of Carillion and the deep uncertainty it has caused in relation to the outsourcing of public services, we are more determined than ever to get it right for the future.
Service trade negotiations were introduced to the multilateral trading system through the general agreement on trade in services. GATS was part of the package of multilateral agreements negotiated in the Uruguay round of global trade talks, which took place between 1986 and 1994 and led to the creation of the World Trade Organisation. Each country submitted a schedule of GATS commitments detailing the level of liberalisation it would offer to other WTO members on a sector-by-sector basis and across the four different modes of service delivery—namely, cross-border supply, consumption abroad, commercial presence and movement of natural persons. That was done by what is known as positive listing, which means that only sectors put forward for liberalisation would be subject to the GATS market access and national treatment provisions. EU member states were able to register their own national limitations to the levels of liberalisation listed for each sector, either by withholding sectors from liberalisation entirely or by attaching national conditions to the opening of their markets. That means that, across the 160 service sectors, the EU’s schedule of commitments runs to more than 540 pages in length.
Services have become an important element in the bilateral trade negations that have proliferated since the demise of the WTO’s Doha round. Contrary to what is often heard in the media, the comprehensive economic and trade agreement between the EU and Canada—CETA—included the most far-reaching commitments to services trade liberalisation ever made by the EU. They were made by a negative listing, which means that only sectors specifically listed for protection from liberalisation would be excluded from the deal’s market access and national treatment provisions. That is commonly known as the “list it or lose it” approach, and it makes for a much more extensive liberalisation outcome than the positive list approach that has been used in multilateral services negotiations.
In all of those negotiations, there has been considerable concern about the potential for public services to fall foul of WTO rules on monopolies, competition and market opening. To that end, the original GATS text included an exemption for services
“supplied in the exercise of government authority”.
That exemption has been carried over into most other bilateral agreements. We sometimes hear people who are new to this issue claiming that this provides a carve-out for public services. However, the exemption for services supplied in the exercise of governmental authority is closely defined to mean only services that are supplied on a non-commercial basis and without any competition from the private sector. There is consensus among all trade policy experts that it is a carve-out not for public services, but only for specific state functions, such as the judiciary, the army or the police.
The detailed paper on the subject published by Professor Markus Krajewski notes that academics and trade policy practitioners alike now accept that most public services, including social, health and educational services, as well as network-based and universal services, are not covered by the exemption clause. The EU agrees. The European Commission has confirmed that public services such as the NHS are not protected by the governmental authority exemption. The relevant passage from the Commission’s proposal to modernise the EU’s treatment of public services in future EU trade agreements states:
“The scope of the GATS includes services which may be considered by each Member to be ‘public services’. A wide variety of so-called public services, including certain activities relating to education, healthcare, postal, telecommunications, waste collection, water provision, electricity, transport, etc as they exist today in many countries, including in most EU Member States will have certain commercial aspects and may be provided to some extent by private operators on a competitive basis. Where this is the case, they would normally fall within the scope of the GATS as representing ‘tradable’ services.”
Faisal Rashid
Does my hon. Friend agree that modern-day international trade agreements extend into a wide range of public policy making and it is therefore essential that our Government maintain the capacity to deliver public services?
Bill Esterson
That is absolutely right. It is at the heart of amendment 7 that our Government and this country retain the right to decide who runs vital national services. Our concern from the body of evidence over the years—I have started to run through where some of those concerns come from—is that there is doubt about whether that will continue to be possible.
Alan Brown (Kilmarnock and Loudoun) (SNP)
I am fully behind the principle of the amendment. Scotland still leads the way in terms of Scottish workers being employed under public ownership. We are looking at a public sector energy company and a public sector bid to run the ScotRail franchise. I completely support that public sector ethos. As was mentioned, the Bill is supposed to be about existing trade agreements being rolled over into UK law. Is the hon. Gentleman saying that even under existing EU trade deals, these public service operations are at risk, meaning that that would be a concern when any one of those deals was rolled over?
Bill Esterson
If the amendment is agreed, we are making sure that there is no prospect of there being a problem or concern about any of these things arising. I am glad that the hon. Gentleman mentioned some of the important elements of public services that are still in the public sector in parts of the United Kingdom, because in the Labour manifesto last year that is certainly what we envisaged for the whole country.
We believe that those with concerns are right to be concerned, given that the European Commission has said the following about including public services in the multilateral services regime in its proposal on modernising the system:
“Indeed, it is important for the EU that GATS does cover public services, as the EU, for whom services represent 70% of the overall economy, and where EU harmonisation has led to the liberalisation of former public monopolies in areas such as telecoms and postal services, is also the world’s largest exporter of services and seeks access to other markets.”
That is why public reassurances and best endeavour commitments from Ministers are not the issue here. Legal certainty and absolute exemption are required, which again answers the point made by the hon. Member for Kilmarnock and Loudoun. Amendment 7 seeks to exclude, once and for all, public services from the fear of being trapped by world trade rules, by prohibiting Ministers passing regulations to implement the trade agreement if that agreement in any way restricts the ability to keep public services in public hands or to bring them back into public hands once they have been outsourced.
In the wake of the disastrous collapse of Carillion, I would hope that the common sense of the amendment is so overwhelming that it will receive support from the Government. We cannot have a situation where the outsourcing of public services to the private sector might end up entangled in trade rules so that future Administrations find themselves in any way restricted in bringing those public services back into the public sector for delivery by public sector employees.
When the Secretary of State gave evidence to the International Trade Committee last February, he was invited by my hon. Friend the Member for Birmingham, Ladywood (Shabana Mahmood) to repeat the words:
“The NHS is off limits in any future trade deal.”
In reply, the Secretary of State stated:
“Let me tell you, as the person who will be in charge of negotiating that, it would not be happening on my watch.”
Let us hope that the Secretary of State’s commitment will encourage the Government to vote in support of the amendment and to ensure that our NHS and our other vital public services will never be pawns to be bargained away in international trade negotiations.
Alan Brown
It is a pleasure to serve under your chairmanship, Ms Ryan. I will expand briefly on the point I made in my intervention. We fully support the principles behind amendment 7. Scottish Water is still in public ownership in Scotland. Caledonian MacBrayne ferries recently went out to tender and there was a public sector bid, so that remains run by the public sector. Going forward, the Scottish Government are looking at the ScotRail franchise possibly coming into the public sector, as well as public sector energy companies. Of course, we all value the different national health services across the constituent countries of the United Kingdom.
The hon. Member for Sefton Central touched on Carillion, which is certainly a good example of how private does not always equal better. We have now seen the latest east coast main line fiasco—Stagecoach and Virgin were able to walk away and not honour their commitment to the public purse in the franchise moneys they were meant to pay. It is clear that that service has been run successfully in the public sector before and there is no reason why that could not be done again. We would certainly like to see more rail franchises operated by the public sector.
For those reasons, we would welcome these protections being added to the Bill. I would like to think that the amendment is not really required, but there does sometimes seem to be a confused position in the Labour party. The leader of the Labour party, the right hon. Member for Islington North (Jeremy Corbyn), has suggested that we cannot be in the single market and have rail nationalisation. This is not correct, given how many national rail companies operate in the UK and run UK franchises. Clearly, we can have nationalisation and be in the EU single market.
Barry Gardiner
Perhaps the hon. Gentleman will allow me to clarify. I believe that the contention is not that we cannot have a nationalised industry as a member of the single market; it is that once the sector has been liberalised, it then becomes very difficult to take it back under national control. That is the point my party’s leader was making, not the one he suggests.
Alan Brown
I thank the hon. Gentleman for that clarification. I would still contend that there is a confused viewpoint regarding the single market and how it aligns with membership or otherwise of the EU. Again, where the rail franchising system in the United Kingdom has been liberalised, clearly there is no impediment to the Scottish Government making a public sector bid. That proves that it can happen within the EU single market.
In conclusion, I welcome any commitment to strengthen the public sector ethos and public sector ownership, and I will be interested to hear what the Government have to say.
Greg Hands
As I have mentioned, the aim of continuity means that this exercise will not be used as a back-door way to alter how the UK delivers public services. I make it clear to the Committee that the protection of public service delivery is written into many EU trade agreements and they already include safeguards to protect EU country Governments from being forced to privatise their services. That protection has worked for 20 years.
I will turn to some of the individual points that have been raised. The hon. Member for Sefton Central talked about the agreement on government procurement. Just to be clear, the GPA operates on a positive list basis—that is, only areas listed by GPA members in their GPA schedules are covered by the GPA’s obligations.
Secondly, the hon. Gentleman will know, as I do, that negotiations on the trade in services agreement are ongoing at the WTO, but are not making a great deal of progress. The UK’s position, as it currently stands, will be represented in those discussions by the European Union.
Faisal Rashid
If the Government will not support the amendment today, will the Minister provide assurances to the Committee and to the British people that the Bill will not put vital public services, such as the NHS, at risk of piecemeal privatisations that are ultimately detrimental to those who rely on those services?
Greg Hands
We have been clear that many EU trade agreements presently provide those protections and we have been clear that this exercise of transitioning existing EU free trade agreements will not be used for any back-door attempt to do anything to the NHS that would prevent our right to regulate domestically for the NHS. This party has a proud record of defending and protecting the national health service, and that will continue.
Barry Gardiner
Does the Minister recall that during the drafting of CETA, while Germany put a clear exemption into the agreement’s text that it would not allow any privatisation of its health service in that way, the UK failed to do so? One reason the ancillary document—the interpretative document—was necessary was to make that clear, but that document was not binding in law. As such, the Government do not have a good record on this, do they?
Greg Hands
The hon. Gentleman and I had an extensive debate on this matter in February. We are satisfied that the protections in CETA are adequate for protecting our national health service and our right to regulate in the domestic market.
It has long been an aspect of UK Government policy under successive Governments to make sure that trade agreements work for services. That is actually in the UK national interest—80% of our country’s GDP comes from services and 79% of our employment comes from services—and has been an objective of successive Governments.
Greg Hands
Of course I will allow the hon. Gentleman to intervene, to clarify where he is with Tony Blair.
Barry Gardiner
My relationship with our former Prime Minister is probably not in scope for the Committee. However, I assure the hon. Gentleman that the Labour party and the Opposition in Committee do not in any way want to stop the very valuable exports that our service industries make to the rest of the world. We want to see them flourish, but we want them to do so within a framework that does not prejudice the protections that should properly—as the Minister has acknowledged—be in place for public services and the public sector in this country, and the right to protect our national health service and to ensure that public procurement can be done properly.
Greg Hands
I think we shall leave it at that. I thank the hon. Gentleman for his clarification of where he stands in relation to Tony Blair.
Protecting the UK’s right to regulate public services is, of course, of the utmost importance. UK public services are protected by specific exceptions and reservations in EU trade agreements where relevant. As we leave the EU, the UK will continue to ensure that rigorous protections are included in all trade agreements that it is party to. On that basis, I ask the Opposition to withdraw the amendment.
Bill Esterson
I will not be drawn on everything the Minister said, but I will go back to what the hon. Member for Kilmarnock and Loudoun said in his short speech. The amendment and the Bill are about trade agreements and not about the single market. My hon. Friend the Member for Brent North made it clear on Second Reading exactly what our relationship with the single market will be once we have left the European Union—if we are not a member of the European Union, it is not possible to have a say in the rules, so we are therefore not a full member whatever our relationship with the single market. He explained it extremely well.
The amendment is about the relationship with future trade agreements and about having the right protections for public services. I go back to what I said in my speech: the amendment is about ensuring that we have the ability in law to bring services back in, in the light of Carillion, whether they are to do with the NHS or other services. In the public interest—the public good—this country should have the ability to decide where its public services are run.
Matt Western
Back in February last year, as I understand it, the Minister told the International Trade Committee that the NHS would remain off limits in trade negotiations and that he would not sacrifice the Government’s right to regulate public services. Does my hon. Friend therefore share my surprise that the Minister is not keen to include the amendment in the Bill?
Bill Esterson
I share my hon. Friend’s surprise because, as I said in my speech, repeated public reassurances and “best endeavour” commitments from Ministers are not the issue; legal certainty and absolute exemption are required. If the Minister will not accept the amendment, perhaps he will tell us now that he will bring forward his own amendment later in our proceedings to achieve exactly that.
Greg Hands
We are talking here about future trade agreements, on which I have clearly laid out our position. I will just pick up on a point made by the hon. Member for Warwick and Leamington. I think he is incorrect in what he said on any evidence I might have given to the International Trade Committee last February. To be clear—and perhaps to my regret—I did not appear in front of that Committee until last week.
Bill Esterson
It is odd to be intervened on about the comments of another Member. I suspect my hon. Friend the Member for Warwick and Leamington meant the Secretary of State. I thought all Ministers spoke as one in Government, although we have seen enough evidence in recent days, weeks and months to suggest that that is not entirely true. Today is perhaps the latest example, with the leaked reports from the Secretary of State for Exiting the European Union. We are wandering, and I think the Chair might have something to say on that.
Over the weekend, the Prime Minister left a degree of ambiguity in her words on this issue. As my hon. Friend the Member for Brent North quite rightly reminded us, the German Government felt sufficiently concerned about CETA to exclude healthcare from its provisions. We should be very mindful of that. The Government are keen to, in their words, roll over that agreement, although with the acknowledgement that that may involve technical changes. Perhaps we can all agree that it will become a corresponding agreement.
There is a body of evidence from across the years showing the need for cast-iron guarantees to protect public services, so that they can be delivered in the public good and brought back in house where necessary. Without it being legally binding in the way we have set out in the amendment, it is difficult to see how that can be achieved. I will ask again: if the Government will not support the amendment, will they bring forward their own amendment that delivers on exactly that point later in our proceedings? There will be further opportunities in this House and in the other place to do so.
Question put, That the amendment be made
Judith Cummins
I beg to move amendment 8, in clause 2, page 2, line 29, at end insert—
“(4A) Regulations may only be made under section 2(1) if—
(a) the provisions of the international trade agreement to which they relate are consistent with standards for food safety and quality as set and administered by—
(i) the Department of Health;
(ii) the Food Standards Agency; and
(iii) any other public authority specified in regulations made by the Secretary of State;
(b) the Secretary of State is satisfied that mechanisms and bodies charged with enforcement of standards for food safety and quality have the capacity to absorb any extra requirement which may arise from the implementation of the agreement;
(c) the provisions of the international trade agreement to which they relate are consistent with policy to achieve reduction in the risk of disease or contamination as set and administered by—
(i) the Department of Health;
(ii) the Food Standards Agency; and
(iii) any other public authority specified in regulations made by the Secretary of State;
(d) the provisions of the international trade agreement to which they relate are consistent with achieving improvements in public health through any food policy priorities set and administered by—
(i) the Department of Health;
(ii) the Food Standards Agency; and
(iii) any other public authority specified in regulations made by the Secretary of State;
(e) the provisions of the international trade agreement to which they relate are compliant with policy to achieve targets for farm antibiotic reduction set by the Veterinary Medicines Directorate;
(f) the provisions of the international trade agreement to which they relate are compliant with retained EU law relating to food standards and the impact of food production upon the environment; and
(g) any food or food products to which the provisions of the international trade agreement apply meet standards of labelling, indication of provenance, and packaging specified by the Food Standards Agency.
(4B) A statutory instrument containing regulations of the Secretary of State under this section may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, each House of Parliament.”.
This would ensure that international trade agreements maintain or enhance food safety standards in the UK.
The amendment speaks to the critical issue of food and food safety, in the context of our future international third country agreements. No Committee member needs me to tell them of the central importance of maintaining food safety standards in this country and ensuring that the British people can have confidence in those standards. However, perhaps it is necessary to provide some explanation of why this has become such a totemic issue in the debate around international trade.
Alan Brown
In her opening remarks, the hon. Lady has talked about reassuring the British people. I note that the amendment mentions the Department of Health and the Food Standards Agency. Is it not deficient because it does not recognise the devolved Administrations? I wonder whether that is an omission, because Food Standards Scotland actually gave evidence to this Committee.
Judith Cummins
The hon. Gentleman makes a very good point.
It is easy to joke about chlorine chicken or hormone beef, and at least one of the witnesses in the oral evidence sessions noted that we have heard more about those particular delicacies than we would ever wish to. Yet there is a profoundly serious point underlying the reference to them—a point that was hammered home in November last year when Wilbur Ross, the man appointed by Donald Trump to be US Secretary of Commerce, addressed the annual conference of the CBI.
Mr Ross put the UK on notice that we will have to relax our food safety laws if we wish to have a trade deal with the USA. He specifically called out the sanitary and phytosanitary regulations that we have in place to protect against the importation of potentially dangerous products, and he complained that they act as a barrier to US exports, seeing as the regulations that US producers have to abide by in their home markets are much lower than those that apply in Europe. Mr Ross explicitly warned the British people that we need to downgrade our food standards if we wish to have a trade deal with the USA.
The regulatory system that we have developed over decades in the UK is based on the precautionary principle, which states that where there is a risk that public health or safety might be compromised, regulatory bodies must err on the side of caution. The principle applies even if the level of risk cannot be fully quantified under the science that we have today. Any company or individual who wishes to introduce a product or process to the market must—quite rightly—prove it is safe to do so.
Barry Gardiner
On the point made earlier by the hon. Member for Kilmarnock and Loudoun, proposed new sub-paragraph (iii) of the amendment refers to
“any other public authority specified in regulations made by the Secretary of State”.
Does my hon. Friend agree that that therefore makes provision for the other Administrations’ bodies to be included in the scope of the amendment, although I entirely take the hon. Gentleman’s point that Food Standards Scotland was not specifically mentioned, and it might well have been?
Judith Cummins
I thank my hon. Friend and the hon. Member for Kilmarnock and Loudoun for their interventions, in which they both made valid points.
In the USA, the requirement is reversed. Those who wish to introduce products or processes to the market are free to do so unless the authorities can prove that they are unsafe. What they have tried to call the “scientific” approach to food safety, as opposed to the risk-based approach that we enjoy in this country and throughout Europe, has meant that the USA has ended up with lower standards of food hygiene and food safety. That is why the processes behind meat production on either side of the Atlantic are so radically different.
More than 90% of US beef is produced with the use of bovine growth hormones that have been linked to cancers in humans. We have food safety regulations in place across Europe that have banned any imports of hormone-grown beef from the USA and other countries for 30 years. US poultry producers are permitted to douse chicken and turkey carcasses with chlorine washes before selling them on to consumers. Again, that practice has been banned in Europe for more than 20 years, and the USA has challenged the ban at the WTO as being a barrier to its ability to penetrate the EU market.
The connection with animal welfare is paramount in this respect, in that the European regulations seek to introduce at least some consideration for the welfare of the animals that are farmed for human consumption. The USA has no comparable regulations on animal welfare, and the conditions in which its industrial farming takes place do not bear thinking about. Let me make the central point clear: the issue before us in this Bill is not whether we like the idea of eating hormone-grown beef, or whether we care about animal welfare in the raising of poultry for slaughter—those are debates we can have another time; the issue before us here is that we must be the ones to decide on food safety and animal welfare issues, and we must do so in an open forum as the elected representatives of the people of the United Kingdom.
Faisal Rashid
Does my hon. Friend agree that, if we do not secure an amendment to protect food safety standards in the UK, we will be failing our constituents and potentially putting public health at risk?
Judith Cummins
My hon. Friend makes a very important point. It is important that we consider those wider issues in this Committee.
It is unacceptable that we might come to such a debate in the future only to discover that our right to choose what we eat and how it is produced has already been traded away in secret negotiations by a Secretary of State who ranks getting a trade deal far above protecting food safety for the British people. Amendment 8 would simply ensure that our trade agreements conform to food safety policies, not the other way around.
The significance of the challenge laid down by Wilbur Ross at the CBI last November was lost on no one. Two days after the speech, the EU’s chief negotiator, Michel Barnier, responded to Wilbur Ross and posed the No. 1 question for the UK: do the British people wish to remain aligned with the European Union’s relatively high standards, or do we want our food safety standards to be downgraded so we can do a dirty deal with the USA?
Matt Western
Does my hon. Friend agree that, given the Secretary of State’s statement that there
“are no health reasons why you couldn’t eat chickens that have been washed in chlorinated water”—
of course, that is the same Secretary of State who said that Brexit is the easiest thing in human history—it is crucial that we set out in statute that international trade agreements must maintain the food safety standards in our country?
Judith Cummins
My hon. Friend is absolutely right that that must be set out in regulations and in statute.
I want to spell out clearly the connection between this amendment and one of the key issues in the post-Brexit settlement between the UK and the EU—namely, the border issue on the island of Ireland. Hon. Members will recall the dramatic scenes last month when our Prime Minister finally managed to move us on to negotiations with the EU about what our long-term relationship should be after Brexit. That was achieved by way of an agreement in respect of the island of Ireland, which committed the UK to the following:
“In the absence of agreed solutions, the United Kingdom will maintain full alignment with rules of the Internal Market and the Customs Union which, now or in the future, support North-South cooperation, the all-island economy and the protection of the 1998 Agreement.”
When pressed further on what exactly that might mean, the Prime Minister was more explicit. She specified that there are six areas that are covered at present by north-south co-operation on the island of Ireland, and confirmed that one of them is agriculture.
The significance of the Prime Minister’s words goes far beyond the immediate issue of how we are to relate to the remaining 27 member states of the European Union in the future. Any suggestion that the UK might downgrade its food safety regulations to do a deal with the USA or any other trading partner would wreak havoc among farming communities both north and south of the border in Ireland, which would find themselves unable to continue trading freely. Allowing the Secretary of State to contemplate such a divergence in a trade deal with the USA or any other trading partner would jeopardise the peaceful co-existence that we have all endeavoured to hold together since the Good Friday agreement was signed 20 years ago. That is why amendment 8 is so important, and we hope the Government will vote to support it.
There are real threats. The USA agricultural lobby called for EU rules on pesticides to be downgraded in TTIP, given that we have far stricter regulations on the levels of chemical pesticide residue permitted in food. It called for our ban on the sale of genetically modified organisms to be eliminated, given that 70% of all processed food in US supermarkets is now made with genetically modified ingredients. It also called for an end to the mandatory labelling of products containing genetically modified ingredients, on the grounds that it represents a hidden barrier to trade. Consumer choice would go out of the window with public health, food safety and animal welfare rights.
Matt Western
Does my hon. Friend agree that this is clearly an issue, as has been described, of consumer information and consumer rights, in terms of not just the quality of food being put on our plates but the conditions in which our animals are kept, the state of the abattoirs and the standards we maintain so highly in this country?
Judith Cummins
I thank my hon. Friend for that intervention, and I repeat that it is important to maintain the regulatory standards we have in this nation.
The US Government trade representative confirmed in writing at the very outset of the negotiations that the USA’s TTIP negotiators would be seeking to eliminate or downgrade those sanitary or phytosanitary measures that prevent US exports from entry into the market of the UK and other EU member states. That was one of the central reasons why TTIP became so toxic across country after country in Europe, and why the European Commission soon discovered that it had no legitimacy to continue the TTIP negotiations at all.
I should also note that there is a commercial aspect to this. The celebrity chef, Jamie Oliver, was so concerned about the potential impact of TTIP on his business—which is based on high-quality food imports at every stage of the supply chain—that he took it upon himself to call on the previous Secretary of State for cast-iron guarantees that food standards would not be included as part of the TTIP negotiations. The Secretary of State was unable to give him those guarantees, since the TTIP negotiations were, at that same moment, addressing sanitary and phytosanitary measures at the express demand of the US Government. Of course, those negotiations were going on behind closed doors.
That is what Wilbur Ross meant when he warned that the USA would demand the downgrading of UK food standards. That is why it has been so appalling to see the current Secretary of State laughing off the threat represented by such a downgrading of our standards.
Greg Hands
I have been listening carefully, but to be absolutely clear, I think the hon. Lady referred to the previous Secretary of State. Obviously, the current Secretary of State is the first and only Secretary of State for International Trade. Could the hon. Lady perhaps clarify whom she is referring to as the previous Secretary of State?
Judith Cummins
I am referring to the right hon. Member for Twickenham (Sir Vince Cable).
Amendment 8 also seeks to ensure that the food we eat comes from healthy animals that are naturally resistant to disease, not dosed up with antibiotics as an alternative to maintaining food hygiene throughout the production process, which is a standard model of industrial farming in the USA. We all know about the real threat of superbugs that develop their resistance to antibiotics. That is why the Veterinary Medicines Directorate has set targets for the reduction of antibiotic use in agriculture. This is where the interface between animal welfare and food safety becomes most compelling, and why British farmers should be proud to produce food that adheres to the highest standards—all the way from farm to fork.
Finally, this amendment would ensure that the bodies responsible for upholding and enforcing food standards in this country have the capacity to meet any extra requirements placed on them.
Faisal Rashid
I was just reading some of the evidence submitted by Sustain, the alliance for better food and farming, which says exactly what my hon. Friend is saying:
“We want affordable food, not cheap food, which may be poor quality or unsafe to eat. Cheap, poor quality, imported food will come at a cost—to the farmer or food producer, to animal welfare, to the environment or jobs in UK food and farming. There may be hidden costs to our NHS and economy from food poisoning and lost days at work.”
Does my hon. Friend agree that this amendment will help to protect our food standards?
Judith Cummins
I thank my hon. Friend for that intervention and wholeheartedly agree that this amendment would help to protect our food standards.
To clarify my previous comments and the intervention by the Minister, I was referring to the right hon. Member for Twickenham in his former role as Business Secretary.
Finally, this amendment would ensure that the bodies responsible for upholding and enforcing food standards in this country have the capacity to meet any extra requirements placed on them as a result of new UK trade agreements. We absolutely do not wish to see any downgrading of capacity in relation to food safety officers or others responsible for ensuring that we can have confidence in the food on our shelves.
Once again, I find it hard to see how the Government can find any reason to object to this amendment, and I hope that we can count on support from the Government Benches in voting it through.
Trade Bill (Sixth sitting)
Tuesday 30th January 2018
(6 years, 9 months ago)
Public Bill CommitteesRead Full debate Trade Bill 2017-19 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 30 January 2018 - (30 Jan 2018)
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The Minister for Trade Policy (Greg Hands)
May I start by welcoming you to the Chair, Mr Davies?
The Government have already made it clear that we will not use the necessary and indeed pertinent exercise of continuing the effects of our existing agreements as a back-door way to reduce standards, including food safety standards. As the Prime Minister said in Florence in September, we are
“committed not only to protecting high standards, but strengthening them…we will always be a country whose pitch to the world is high standards at home.”
I am happy to reaffirm the Prime Minister’s commitment to the Committee. We are committed to upholding and strengthening our high standards in public health and safety, product performance and protecting the environment.
Faisal Rashid (Warrington South) (Lab)
How does the Minister plan to prevent a race to the bottom on food safety standards in the UK and to protect British consumers if he is not prepared to accept the amendment?
Greg Hands
The Government have always been clear that we will maintain our very high standards on food and animal welfare, and for protection in that space. There will be no race to the bottom. Nothing in free trade agreements precludes a Government from regulating in the domestic environment. I hope that that is enough reassurance for the hon. Gentleman. On protecting the environment, high standards and high quality are what our domestic and global consumers demand, and that is what we should provide.
To be clear, nothing in the Bill would allow us to do a free trade agreement with the United States because, as we know, the United States does not have a free trade agreement with the European Union. While the hon. Member for Bradford South gave an interesting speech of some length about what may or may not happen in any future trade agreement with the United States, it is worth mentioning that the Bill does not cover free trade agreements with the United States. Any future free trade agreement with the United States must work for UK farmers, businesses and consumers, and uphold food safety and animal welfare standards. However, that is a matter for a future day; it is not relevant to the Bill before us.
Barry Gardiner (Brent North) (Lab)
Surely the Minister appreciates that the examples of the USA were given in order to clearly illustrate the principles. At no point was it suggested that those examples were a necessary follow on. However, they illustrated the principles, and the Minister must appreciate that and take it seriously, in terms of the amendment.
Greg Hands
We take incredibly seriously food safety standards, animal welfare and so on. If the hon. Gentleman is suggesting that he has serious concerns in those spaces in respect of any of the 40-plus current EU trade agreements that we are seeking to move into UK law, perhaps he could let me know.
Barry Gardiner
I am very happy to adumbrate on that. The particular concerns relating to growth hormones in beef are, of course, of equal importance in the context of any future UK-Canada trade agreement, given that Canadian beef farmers are permitted to use growth hormones in a way that our farmers are not. The EU granted a higher quota to hormone-free Canadian beef exports in the EU-Canada comprehensive economic and trade agreement negotiations. It was only popular pressure that prevented the European Commission from relaxing the ban on imports of hormone beef. We simply want to ensure that Parliament is the place where this country takes decisions on whether to relax or tighten our food standards. We do not want those decisions taken in secret trade negotiations and then imposed on us through the excessive powers in the Bill.
Greg Hands
I am certain that CETA is consistent with our food safety and animal welfare standards. What is more, I think the majority of Labour MPs agree with me. Last February, Labour MPs split 86 in favour of CETA and 68 against, so whatever concerns the hon. Member for Brent North has, I gently suggest that he tries to persuade his own party before coming to see the Government.
Barry Gardiner
Again, I am happy to take on the Minister on that. He is talking about something that happened before the previous election, and as personnel change, so perhaps does the wish of the members of the parliamentary Labour party. However, that is not really the point. He will also find that those people on the Labour Benches who wanted to support CETA on that occasion seem now to have changed their views about whether CETA—the Canadian model—is a good model for us to pursue in the trade negotiations. Most of them seem to have turned tail and run to the other side.
Greg Hands
The hon. Gentleman is trying to mix up the transitional and existing trade agreements with our future trading relationship with the European Union—which, I remind the Committee, is also not a subject of the Bill. I think he said that his vote against CETA was before the previous election, and if he is suggesting that he might have changed his mind on CETA, I am all ears. When we come to ratification of the treaty, I would personally welcome him as a sinner that repenteth, were he to come into the Lobby with Conservative Members to support the Canadian free trade agreement.
Greg Hands
I will not give way. We are getting a little off the point.
We are absolutely clear that all existing commitments on standards and regulations will remain when those agreements are transitioned. That is in line with our clearly articulated principle that our intent is to transition solely the existing effect of the agreements. The amendment is therefore unnecessary and I ask the hon. Member for Bradford South to withdraw it.
Judith Cummins (Bradford South) (Lab)
We will not withdraw the amendment and wish to proceed to a vote.
Question put, That the amendment be made.
Barry Gardiner
I beg to move amendment 11, in clause 2, page 2, line 41, leave out subsections (8) and (9) and insert—
“(8) No regulations may be made under subsection (1) in relation to an agreement which meets the criteria in subsection (3) or (4) after the end of the period of five years beginning with exit day.”
This would make the sunset clause governing section 2(1) non-renewable.
The Chair
With this it will be convenient to discuss the following:
Amendment 12, in clause 2, page 2, line 41, leave out subsections (8) and (9) and insert—
“(8) No regulations may be made under subsection (1) in relation to an agreement which meets the criteria in subsection (3) or (4) after the end of—
(a) the period of five years beginning with exit day (“the initial five year period”), or
(b) such other period as is specified in regulations made by the Secretary of State in accordance with subsection (9).
(9) Regulations under subsection (8)(b) may not extend the initial five year period beyond the day which falls ten years after exit day.”
This would make the sunset clause governing section 2(1) renewable once only.
Amendment 35, in clause 2, page 3, line 3, at end insert—
“(10) No regulations may be made under subsection (8)(b) unless the Secretary of State has consulted with the Scottish Ministers and the Welsh Ministers.”
This amendment would ensure that there must be consultation with the Scottish Ministers or Welsh Ministers before any extension of the powers in Clause 2.
Barry Gardiner
I, too, am pleased to welcome you back to the Chair, Mr Davies. How do you know when a Minister feels guilty? It is when he or she introduces a sunset clause. The Government know they are pulling a fast one in the Bill and clause 2 includes the Henry VIII power for Government to amend primary legislation by fiat. The provisions in the rest of clause 2 and its accompanying schedules reduce hon. Members of this House to little more than bystanders at a royal pageant.
The Government try to mitigate their power grab by making the offending powers in clause 2(1) subject to a five-year sunset clause. The Secretary of State is on record as saying:
“I hear people saying, ‘Oh, we won’t have any before we leave’. Well, believe me, we’ll have up to 40 ready for one second after midnight in March 2019. All these faint hearts saying we cannot do it—it’s absolute rubbish”.
Let us for a moment take the Secretary of State at his word and believe him when he tells us that we will have all these shiny new agreements ready and waiting by the end of March 2019. The five-year sunset clause that the Bill gives the Government is surely, therefore, the sort of defeatist nonsense that the faint-hearted would say they need. According to the Secretary of State, a half-hour sunset clause would be more than enough—perhaps half a day to pick up the stragglers or half a week to pick up the rank outsiders, the real laggards in the case. What is this nonsense?
There is a serious issue, because these agreements are supposed to provide British businesses with the certainty they desperately need so as to plan their operations and their investments in respect of trade with those countries with which we already have agreements by virtue of our membership of the EU.
Yes, the Secretary of State for Exiting the European Union has confirmed that the UK will be unable to implement any of the new trade agreements until the end of a two-year transition period that we will negotiate with the EU, but that only buys the Government until the end of 2020 to come up with the 40 new trade agreements the Secretary of State promised would be ready by March 2019. The end of 2020 is the terminus proposed by the EU for our transition period, as was confirmed in the negotiating directives that it adopted yesterday.
Faisal Rashid
Does my hon. Friend agree that, without limits on the renewability of the sunset clause and against the backdrop of a Government failure to commit to a second trade Bill, this Bill will certainly be seen by many as a potential Trojan horse for the Government to introduce future deals with minimum levels of scrutiny?
Barry Gardiner
My hon. Friend is absolutely right to be sceptical. The Minister has made much of the arguments that, first, there is a need for speed and, secondly, this is only a temporary Bill that puts in place temporary provisions to roll over the existing agreements. In fact, the powers—certainly the ones relating to the agreement on government procurement—are not temporary; they last longer.
Here, in the provisions of the sunset clause, we have not just one sunset period but the possibility of indefinite roll-overs of the sunset clause itself: five years, followed by five years, followed by five years. If the Minister is absolutely confident that the Bill is a temporary necessity, one must wonder why he wants the sunset clause to continue indefinitely into the future at the Government’s will, when it enables the Government to take on a Henry VIII power.
When I say that there should be a proper process of consultation and scrutiny by which to debate the negotiations, I am only replicating what Anastassia Beliakova of the British Chambers of Commerce demanded in her oral evidence during our final witness session last Tuesday, when she said that provision needs to be made not only for “appropriate scrutiny in Parliament” but for a proper process of “stakeholder engagement for business” and “civil society” in order to scrutinise any changes that might arise as a result of the negotiations.
If the Government are adamant that such a process is to be denied us, rejecting the advice of business and the demands of trade unions and other civil society bodies, it should be denied us for an absolute maximum of five years, with no renewal of the sunset clause, as provided for in clause 2(8) and (9). Every day longer that the Government have those powers is another day for which parliamentary democracy is put on hold. The first of our amendments says that five years is enough. We believe that it is five years too many, given the unmerited powers that the Bill grants to the Government and the rights that it strips away from Parliament, but certainly five years should be enough. If the Government still have not managed to roll over their agreements by March 2024, that power should disappear along with the expiry date.
I really wonder whether Government Members themselves believe that an indefinite use of a roll-over to give an unending Henry VIII power to the Government is a sensible power that this Committee should grant.
Let us say that the Government persist in getting rid of amendment 11. Amendment 12 would allow the Government one renewal only. That is, the Government would be allowed to ask Parliament for permission to renew the sunset clause for one extension, but no more. That would allow the Government the unmerited powers in the Bill right up to the end of March 2029. Can the Minister really demand, with any sense of integrity, that this Committee afford him and the Government greater power than that?
Alan Brown (Kilmarnock and Loudoun) (SNP)
It is a pleasure to serve under your chairmanship again, Mr Davies.
First, I reiterate that Opposition Members do not see the Bill as fit for purpose. We accept the need for clause 2: the Government will need to manage the handover of trade deals that are currently accessed through the EU. However, clause 2 is deficient and we are still to hear what the Government will to do to improve it and to improve the Bill. They have voted down every amendment that has been proposed so far, so it would be good to hear the Minister’s plan. Again, that is particularly important regarding the Government’s attitude to the devolved Administrations.
Just this morning, BBC Radio Scotland led its headline news with a report on the European Union (Withdrawal) Bill, which is now moving to the House of Lords, and the fact that the House of Lords will have to make amendments to clause 11—amendments that were originally promised by the UK Government but were not brought forward. It did not paint the UK Government in a good light, especially when the UK Government could not even put up any spokesperson; it is plain why that was the case.
I say to the Minister that, given that the Scottish and Welsh Governments have both said that they will withhold a legislative consent motion unless there are amendments to this Bill, it would be prudent for him not to fall into that trap. Failing to make amendments once looks incompetent, but if proper amendments are not made to this Bill that satisfy the devolved Administrations, it will look a bit more sinister than mere incompetence.
I remind the Committee that it is not just politicians from the Scottish National party who are saying this; clearly, the Welsh Government are in agreement with the SNP. In the evidence sessions, which the Minister was at, we heard from different witnesses. Chris Southworth from the International Chamber of Commerce UK said:
“Overall...I would be concerned if I were in the devolved Administrations. There is specifically no opportunity for the devolved Administrations…to feed into decisions on trade. I would be very concerned about that, particularly in the devolved Administrations”.––[Official Report, Trade Public Bill Committee, 23 January 2018; c. 35, Q80.]
Michael Clancy from the Law Society of Scotland said:
“There is clearly an issue about how the Sewel convention or legislative consent convention is interpreted in respect of that…any proposals in UK Parliament legislation that seek to alter the legislative competence of the Parliament or of Scottish Ministers require the consent of the Parliament.”––[Official Report, Trade Public Bill Committee, 23 January 2018; c. 56, Q107.]
Professor Winters from the UK Trade Policy Observatory said:
“Parliament and the devolved Administrations need to have an important role in setting mandates, and there need to be consultation and information during the process.”––[Official Report, Trade Public Bill Committee, 23 January 2018; c. 58, Q111.]
In written evidence, the Fairtrade Foundation, Trade Justice Movement, Global Justice Now and Traidcraft all clearly expressed the need for the devolved Administrations and Chambers to be given a role in the UK’s future trade policy.
Unfortunately, despite all that evidence the position of the hon. Member for Brent North appears to be that if the devolved nations do not have the powers at present, they should not look at getting them in the future. His phrase earlier was that they “shouldn’t be looking upwards”. To me, that sounds a wee bit like, “Don’t get ideas above your station”.
We have not tabled any amendments to schedule 1, which imposes limitations on the devolved Administrations. I would argue that that in itself shows that the Scottish Government and the Welsh Government have taken a rational approach to the Bill in respect of the various amendments that have been tabled. We are not trying to create some form of awkward veto, as has been suggested elsewhere. Our simple intention is to make sure that the devolved Administrations are not ridden over roughshod. That means that there needs to be co-operation, consultation and consent.
Barry Gardiner
I want to reassure the hon. Gentleman that we are absolutely at one with him in wanting to ensure that the Bill does not make provision for Westminster Ministers to overreach themselves into devolved competences in any of the devolved Assemblies of the nations of our United Kingdom. We are equally concerned about that.
I have tried to present amendments in as open a way as possible, so that we can get the best wisdom from the Government and from the devolved Administrations, to ensure that nothing is done that would make it difficult, or indeed impossible, for a UK Government to honour any aspects of their international obligations under an international trade treaty. That is my only concern, and I am sure we can get to the right place with good will all round. It is a constitutional question, because these powers have not previously been possessed by the UK Government; they were held at EU level. It is therefore important that we give the matter the scrutiny that it deserves.
On amendment 35, which we are about to move on to, we are probably at one.
The Chair
Order. I remind hon. Members that interventions are meant to be briefer than the leeway I allowed the hon. Gentleman.
Alan Brown
Thank you, Mr Davies, and I thank the hon. Gentleman for his intervention. I welcome his opening remarks, and I might have an opportunity to show how much when other amendments go to a vote. I also welcome his support for amendment 35. He talked about the wisdom of co-operation and of working with Government, and the wisdom of devolved Administrations. It is maybe a pity that the wisdom of the devolved Administrations is coming through me rather than directly, but we will just have to deal with that.
Amendment 35 is very modest. All we are asking is that, if the UK Government propose to extend the sunset clause, they must consult the Scottish and Welsh Governments. That does not seem to be too big an ask to me. It is also more pertinent given the five-year period proposed in the Bill. Given that the Bill, as I keep hearing, is to do only with the UK’s access to existing EU trade deals and bringing those deals into UK legislation, it makes me wonder why we would ever need a period beyond five years. We are dealing with legislation that should be coming forward quickly, given the date for leaving the EU, and given that the International Trade Secretary has said that these negotiations will be the easiest in human history. Why we would need Henry VIII powers beyond five years is a mystery. We are just asking for the courtesy that the Scottish and Welsh Governments are consulted if that is the case.
Greg Hands
We have had a wide-ranging and interesting mini debate, full of historical references and colourful metaphors. We have had Henry VIII, plenty of sunsets and royal pageants. The hon. Member for Warrington South even introduced a Trojan horse. It has been a helpful debate.
Let me try to explain why we have included the sunset clause for this power, because once I have explained, all will become clearer. It is so that Parliament can have the chance to review its merits once again five years after exit date. However, since this power may be required to ensure the operability of transition agreements beyond the five-year period, potentially indefinitely, it is important that the Government have the option to extend the use of the clause 2 power. That will, of course, be subject to the approval of both Houses.
Hannah Bardell (Livingston) (SNP)
I am certain that the right hon. Gentleman is determined, in his approach and plan, to consult the devolved nations. If he is, why not put that in the Bill to ensure that it happens?
Greg Hands
Because I like to keep legislation as brief as possible and, as I shall explain, I do not think it necessary for us to write that obligation into the Bill. Of course, we would continue to engage should we need to extend the clause beyond its sunset five years after exit day.
I was intrigued by the exchange between the hon. Members for Kilmarnock and Loudoun and for Brent North. I am still trying to find out why, on Thursday, the Labour Front-Bench team did not support the amendment promoted by the Welsh Government. I am not sure that the hon. Gentleman properly explained, but perhaps when he responds he can throw a little more light on why he has seemingly jettisoned his colleagues from Wales, one of whom is on this very Committee.
On the requirement for a legislative consent motion, we have been clear that we are seeking such a motion for the Bill. I heard what the hon. Member for Kilmarnock and Loudoun said about that, and I am sure that we will engage further. We are obviously talking to the devolved Administrations so that we can work towards delivering a Bill that will benefit the whole UK. Given that, we do not think that the formal commitments on consultation and engagement in amendment 35 would add substantively to the Bill. I therefore ask hon. Members not to press the amendments.
Barry Gardiner
We have no intention of withdrawing amendment 11, so we need to press it to a vote.
Question put, That the amendment be made.
Barry Gardiner
On amendment 12, to respond to what the Minister said, we heard oral evidence from Mr Howarth, who was in fact an adviser to Conservative MPs, that the Henry VIII powers were needed only for minor changes, potentially around the EU agreements—
The Chair
Order. May I interrupt the hon. Gentleman? His opportunity to respond to the debate was before the previous Division. I was really just asking whether he wanted to move amendment 12 formally.
Barry Gardiner
I was simply explaining that, in the light of the Minister’s remarks, we do wish to move the amendment, because it conforms with the suggestions of one of the Government’s own witnesses.
Amendment proposed: 12, in clause 2, page 2, line 41, leave out subsections (8) and (9) and insert—
“(8) No regulations may be made under subsection (1) in relation to an agreement which meets the criteria in subsection (3) or (4) after the end of—
(a) the period of five years beginning with exit day (‘the initial five year period’), or
(b) such other period as is specified in regulations made by the Secretary of State in accordance with subsection (9).
(9) Regulations under subsection (8)(b) may not extend the initial five year period beyond the day which falls ten years after exit day.”—(Barry Gardiner.)
This would make the sunset clause governing section 2(1) renewable once only.
Question put, That the amendment be made.
Barry Gardiner
I beg to move amendment 13, in schedule 2, page 12, line 5, leave out from “section 1(1)” to the end of line 6 and insert
“may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, each House of Parliament.”
This would require regulations implementing the Agreement on Government Procurement to be subject to the affirmative resolution procedure.
This amendment is a simple but vital first attempt to restore democracy to the Trade Bill. It is simple because it replaces the negative resolution procedure the Government wish to use for future regulations under paragraph 2(1) of schedule 2 with an affirmative resolution procedure. It is vital because, without that, the Government have carte blanche to introduce regulations to implement the obligations arising from our independent membership of the GPA without the slightest hint of anything resembling parliamentary scrutiny. While the UK is a member of the World Trade Organisation in its own right and will continue to be so after Brexit, we are a member of the WTO’s plurilateral government procurement agreement only by virtue of our EU membership. We know that the Government will have to initiate a separate parliamentary procedure under the Constitutional Reform and Governance Act 2010 to prepare for the UK to rejoin the GPA in its own right. I am pleased the Minister made the commitment in our first line-by-line session last Thursday that there will be a vote in Parliament to decide on the terms under which we rejoin the GPA.
Greg Hands
I thank the hon. Gentleman for giving way. That is not a correct assessment of what I said on Thursday. I said we would allow the power for Parliament to bring forward a vote under the Act. It is clearly stated in Hansard.
Barry Gardiner
Good Lord, Mr Davies, it’s a jolly good job I have an extract from the Hansard here. I will press on and then quote from it.
CRAGA does not require there to be a debate or a vote on any treaty laid before Parliament under its terms, as has been repeatedly confirmed by the House of Commons Library via an expert witness from the Hansard Society and by everybody else who has read the Act or knows what it says. Yet, it certainly leaves the possibility open for Government to hold that vote if they are prepared to do so. Again, I am pleased the Minister reaffirmed last week not only that it is possible under CRAGA for the Government to bring forward a vote on the UK’s terms of entry into the GPA, but that
“the terms on which the UK enters the GPA in our own right will be subject to a separate vote in Parliament.”—[Official Report, Trade Public Bill Committee, 25 January 2018; c. 131.]
Those are the words the Minister actually used. I am surprised he wants to cavil about them now. As he knows, our dissatisfaction with CRAGA is that it includes no requirement for a debate or a vote on a treaty laid before Parliament under its provisions. We are dependent on the good will of the Government as to whether Parliament is granted or denied the opportunity for a vote.
In this instance, I thought the Government had confirmed that there will be a vote, not that there might be, depending on the Labour party, so we look forward to the Government introducing that debate in Government time. However, that in no way deals with the broader issue of why Parliament should be dependent on the Government’s good will to have the opportunity to exercise its rights to due democratic process.
Faisal Rashid
It has been widely documented that the use of the negative resolution procedure the Bill proposes affords Members less opportunity for scrutiny in the House than is currently enjoyed by Members of the European Parliament. Indeed, Jude Kirton-Darling MEP told the Committee in no uncertain terms that the Bill is
“an enormous step back in democratic oversight of trade agreements.”—[Official Report, Trade Public Bill Committee, 23 January 2018; c. 43, Q86.]
Does my hon. Friend therefore agree that, for the Government to meet their commitment that the Bill will replicate existing arrangements as closely as possible, they must support the amendment to ensure the opportunity for scrutiny enjoyed by Members is closer to that currently enjoyed by MEPs?
Barry Gardiner
Indeed—my hon. Friend is right. Many Members on both sides of the House think it a travesty that we are afforded less opportunity to scrutinise things and less transparency than is afforded to our colleagues in the European Parliament.
On the agreement on government procurement, once we have had our opportunity to debate and vote on the terms under which we will rejoin it, the Government will then lodge our annexes with the WTO. The next stage is to issue the regulations that will implement the terms of our accession to the GPA, and then, in the years thereafter, to make changes to our domestic legislation that reflect the accession of new parties to the GPA or the withdrawal of any countries that decide to leave it.
It is important to note that that is not a temporary power covered by a sunset clause, as with the international trade agreements in clause 2. This is a permanent power for the Government to issue regulations implementing the UK’s obligations under the GPA into the indeterminate future—for as long as the WTO remains and the GPA is one of its constituent agreements. When we look at the fine detail of the Bill, we yet again discover that it is not a temporary little Bill about rolling over existing agreements; it actually has permanent, lasting effect. The roll-over powers could give Ministers the powers in perpetuity, under the Henry VIII provision.
We hear that the Bill is small, necessary, timely and time-limited, but in actual fact it is not. Our amendment 13 seeks to replace the negative resolution procedure, which the Government wish to apply to clause 1(1), with the affirmative procedure. I will remind the Committee of what that means so that we have a proper understanding of what we are talking about in this context, because it will also be essential to several later amendments that we will bring forward to other parts of the Bill.
The scrutiny procedure for delegated legislation in the House of Commons has come in for intense criticism in the context of the European Union (Withdrawal) Bill. That criticism is well merited. The Hansard Society’s expert report, “Taking Back Control for Brexit and Beyond”, lifted the veil on just how badly the system is failing to deliver the necessary scrutiny of secondary legislation at precisely the moment we need full confidence in it as we rebuild our system of checks and balances for the post-Brexit future. That report does not make pleasant reading.
The negative resolution procedure the Government propose for regulations under clause 1(1) is the least rigorous of all parliamentary procedures available. Secondary legislation subject to the negative resolution becomes law automatically once it has been laid before Parliament and has remained unchallenged for the requisite number of days—no need for a debate, no call for a vote. MPs may pray against any regulation by means of an early-day motion, but there is no obligation for the Government to schedule parliamentary time to debate that prayer.
The convention is that prayers made by Her Majesty’s official Opposition should receive parliamentary time for a debate, yet even then there is no guarantee that the convention will be respected. In the 2015-16 parliamentary Session, the Leader of the Opposition tabled a dozen prayer motions for debate—five were granted. Of the 585 negative instruments laid before Parliament in that session, only 3% were even debated. In the following parliamentary Session, fewer than one in 100 statutory instruments subject to the negative resolution procedure were debated at all.
The main point of the negative resolution procedure is to allow the Government to have their way without any need to bother parliamentary democracy, and it has been spectacularly successful. The last time a negative instrument was successfully annulled in the House of Commons was the Paraffin (Maximum Retail Prices) (Revocation) Order in 1979. I think that tells the story about what is intended by making these provisions subject to the negative resolution procedure.
Faisal Rashid
Almost every individual who has appeared before this Committee over the past week, from business leaders to academics, civil activists and lawyers, has told us that more needs to be done by way of parliamentary scrutiny in this Bill. If the Government will not support these amendments, what good reason do they have to ignore the recommendations of these individuals?
Barry Gardiner
Again, my hon. Friend puts it very succinctly and very well.
The delegated powers memorandum argues that the negative resolution procedure is appropriate to implement the UK’s obligations as an independent member of the GPA. It argues that it would be inappropriate to demand primary legislation to bring in the legislative changes necessary to reflect our new status as an independent GPA member, as this could introduce a significant delay in the proceedings.
Labour Members agree; we are not opposing the Government on that point. Primary legislation would be inappropriate to implement our obligations under the GPA once we had fully debated the terms on which we were joining the agreement, as the Minister promised us last Thursday that we will. Yet the issue here is not primary versus secondary legislation; it is negative versus affirmative in respect of the resolution procedure that governs the secondary legislation.
We simply do not believe that the negative procedure can be appropriate, precisely because of the lasting damage that could be done to contractors currently providing councils with goods and services if the regulations about Government procurement are made wrongly. Nor do we accept the Government’s contention that they must be allowed to use the negative resolution procedure because of time pressures inherent in the GPA itself. It is entirely spurious to suggest that the 30-day period between depositing the UK’s instrument of accession to the GPA and the accession coming into force is in any way coterminous with the drafting of a statutory instrument and its passage through Parliament.
The guidance on drafting statutory instruments issued by the Government Legal Service recommends allowing an absolute minimum of 22 weeks for the very simplest of negative instruments, with more complex ones requiring anything up to 61 weeks from their inception to the time they come into force—that is, well over year. Affirmative resolution instruments require only marginally longer, depending again on how complex they are—the Government Legal Service suggests allowing 26 to 67 weeks. In both cases, the process requires many months of planning beyond the 30-day period stipulated in the GPA. Government officials will have had to start work on the secondary legislation months in advance of depositing the UK’s accession instruments with the WTO, and they can just as easily factor in an affirmative resolution procedure as they can a negative one.
When it comes to the future accession of other WTO members to the GPA, which may well happen, the situation is even more acute. Here, Members of Parliament will have had no opportunity to consider any of the ramifications of opening up our public procurement contracts to new countries. So the only chance we will have of subjecting those new regulations to any scrutiny will come through the procedure that we enshrine in this Bill.
The WTO lists 10 countries that are in the process of acceding to the GPA: Albania, Australia, China, Georgia, Jordan, the Kyrgyz Republic, Oman, Russia, Tajikistan and the former Yugoslav Republic of Macedonia. Five other WTO members have undertaken commitments in their WTO accession protocols to initiate accession to the GPA: Afghanistan, Kazakhstan, Mongolia, Saudi Arabia and the Seychelles. If and when they do accede, the UK will need to open up its Government procurement contracts to suppliers from every one of those countries. Once again, we agree with the Government that it would be overly burdensome to require new primary legislation every time another country accedes to the GPA. We are not asking for that. But we disagree that new Government regulations to implement our obligations should just be passed through on the nod. That is why we are arguing for the affirmative procedure in this case too.
Once again, the Government’s argument that we are constrained by the 30-day period between a country’s accession and our having to grant that country access to the UK’s public procurement market is entirely spurious. We will have been party to the negotiations surrounding their accession for months beforehand, giving Government officials ample time to prepare the requisite instrument for either negative or affirmative resolution.
This is a blunder. Even where a statutory instrument is subject to the affirmative resolution procedure, the scrutiny that it undergoes is still remarkably light. MPs who have previously been assigned to Delegated Legislation Committees—and there will be many in this House—know they are not encouraged by the Whips to engage and speak. The affirmative resolution procedure has been called farcical and a waste of time. The Hansard Society notes, not surprisingly, that this system is “not fit for purpose”. It concludes with the stinging rebuke to all of us who are responsible for the proper functioning of Parliament that
“MPs can no longer be indifferent to the inadequacies in the system. They must now finally take seriously their democratic responsibility for delegated legislation.”
That is why the Labour party has tabled amendments to the Bill calling for an upgrading of the process for parliamentary scrutiny in respect of regulations stemming from our new trade obligations. As we have noted repeatedly, those obligations are serious. They are binding commitments made in international treaties that cannot easily be repealed. Domestic legislation can be repealed much more easily. If there was ever an example of secondary legislation crying out for proper parliamentary scrutiny and oversight, this is it. For the regulations necessary to implement obligations arising from the UK’s independent membership of the GPA, we consider the affirmative resolution procedure to be appropriate and proportionate. However imperfect the system is, at least the affirmative procedure provides Members of Parliament with the possibility of a debate and a vote. It is then up to us to make proper use of that opportunity.
Having heard the objections of such an independent body as the Hansard Society, I hope Government Members will agree with us—on this amendment at least—and support it.
Greg Hands
The UK currently participates in the government procurement agreement, known as the GPA, through our EU membership. The GPA offers UK businesses guaranteed access to approximately £1.3 trillion per annum of global public contract opportunities. We intend to remain in the GPA with the same rights and obligations that we currently enjoy as part of the European Union. Those were negotiated by the EU on behalf of member states for the 1994 GPA. The 2012 revised GPA was negotiated by the EU and scrutinised by the European scrutiny Committees in Parliament.
The power in clause 1 is a narrow one designed to allow us to implement the GPA as an independent member, as well as to reflect new parties joining and crucially—the hon. Member for Brent North rather overlooked this—to allow existing parties to withdraw from it. It will be a case of the UK using clause 1 to reflect having a new status within an existing, established agreement on procurement.
Barry Gardiner
I agree with the Minister’s interpretation of what he has just read out. Does he accept that he also said the following:
“the terms on which the UK enters the GPA in our own right will be subject to a separate vote in Parliament”?—[Official Report, Trade Public Bill Committee, 25 January 2018; c. 131.]
Greg Hands
Hence, the clarification, twice over, to be absolutely precise how that vote would work. I know the hon. Gentleman has attacked the negative resolution procedure, but I do not remember any such exhortation when he was a Minister under Tony Blair—I did not listen to every single thing he said in those years, but I do not recall that. I think he would have troubled the scorers if he had attacked such a procedure at the time under CRAG, which as we know is an Act of Parliament introduced by the last Labour Government.
The hon. Member for Brent North confirmed last week that he did indeed vote for CRAG. He said it was important in the days when the treaties in question had already been scrutinised by the EU and scrutiny was also passed down to
“this Parliament, where the European Scrutiny Committee…would examine forensically the contents passed from Europe”.—[Official Report, Trade Public Bill Committee, 25 January 2018; c. 149.]
I can reassure the hon. Gentleman that the revised GPA in 2012 went through the very process he described to the Committee and the very process that he voted for in 2010.
The hon. Gentleman asked why the GPA power is not time-limited. The answer is that new accessions to the GPA are covered by the clause to ensure that the UK does not breach its own GPA commitments. It is also essential to have the power to reflect withdrawals to ensure that withdrawing parties do not continue to enjoy guaranteed access to UK procurement markets. I will speak in more detail about withdrawals from the GPA.
The hon. Gentleman asserted that the GPA power continues into perpetuity, including the Henry VIII power. There is no Henry VIII power in clause 1, which allows for the implementation of the GPA. The powers in clause 1 are narrow in scope. They are designed to allow the UK to make legislative changes that reflect its new status as an independent member but, none the less, as a member of an existing and settled agreement.
The UK needs to use the power in clause 1 quickly to prevent UK businesses from losing guaranteed access to valuable procurement markets. The revised GPA has already been scrutinised by the EU and the European Scrutiny Committee, using the powerful microscope the hon. Gentleman described last week and for which he voted not so long ago.
Faisal Rashid
Last Thursday my hon. Friend the Member for Brent North spoke of the emails members of this Committee had received from members of the public urging them to amend this Bill to protect our democracy. The number of these emails in my inbox—and, I am sure, in all other Members’ inboxes—has reached just over 5,000. If the Government will not support these amendments to introduce at least some degree of parliamentary scrutiny, what good reason can they give the 5,000 individuals who have taken time to contact us for ignoring their concerns?
Greg Hands
I thank the hon. Gentleman for his intervention, because it allows me to put on the record something that concerned all members of this Committee when they logged on last Tuesday and discovered, seemingly, a large number of emails—hundreds and, in one case, 1,200—about this Bill. I am sure he, in the course of being a good constituency MP, would seek to check whether those emails were, indeed, from his constituents. I have to report that my colleague who received 1,200 such emails discovered, following further examination by his very diligent parliamentary staff, that precisely four of those 1,200 emails came from his constituents.
I would say to the hon. Gentleman that, in respecting parliamentary rules, I would have a close look at those emails and ask where they are coming from. Is the hon. Gentleman, indeed, answerable to these people? All of them will have a Member of Parliament in this House who will be the right person to direct those emails to. Getting 5,000 emails from across Britain in relation to one issue in this Parliament need not necessarily be representative of a wider move against this Bill, which is a technical Bill all about the continuity of our existing trading arrangements.
Faisal Rashid
I thank the Minister for giving me time. This is a national issue; it is not just a constituency-based issue. I understand that there is parliamentary procedure and that we do not have to reply to all those emails if they are not from our constituents. However, surely it tells us, as parliamentarians, that the problems and issues among the general public and in the business environment are quite immense.
Greg Hands
I thank the hon. Gentleman for his intervention. We might be going too far down this road. I do not want to sound in any way condescending to a new Member, and my only advice to him, having been a Member in this House for 12 years, would be that the receipt of 5,000 emails from 650 constituencies is an average of nine emails per constituency. If he is suggesting that we make public policy, and that each of us makes our policy decisions, based on the opinions of nine constituents, I do not believe that would be a helpful road for us to go down.
Returning to the GPA, the UK’s independent membership will be considered under the CRAG process, meaning Parliament will be able to scrutinise the terms of the UK joining the GPA before the GPA can join, as I referred to in the debate on Thursday. The Government therefore believe that the negative resolution procedure provides an appropriate level of parliamentary scrutiny for the power to implement the GPA in clause 1.
Furthermore, the Opposition amendment would also apply the affirmative resolution procedure when the UK uses clause 1 to make regulations to reflect new parties joining the GPA or—this is a very important point—existing parties withdrawing from it. In the case of new and withdrawing parties, it is important that the UK is able to respond quickly and flexibly. Once a new party deposits its instrument of accession, there is a period of only 30 days before that accession comes into force. The UK will then be under an immediate obligation to provide that new party with guaranteed access to UK procurement opportunities covered by the GPA. If the UK failed to offer the new party this guaranteed access, it would be in breach of its GPA commitment. On the other hand, a party to the GPA can decide to withdraw unilaterally, and where a party notifies the GPA committee that they intend to withdraw, they will cease to be a GPA member just 60 days later. Therefore, it is vital we are able to react quickly to such a notification.
If the power to amend UK legislation to reflect parties withdrawing from the GPA were subject to any affirmative procedure, the UK might not be able to legislate in time to remove the party by the 60-day time limit, which, of course, could result in the UK contracting authorities continuing to give guaranteed access to UK markets to a party that is leaving or had already left the GPA, and was therefore no longer entitled to access.
Barry Gardiner
I am listening carefully to the Minister. Does that 60-day timescale for countries seceding from the GPA mean that in those cases the Minister will not be able to fulfil the guidelines for statutory instruments that I referred to? If that is the case, it suggests that at an absolute minimum a statutory instrument, even on the negative procedure that he proposes, would only be for 22 weeks and at the outside for 60 weeks. Is he confirming to the Committee that in those circumstances, the guidelines laid down by the Government and Parliament in this area, even for the negative procedure, would not apply?
Greg Hands
I want to make sure of the answer to the hon. Gentleman’s question. Perhaps I can pledge to write to him, copying in other members of the Committee and you, Mr Davies, on precisely how this fits in with our statutory instrument procedures.
Greg Hands
To conclude, the withdrawing party would have no obligation to give UK businesses reciprocal access to its procurement markets, and it is of course vital that Parliament has the opportunity to scrutinise new accessions to the GPA.
I reassured the Committee last week and earlier today that we want to ensure a clear and significant role for Parliament in scrutinising future trade agreements. The provisions will enable those agreements to be completed effectively and efficiently, while respecting due process in Parliament. New accessions to the GPA will be included within that scrutiny process. That will ensure that Parliament can scrutinise new accessions during accession negotiations. The power that we are discussing will be used after that scrutiny, and approval of the accession, so I invite the hon. Member for Brent North to withdraw the amendment.
Barry Gardiner
I am grateful to the Minister for his assurance that he will write to the Committee, but I will press the amendment to a vote, because it makes an important point.
Question put, That the amendment be made.
Barry Gardiner
I beg to move amendment 16, in schedule 2, page 12, line 5, leave out “or 2(1)”.
This is linked to amendments 14, 15, 17, 19 and 20.
The Chair
With this it will be convenient to discuss the following:
Amendment 14, in schedule 2, page 12, line 6, at end insert—
“(1A) A statutory instrument containing regulations of a Minister of the Crown under section 2(1) in respect of a free trade agreement which meets the criteria under section 2(3) may not be made unless all provisions of paragraph 2A have been satisfied.”
This amendment is linked to amendments 15 and 16, which would require the United Kingdom’s free trade agreements with third countries which already have a corresponding agreement with the European Union to be subject to a super-affirmative resolution procedure prior to ratification.
Amendment 15, in schedule 2, page 12, line 17, at end insert—
“Scrutiny of corresponding agreements: super-affirmative procedure
2A (1) Before a free trade agreement which meets the criteria under section 2(3) and to which the United Kingdom is a signatory may be ratified, the Secretary of State must lay before Parliament—
(a) a draft order to the effect that the agreement be ratified, and
(b) a document which explains why the Secretary of State believes that the agreement should be ratified.
(2) The Secretary of State may make an order in the terms of the draft order laid under subparagraph (1) if—
(a) after the expiry of a period of 21 sitting days after the draft order is laid, no committee of either House of Parliament has recommended that the order should not be made, and
(b) after the expiry of a period of 40 sitting days after the draft order is laid, a motion in the terms of the draft order is approved by a resolution of each House of Parliament.
(3) If a committee of either House of Parliament recommends that an order should not be made under subparagraph (2), the Secretary of State may, after the expiry of a period of 60 sitting days after the draft order is laid, make a motion for a resolution in each House of Parliament in the terms of the draft order.
(4) If a motion in the terms of the draft order is approved by a resolution of each House of Parliament under subparagraph (2)(b) or (3), the Secretary of State may make an order in the terms of the draft order.
(5) A free trade agreement to which this paragraph applies shall not be deemed to be a treaty for the purposes of Part 2 of the Constitutional Reform and Governance Act 2010.
(6) In section 25 of the Constitutional Reform and Governance Act 2010, after subsection (1)(b), at end insert—
‘but does not include a free trade agreement to which paragraph 2A of Schedule 2 to the Trade Act 2018 applies.’”
This would require the United Kingdom’s free trade agreements with third countries which already have a corresponding agreement with the European Union to be subject to a super-affirmative resolution procedure prior to ratification.
Barry Gardiner
Let me state for the record that I am grateful to you, Mr Davies, and to the Clerks for agreeing to the reordering that we requested, so that amendments 14 and 15 could be selected with amendment 16, and debated ahead of amendments 17 and 19. I will try to make it clear why that is necessary.
Faisal Rashid
The super-affirmative procedure closely replicates the powers that MEPs enjoy in the European Union, so does my hon. Friend agree that if the Government are to meet their commitment that the Bill will replicate existing arrangements as closely as possible, they must support the amendment?
Barry Gardiner
Again, my hon. Friend makes the point about the discrepancy between the scrutiny available to us here in this sovereign Parliament and the scrutiny available to members of the European Parliament. It would seem entirely at odds with the Government’s stated purpose for the European Union (Withdrawal) Bill if we ended up having fewer scrutiny powers than Members of the European Parliament. That would seem to be a travesty.
I look forward with perhaps slightly more than the usual expectation to the Minister’s response to the amendment, given that this is the issue on which not only the right hon. and learned Member for Beaconsfield spoke on Second Reading, but on which several other hon. Members from across the House registered their profound concern. This is the moment when we discover whether the Government are prepared to heed the calls of right hon. and hon. Members alike and look at the Bill in a much more sensible way.
Greg Hands
Let me reassure hon. Members that I listened very carefully to what the hon. Member for Brent North said. First, let me repeat that the majority of free trade agreements within the scope of the Bill have already been ratified, and Parliament had the opportunity to scrutinise them during ratification. Parliament’s European Scrutiny Committee also scrutinised these agreements when they were negotiated, included, signed and provisionally applied. They had, of course, already gone through the European Parliament process as well, to which the hon. Member for Warrington South helpfully drew our attention.
The Government have made clear their intention to ratify by exit date all the EU free trade agreements that currently provisionally apply, including the EU-Canada comprehensive economic and trade agreement, and the economic partnership agreement with the Southern African Development Community, or SADC.
The hon. Member for Brent North drew attention to the comments of a South African Minister. To be honest, I cannot remember precisely whom he referred to, but for clarity I refer him to the memorandum of understanding signed by the Secretary of State for International Trade in South Africa in either August or September. Both parties specifically agreed to transition the agreement and maintain continuity, without substantive change. Whatever the hon. Gentleman’s South African said, the memorandum of understanding is absolutely clear in that regard. As I said to the International Trade Committee last week, 70-plus countries have agreed in principle to maintain continuity in trading arrangements. For example, we signed a similar memorandum with the CARIFORUM group to do precisely that.
Parliament’s scrutiny of these agreements, which have already been scrutinised, will be guaranteed by the process under the Constitutional Reform and Governance Act 2010. As we have made clear, this is a technical exercise to secure continuity in our existing trading arrangements, not an opportunity to renegotiate the terms of existing agreements. That means that further scrutiny of those agreements, the benefits of which are already felt by businesses and consumers, is unnecessary. As we have made clear, we want Parliament to play a vital role in the scrutiny of future trade agreements that are not covered by the Bill, but that is for a separate occasion. We made clear in the trade White Paper and in this Committee on Thursday that our future trade policy must be transparent and inclusive.
Faisal Rashid
We heard from many witnesses last week that so-called roll-over agreements not only will be legally distinct from our existing EU agreements, but are likely to be substantially different in their terms. Does the Minister agree that those new agreements need to be subjected to adequate scrutiny and parliamentary oversight, and that a super-affirmative procedure is appropriate?
Greg Hands
I thank the hon. Gentleman for his intervention. I very much appreciate the way, as a new Member, he is getting stuck into the Bill, but I remind him that, in terms of securing the continuity of agreements, more than 70 countries have now agreed that there will not be substantive change. I mentioned South Africa, with which we have a memorandum of understanding saying that. There is no need to re-scrutinise agreements that are substantively the same and have already been through the proper scrutiny processes of both Houses. That is why we made clear in the trade White Paper and in this Committee on Thursday that our future trade policy must be transparent and inclusive, and that Parliament will be engaged throughout the process. I therefore ask the hon. Member for Brent North to withdraw amendment 16.
Barry Gardiner
We intend to press amendment 16 to a vote.
Question put, That the amendment be made.
Barry Gardiner
I beg to move amendment 17, in schedule 2, page 12, line 6, at end insert—
“(1A) A statutory instrument containing regulations of a Minister of the Crown under section 2(1) may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, each House of Parliament.”
This would require regulations implementing international trade agreements to be subject to the affirmative resolution procedure.
The Chair
With this it will be convenient to discuss amendment 19, in schedule 2, page 12, line 6, at end insert—
“(1A) A statutory instrument containing regulations of a Minister of the Crown under section 2(1) may not be made except in accordance with the steps in subparagraphs (1B) to (1E).
(1B) The Minister shall lay before Parliament—
(a) a draft of the regulations, and
(b) a document which explains why the Secretary of State believes that regulations should be made in terms of the draft regulations.
(1C) The Minister may make an order in the terms of the draft regulations laid under subparagraph (1B) if—
(a) after the expiry of a period of 21 sitting days after the draft regulations are laid, no committee of either House of Parliament has recommended that the regulations should not be made, and
(b) after the expiry of a period of 60 sitting days after the draft regulations are laid, the draft regulations are approved by a resolution of each House of Parliament.
(1D) If a committee of either House of Parliament recommends that the regulations should not be made, the Secretary of State may—
(a) lay before Parliament revised draft regulations, or
(b) after the expiry of a period of 40 sitting days after the revised draft regulations are laid, make a motion for a resolution in each House of Parliament for approval of the draft regulations.
(1E) If a motion under subparagraph (1D)(b) is approved by a resolution of each House of Parliament, the Secretary of State may make the regulations.”
This would require regulations implementing international trade agreements to be subject to the super-affirmative resolution procedure.
Barry Gardiner
Amendment 19 would require any regulations implementing new UK trade agreements to be subject to a super-affirmative procedure. If the Government are not willing to allow us the super-affirmative procedure prior to ratification, as they have just shown they are not, we will be compelled to argue for it afterwards. Clearly, we would prefer to keep the stable door shut rather than having to retrieve the horse after it has bolted, but if we could at least provide for some parliamentary process subjecting implementing regulations to scrutiny, that would be better than nothing. As it is presently constituted, nothing is precisely what the Bill offers.
The procedure mirrors that which we seek to introduce with amendment 15: namely, in this case, a proper process granting Parliament the power to subject implementing regulations to scrutiny. The provisions are drawn from existing primary legislation that provides for enhanced scrutiny in other contexts. Once again, the key elements of them are that a Committee of either House can object to the regulations, and that both Houses must give their approval before the Secretary of State can proceed with making the regulations.
Greg Hands
I think we are potentially about to have quite a similar debate to the one that we just had, but let me be as succinct as I can. I remind Members that this power will be used only to introduce regulations that reflect current obligations in our EU trade agreements. That means that we are not seeking to change the effects of our existing trade agreements through the power. The agreements have already been examined by Parliament as part of its regular scrutiny of EU business. Ratified free trade agreements have already been through the normal parliamentary scrutiny process for treaty ratification.
Barry Gardiner
The Minister said that the Government are not proposing to change the provisions in any of the treaties. I think he said earlier in our debate that 71 countries had already agreed. Could he just clarify for the Committee once and for all, because he has failed to do so thus far, whether that includes Norway, Switzerland and Turkey?
Greg Hands
I thank the hon. Gentleman, but we have already covered that ground as well. The agreements with Norway, Turkey and Switzerland will inevitably be dependent on our future trading relationship with the European Union, because of the unique way that each of those countries operates in conjunction with the European Union.
The hon. Gentleman says that we are not proposing changes. It is just as important to recognise that more than 70 of our partners do not want substantive changes to the agreements either. Perhaps we need to put aside for a moment some of the ways in which the Bill operates, and think about what is in the interests of our trading partners. It is as much in their interests as ours to have continuity of the existing agreements. It is therefore not a surprise to me that more than 70 countries have said that they are not seeking substantive changes to the agreements.
Matt Western (Warwick and Leamington) (Lab)
I appreciate the point that the Minister seeks to make. However, as he says, there are 70 of them and one of us. In any negotiation, the disadvantage is always with the minority. We are going to be in a very difficult position. One could well imagine—this point came up at the International Trade Committee last week—that the opportunity exists for those nations to renegotiate or, recognising the time pressure that we will be under, to make changes. Surely it should be for Parliament to consider any such change to a trade agreement, not for the Minister or a select few.
Greg Hands
The hon. Gentleman puts his question in a reasonable way. I know he is a member of the International Trade Committee and was there for the evidence session last Wednesday. However, it is not the case that we and the 70-plus countries are in some kind of plurilateral agreement. The number he talks about is the number of agreements, not the number of negotiating partners to that same agreement. Essentially, they would run the same risk that we would run if anyone were to want to renegotiate the agreement. The risk is that we would run out of time to have the transitioned agreement in place come the day that we leave the European Union. We have as much risk and as much downside as the counterpart does. That is the important thing to understand. The Government therefore consider the negative procedure to offer the appropriate level of further scrutiny over the operation of the power.
Turning to amendment 19, as we have made clear, the purpose of the Bill is to help maintain the effects of our existing trading arrangements as we leave the EU. It is vital that we secure that continuity without delay, to avoid disruption for businesses and consumers. That is why we are seeking a power that ensures that our transitioned trade agreements can be implemented in the nimblest and most efficient way possible, through the negative resolution procedure. A switch to the super-affirmative procedure would risk undermining that objective. Statutory instruments subject to the super-affirmative procedure may take even longer than using primary legislation to implement a transitioned agreement, which would therefore increase the risk of a cliff edge in our trading relationships.
Matt Western
Just to clarify—the Minister can correct me if I am wrong—the agreements will in many cases be trilateral because of our existing relationship with the EU and the relationship with the other country among the 70-plus the Minister mentioned. There is therefore an opportunity for that other country to make the negotiation or arrangement difficult. That is why we are seeking to put in place scrutiny in Parliament.
Greg Hands
I refer the hon. Gentleman to the comments I made earlier: none of the 70-plus countries that we have spoken to has said that it wants to do that. It would not be in their interests for them to do so, for reasons of maintaining continuity in our trade relations. That is very much in our and their interests.
Let me finally remind the Committee that Parliament still has oversight of statutory instruments introduced under the negative resolution procedure, using well-established processes as outlined in CRAG. I therefore ask the hon. Member for Brent North to withdraw the amendment.
Barry Gardiner
We will press amendment 17 to a vote.
Question put, That the amendment be made.
Barry Gardiner
I beg to move amendment 20, in schedule 2, page 12, line 6, at end insert—
“(1A) A statutory instrument containing regulations of a Minister of the Crown under section 2(1) relating to an international trade agreement other than a free trade agreement which does not meet the criteria under section 2(4) may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, each House of Parliament.”
This would require regulations implementing an international trade agreement which is not a free trade agreement and which does not correspond to a prior or existing EU agreement to be subject to the affirmative resolution procedure.
This is the final amendment in our series trying to introduce just a modicum of parliamentary scrutiny into the Bill. It refers to the last category of trade agreements that have not yet been covered in the previous amendments.
If hon. Members cast their minds back to amendment 3, which we presented in the first line-by-line sitting last Thursday, that amendment sought to expand the remit of the Bill to include not just agreements that correspond to existing EU agreements but those with countries where there is no prior EU agreement in place. The major set of amendments that I presented at that sitting sought to introduce a full process of preparation, debate and scrutiny up to the point of signature of free trade agreements within the category of comprehensive agreements that need to be notified under GATT article XXIV or GATS article V. Amendment 20 picks up on trade agreements that are not free trade agreements for the purposes of GATT article XXIV or GATS article V, and that do not correspond to an existing EU agreement. Without the amendment, they would not be covered anywhere in the expanded Bill as we envisage it.
We do not believe that it would be an appropriate use of parliamentary time to subject every new mutual recognition agreement to the full rigour of impact assessment and mandate-setting parliamentary scrutiny. We believe it would be enough to have the minimum scrutiny of the affirmative resolution procedure, which allows for a debate and vote where it is thought necessary, but which also allows for the swift passage of regulations through Parliament where they are clearly non-controversial.
I will point out here that some mutual recognition agreements and other agreements are potentially very controversial. In the case of mutual recognition agreements with countries whose regulatory systems are radically different from our own, such as the United States, there could be huge pitfalls in allowing for mutual recognition where it could lead to products entering the UK market that have not been subjected to the rigorous tests that we demand in our jurisdiction. If anything, we are erring on the side of being too pragmatic in suggesting that those agreements be subjected to the affirmative resolution procedure only, seeing as the affirmative procedure can be open to the abuse I described earlier in my reference to the Hansard Society’s report. At least we can take comfort in the fact that a Delegated Legislation Committee would have the power to hold the most controversial regulations up to scrutiny and subject them to a vote in Parliament, which would be a quantum leap from what the Bill currently offers.
Greg Hands
Clause 2 would limit the scope of agreements on which the power can be used to those where the other party had a free trade agreement signed with the EU before exiting. Amendment 20 would establish a procedure whereby the power is used in relation to agreements falling outside those parameters. As we do not wish to extend the scope of clause 2 to allow the power to be used in relation to more agreements, it follows that we do not need to apply a procedure to the implementation of such agreements. The amendment, therefore, is unnecessary in every way.
However, if the spirit of the amendment is to explore what constraints we have drafted into the clause 2 power, I am happy to provide reassurance to the Committee. As I have said before, the power can be used only in relation to free trade agreements with countries that have signed EU free trade agreements before exit day. A free trade agreement covers substantially all trade notifiable to the World Trade Organisation. To be clear, the power cannot be used to amend primary legislation except when that primary legislation is retained EU law. It cannot be used to implement a trade agreement between the United Kingdom and the European Union itself. Nor can it be used to extend or create new criminal offences or create new fees or charges.
The power has a five-year sunset clause from exit day. If the Government wish to extend this period, they may do so only with the permission of both Houses. We and our trading partners are clear that this will be a technical exercise to ensure continuity in trading relationships. It is not an opportunity to change or renegotiate the terms of these EU agreements. Therefore, I ask the hon. Member for Brent North to withdraw the amendment.
Barry Gardiner
I do not wish to shock the Committee, but we will not press the amendment to a vote. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Mr Mark Prisk (Hertford and Stortford) (Con)
I will not detain the Committee for long, but it is important when we establish a new authority to step back. Some of these issues will be raised in debates on amendments, so I will not get too far into the detail.
I strongly support the creation of the Trade Remedies Authority. As our trade policy is slowly developed in the months and years to come, we will need it to be underpinned by a robust remedies regime. Certain characteristics of the authority are very important, and it would aid the interpretation of the Bill in due course if the Government’s aims and intentions were set out on the record.
For an authority to be effective, it needs certain characteristics. First, it needs to be objective and evidence-based. I think that most Members would agree with that in general, but it becomes far more difficult when there is an acute case that is difficult in our constituencies or is of a totemic nature nationally. We need to be clear when we establish the authority that it should be objective and evidence-based in its deliberations and when advising Ministers.
Secondly, the organisation needs to have a broad base. It needs to be open and accessible. All stakeholders must feel that they are able to engage with the authority, and that they are listened to by its whole structure. We have heard examples of authorities in other countries. I simply say that I want to ensure that the consultation process includes not just the business world, but the workers whose jobs may well be threatened and consumers, whom we heard mentioned in evidence. I hope that the Minister can confirm that it will. Many of these issues require a balance between those two sides, and we need to ensure that we have such a balance. It is also important that the authority listens and is seen to listen. The characteristics I have touched on—objectivity, broadness and inclusivity—are important if the authority is to be recognised both here in the United Kingdom and by our trading partners abroad.
The third characteristic is efficiency—or timeliness, as some lawyers describe it. I always find it entertaining when lawyers describe timeliness. Efficiency is of course in tension with the idea of a broad consultation, but we are all aware that there will be cases where prompt action is required, so it is necessary to have good processes in place. Although those will clearly come later, it is important that we put that on the record at this stage, and we would benefit from hearing from the Minister about that.
The most important characteristic, however, is independence. We have heard on Second Reading and in Committee that we all want the authority to be independent and that, naturally, it should be at arm’s length from the Government—the current Administration and future Administrations—for many years to come. That is right, but if it is to be effective, the authority also needs to be able to withstand the media and political pressures that will arise when individual cases come forward. We must ensure that the structure that the Bill builds is robust enough to withstand those pressures. That is why the authority’s non-executive members must be appointed on the basis not of sectional interest but of merit.
We will debate in due course whether the non-executive members should include people from Wales or Scotland, or trade unionists. There are merits to ensuring that the authority listens to all such interests, but I worry that if non-executive members are appointed because they represent one sectional interest or another, the authority’s ability to give independent, objective advice to the Government will be limited. We will come on to the details of that when we debate amendments, but that is an important broad principle.
I strongly believe that if we are to have a remedies authority and an effective set of remedies rules, we need to ensure that those principles are clearly set out not just in legislation but by Ministers and those who are appointed to the authority, so that people both here and abroad can see that that is the intention. I think that would also answer some of the concerns about whether the authority will listen to workers through the trade union movement, by ensuring that consultation is broad and that the authority is clearly outward facing.
It comes back down to this last point: if we want others to follow the rules in trade, so that we have a free and fair system, we have to be seen to abide by those rules ourselves. There will come a moment when this authority reports to a Minister, when there will be a totemic business that is right on the cusp because of a particular practice, or there will be job losses that sharply affect a community that has already lost many jobs. At that moment, the test of the authority is whether it is objective. Is it giving its advice to Ministers on the basis of evidence? Is it genuinely independent and therefore able to be trusted by people here and abroad? Those are important principles and I welcome the Minister’s response.
Greg Hands
No.
Mr Davies, I would like to start by stressing that the Government recognise the important role of making sure—that you are in the right place at the right time. [Laughter.]
I will respond to my hon. Friend the Member for Hertford and Stortford because he raised some incredibly strong points. Free trade is not trade without rules, as the Secretary of State outlined on Second Reading. It is vital for us to have the ability to conduct and operate trade remedies. That is the position we need to be in. I am therefore doubly if not triply surprised that the Opposition voted against creating this body on Second Reading.
My hon. Friend outlined—I know that we will come on to debate some of this when we consider the amendments—some of the key parameters that we want in the Trade Remedies Authority, in that it needs to have regard to a wide variety of stakes and interests in this whole process: businesses, workforces, consumers and so on. We need to make sure that our regime is robust in this space.
It is also important for the message we send abroad, because Members know that free trade has been questioned by more and more countries over the last five to 10 years. Many countries are looking at what the UK does generally in trade policy—and that includes trade remedies—to show that we are committed free traders. People are looking forward to the UK rectifying its own schedules at the World Trade Organisation as we retain and regain our independent voice there to make these points. Trade remedies are a vital part of that and it would be folly for the UK not to have a proper arm’s length trade remedies authority that can do this.
As for my hon. Friend’s points on efficiency and promptness, regarding some of the detail of the Trade Remedies Authority’s operations, I advise him to have a look at what is going on with the Taxation (Cross-Border Trade) Bill, which incorporates a lot of the day-to-day workings of the Trade Remedies Authority and is being debated as we speak in another room. Most of all, regarding his important points about the independence and arm’s length nature of this body, it is incredibly important to ensure that we have specialists on it who can withstand pressures, non-executives appointed on merit and not representing sectional interests. We need to make sure that our Trade Remedies Authority members can consider UK-wide issues, but also regional issues at the same time, without being beholden to a particular sector or region. Our objective is therefore to have an independent, evidence-based approach to trade remedies.
Question put and agreed to.
Clause 5 accordingly ordered to stand part of the Bill.
Schedule 4
The Trade Remedies Authority
Bill Esterson (Sefton Central) (Lab)
I beg to move amendment 21, in schedule 4, page 14, line 24, leave out line 34 and insert—
“(a) a member to chair it, appointed by the Secretary of State with the consent of the International Trade Committee of the House of Commons,”.
This would establish the requirement for Parliament, through the relevant committee, to give its consent to the Secretary of State’s recommendation for appointment to the Chair of the Trade Remedies Authority.
The Chair
With this it will be convenient to discuss the following:
Amendment 39, in schedule 4, page 14, line 34, at end insert
“with the consent of each devolved authority,”.
This amendment would require the Secretary of State to secure the consent of each devolved authority before appointing the Chair of the TRA.
Amendment 38, in schedule 4, page 14, line 34, at end insert—
“(aa) a non-executive member appointed by the Secretary of State with the consent of the Scottish Ministers,
(ab) a non-executive member appointed by the Secretary of State with the consent of the Welsh Ministers,”.
This amendment would require UK Ministers to secure the consent of the Scottish Ministers and Welsh Ministers to one non-executive member each of the Trade Remedies Authority.
Amendment 22, in schedule 4, page 15, line 2, leave out subsection (3) and insert—
“(3) No person may be appointed as a non-executive member of the Authority under subparagraph (1)(b) unless—
(a) the Secretary of State has first consulted the Chair of the Authority on the proposed appointment, and
(b) the International Trade Committee of the House of Commons has consented to the appointment.”
This would establish a procedure for appointing non-executive members of the Trade Remedies Authority other than the Chair.
Amendment 23, in schedule 4, page 15, line 3, at end insert
“(3A) In making any proposal under subparagraph (3), the Secretary of State must ensure that there is on the Authority a representative of —
(a) producers,
(b) trade unions, and
(c) each of the United Kingdom devolved administrations.”
This would ensure that the Trade Remedies Authority must include, among its non-executive members, representatives of stakeholder bodies potentially affected by its recommendations.
Amendment 40, in schedule 4, page 16, line 20, after “may” insert
“, with the consent of each devolved authority,”.
This amendment would require the Secretary of State to secure the consent of each devolved authority before removing a person from office as the chief executive of the TRA.
Amendment 41, in schedule 4, page 17, line 27, at end insert—
“Offices
25A The TRA shall maintain offices in—
(a) Scotland,
(b) Wales, and
(c) Northern Ireland.”
This amendment would require that the TRA shall maintain offices in Scotland, Wales and Northern Ireland.
Bill Esterson
It is interesting that the hon. Member for Hertford and Stortford chose to speak in the clause 5 stand part debate, because many of the points he made relate to amendments 21, 22 and 23, which I now speak to on behalf of myself and my hon. Friends. During his interesting and thoughtful speech, he made very strong arguments in favour of each of our amendments. He spoke of the need to be evidence-based and objective, which would be much easier achieved by the balanced membership proposed by our amendments. Equally, he spoke of the need for a broad-based membership—I agree. He also made the argument for balancing the different interests that are involved in delivering trade remedies and an effective Trade Remedies Authority. I will be interested to see how he votes, given that he made the case for supporting each of our three amendments.
As ever, the Minister reminds us of the vote on Second Reading. He neglected to say that in our reasoned amendment we called for the need for effective legislation to implement the establishment of a Trade Remedies Authority to deliver the new UK trade remedies framework. We voted for that, and he voted against it. If he wants to tell me why he voted against an amendment that called for the establishment of a Trade Remedies Authority to deliver the new UK trade remedies framework, he can do so now.
Greg Hands
I thank the hon. Gentleman for allowing me to do so. We all know that the usual purpose of a reasoned amendment is that it allows an Opposition party to put forward a point of view about a Bill while nevertheless still allowing it not to oppose the Bill itself. That is the standard way in which reasoned amendments operate. We were simply amazed that once his reasoned amendment fell he nevertheless opposed the Bill. That shows that he opposes the continuity of these trade agreements, the creation of a Trade Remedies Authority, and data-sharing powers that will help our exporters. I am afraid that that is on the record from his vote on Second Reading.
Bill Esterson
I am glad that the Minister has confirmed that we voted to support the creation of a Trade Remedies Authority and that he voted against it. I think that was very clear in that lengthy intervention.
As the explanatory statements make clear, amendments 21, 22 and 23 would have the effect of giving Parliament the power of consent over the appointment of a chair to the Trade Remedies Authority set up by the Bill. They would establish a procedure for the appointment of non-executive members to the authority, and ensure that the TRA includes representatives of key stakeholder bodies among its non-executive membership—all things that the hon. Member for Hertford and Stortford requested.
Mr Prisk
I actually said that the non-executive members need not to be beholden to a sectional interest and they need to be able to make a corporate decision. My worry is that amendment 23 does precisely the former. There are some 5.3 million people in the west midlands and some 5.6 million in Scotland. Presumably, according to the logic with which the hon. Gentleman has drafted the amendment, we should also have somebody from the west midlands. I am sure that people from Yorkshire would then like to have someone from Yorkshire. My concern is that ultimately we will end up with one person representing not the broad picture, but a sectional interest. I am very happy to have people who have links and connections to those areas, but to appoint them on the basis of where they come from or to represent one sectional interest would be wrong. Merit should win.
Bill Esterson
Perhaps the appointment of the non-executives can cover all those areas.
Trade remedies and the Trade Remedies Authority are a key element of our trade policy. Gareth Stace of UK Steel told us in one evidence session that
“If we get this very wrong, we become the dumping ground—not just in Europe, but for the rest of the world.”–––[Official Report, Trade Public Bill Committee, 23 January 2018; c. 66, Q127.]
It is therefore essential that we get it right, and the Bill is our opportunity to do that. The Government have spent the past few days in Committee trying to convince us that the Bill is a technical little Bill that is not trying to do much other than put in place necessary frameworks. On the Trade Remedies Authority in particular, they have gone to great pains to stress that they are simply setting up the necessary structures to carry out our trade defence once we have left the European Union. This much is true: the Trade Bill does set up the Trade Remedies Authority, which will be a key component of our trade policy once we leave the European Union, when we have to carry out our own trade remedies.
Hannah Bardell
I thank the hon. Gentleman for giving way—that was a clash of interventions and I am glad to have won the battle. I absolutely agree with him. Does he agree with me that, although none of us, unfortunately, has tabled the amendment that has just occurred to me, the authority should reflect the gender balance of society? Perhaps there should be a gender balance mechanism, as it will be a public body.
Bill Esterson
It is really important that we take on the challenge set by the hon. Lady and apply it to all public bodies. How we achieve such a gender balance is perhaps a question for wider discussion, but her point is well made. The Minister might achieve the balance she suggests when he creates the authority.
Faisal Rashid
The role of Parliament in overseeing the creation of the Trade Remedies Authority was described to the Committee as “critical” by Chris Southworth of the International Chamber of Commerce. Does my hon. Friend share my concerns that if the Government do not support the amendment, they are clearly choosing to ignore the voice of the ICC? Does he also share my concerns about the repercussions that that might have for the future of UK trade?
Bill Esterson
My hon. Friend makes an excellent intervention, as he has done throughout Committee. That body has to carry the confidence of all sides of industry and all parts of society and of the United Kingdom. It is crucial that it does so, which is why we are attempting to push the amendments through. I imagine, from what the Minister has said, that he is unlikely to support us—why change the habit? Perhaps, however, he will explain how those points will be addressed and how the Government will respond to the witnesses mentioned by my hon. Friend, as well as some of the other witnesses.
The Minister is not letting on that trade remedies are not simply a technical detail of trade policy. They have the potential to be highly political. In essence, trade remedies defend domestic producers from unfair competition from dumped goods from other countries. The remedies are an essential policy tool to correct multilateral distortions, as Mr Stevenson, the specialist adviser to the Manufacturing Trade Remedies Alliance told us last week. Deciding when and how to use such trade defence instruments, however, is a political decision, and a highly political one at that, as is that on the membership of the TRA. It is crucial to get the membership right, to ensure that the TRA makes correct, balanced and evidence-based recommendations—as the hon. Member for Hertford and Stortford put it—to Government.
As the system is to operate under this Bill and the Taxation (Cross-border Trade) Bill, the Secretary of State has the capacity to use an economic interest test to allow the Government not to take action even when problematic trade behaviour by another country has been identified. In other words, the Government will have the capacity to decide that even when harm is being done to our domestic industries, other interests such as the consumer interest may outweigh those of the producers affected. To quote the words of George Peretz, QC, who we heard from last week:
“That seems to me to be a political position: it is balancing the interests of jobs in a particular area of the country against the interests of consumers across the country”.––[Official Report, Trade Public Bill Committee, 23 January 2018; c. 55, Q105.]
The same point was made on Second Reading by a number of hon. Members, including about the Scotch whisky and steel sectors.
The Minister cannot pretend that the Bill and the structures created by it are apolitical and purely technocratic. Trade remedies can make the difference between the survival of an industry and its decimation. They can protect thousands of jobs or let them be exported overseas. They can defend our foundation industries or let them fall by the wayside. I am sure the constituents of the hon. Member for Corby can attest to that.
Bill Esterson
The hon. Gentleman comments from a sedentary positon; perhaps he is allowed to do that.
Alan Brown
I just want to respond to the comments made by the hon. Member for Corby from a sedentary position. It is ironic that he is saying yet again that we should have voted for the Bill on Second Reading and then tabled amendments, even though the Government have voted against every single amendment.
Bill Esterson
The hon. Gentleman is of course right. I remind the hon. Member for Corby and his colleagues that he and they all voted against our reasoned amendment, which called for the setting up of the Trade Remedies Authority.
Trade remedies are absolutely essential in order to protect British industries, including the steel sector, ceramics, tyres, chemicals and pharmaceuticals. As Gareth Stace of UK Steel told us,
“Trade remedies...are the safety valve that enables free trade to take place.”––[Official Report, Trade Public Bill Committee, 23 January 2018; c. 66, Q127.]
One need only look at the steel sector to understand why trade remedies are necessary and also how incredibly political they can be.
As the steel crisis highlighted, when no trade remedies are put in place to defend our steel industry against dumping from countries such as China, thousands of jobs are lost and entire communities are negatively affected. We were reminded of that at BEIS questions earlier today, when my hon. Friend the Member for Redcar (Anna Turley) raised the ongoing devastating impact on the community and workers who lost their jobs at SSI. She spoke of the continuing struggle to replace their jobs and to create prosperous alternatives for her constituents. So far, that has not been resolved.
During the steel crisis the Conservative Government under David Cameron acted as the ringleader of a group of countries in Europe trying to block efforts at the European Council to put in place more rigorous anti-dumping measures against China by lifting the lesser duty rule. British steel was going through an existential crisis and the Conservative Government did not use all the policy tools available to them to restore a level playing field. The EU ended up imposing tariffs on unfairly traded steel, but they were much lower than those imposed by other countries such as Australia and the USA.
Now that we are leaving the European Union the Government have rightly set out to create an independent trade remedy regime, yet they seem to not have left their bad habits behind. They still envisage having a lesser duty rule in place. On top of that, they have introduced an economic interest test in the Taxation (Cross-border Trade) Bill. Once again British producers do not make it to the top of the list of concerns for the Secretary of State and Ministers. They seem to want to champion only consumer interests. That is why we believe it is important that Parliament has a say in the appointments to the Trade Remedies Authority and why we believe non-executive members of the TRA should include representatives of producers and trade unions from each of the devolved Administrations. There needs to be an in-built system of checks and balances so that all interests are taken into consideration and all voices are heard. As Mr Southworth from the International Chambers of Commerce said on Tuesday last week, issues such as steel dumping have
“huge implications for a lot of people, particularly in geographies that tend to be vulnerable...It is important that everyone has a chance to have their say about what that decision should be.”––[Official Report, Trade Public Bill Committee, 23 January 2018; c. 26, Q57.]
Even in the short time that the Department for International Trade has been in existence, its track record on being inclusive and mindful of the input of stakeholders has not been ideal. The consultation on the Trade Remedies Authority ended on the evening of 6 November. By early morning on the 7th, the Trade Bill had been published and delivered to Parliament. James Ashton-Bell of the CBI diplomatically said that
“the optics were not ideal.”––[Official Report, Trade Public Bill Committee, 23 January 2018; c. 34, Q79.]
What a disgrace. Why did the Government bother to have a consultation when they clearly had no intention of reading the responses, let alone taking on board the suggestions? That is a clear breach of the consultation principles issued to all Departments in 2016.
Greg Hands
I have a quick question: does the hon. Gentleman agree with his party leader that free trade itself is a dogma?
Bill Esterson
I think we should press on. The Minister has enough to worry about.
As Mr Stevenson of the Manufacturing Trade Remedies Alliance told us last week:
“Some see trade remedies as purely protectionist and would abolish them completely”.––[Official Report, Trade Public Bill Committee, 23 January 2018; c. 65, Q124.]
It is key, therefore, that Parliament, through its relevant Committee, should get to scrutinise who the Secretary of State appoints as the head of the relevant body, and that it should make sure it is someone with the competence, experience and disposition to stand up for the best interests of British industries and the British people.
Similarly, amendment 22 would ensure that the Secretary of State cannot appoint non-executive members to the TRA at his whim and fancy. He should not be able to stack the TRA with members of a certain political and ideological persuasion that would mean they would be less likely to act on complaints brought forward and less likely to recommend measures. We heard from Mr Stevenson of the MTRA last week that if all its members
“thought trade remedies were protectionist, we would never get any trade remedies through”.––[Official Report, Trade Public Bill Committee, 23 January 2018; c. 65, Q124.]
Parliamentary scrutiny of the membership of the TRA is even more important in the light of the evidence given to this committee by Mr Tom Reynolds of the British Ceramic Confederation. He highlighted to us at column 67 that, within the context of our membership of the European Union, the UK Government took on the role of the “liberal counterweight” opposing strong trade defence measures. However, now that we will not have the other 27 member states, of which a majority is for trade remedies, we cannot afford to take the same approach.
Unfortunately, according to Mr Reynolds, UK civil servants and experts are “steeped in that heritage” of the UK being a neo-liberal counterweight. We cannot afford to let that institutional memory dictate how our independent trade defence policy is conducted. We need to ensure that the non-executive board of the TRA is a watchdog that ensures balance in the system. The only way to do that is to allow this House, through the appropriate Committee, to have a say on the appointment of the board members.
Finally and most importantly, amendment 23 would ensure that the TRA includes among its non-executive members representatives of stakeholder bodies potentially affected by the recommendations of the TRA. Those stakeholders are the producers, the trade unions representing the workers and a representative of each of the devolved Administrations. We have put that into our amendment because we believe that the key stakeholders affected by unfair trading practices should be represented around the table where decisions are being made that affect the survival of their industries and jobs, and the wellbeing of their communities. The TRA will only be enriched by experts from industry, trade unions and the devolved Administrations, who are the ones facing the realities of dumping on a day-to-day basis and close to home.
Matt Western
Does my hon. Friend have a view on the recent situation with Bombardier and the involvement of the US trade body that found in its favour? Are there any learnings from that? I am specifically interested in the role of the unions on that body, as well as industry representatives.
Bill Esterson
My hon. Friend is right to raise that. The Bombardier experience shows that countries are prepared to apply very significant trade remedies. We have to be realistic. We need to be in a position to have our own trade remedies system, be prepared to use them and not expect that not using such processes is always appropriate. That is why we must have the right membership, including from the trade unions, to protect jobs, as my hon. Friend has said, because otherwise we leave ourselves wide open.
Greg Hands
Can the hon. Gentleman be absolutely clear? I am intrigued. Is he saying therefore that he agrees with the US approach—not having a lesser duty rule and allowing these very large punitive tariffs to be put on British industry, Bombardier in this case, exporting to the United States? I think he is agreeing that he likes the US approach.
Bill Esterson
That is not what I was suggesting. I am saying that we have to recognise that countries such as the US, as demonstrated by this case, are prepared to act. We have to be realistic about that. We have to make sure that we have the right representation on the TRA so that we are making the right case. I do not think 300% tariffs is a good idea at all, but we certainly need to be able to make the right judgments when such things apply. There is a balance between protectionism and the approach in the Bombardier case.
Barry Gardiner
Does my hon. Friend agree that it would be foolish to look at one specific example of an outrageous situation, as we have had with Bombardier in the US? Thank goodness that the ITC came to the correct conclusion there. Just because it is possible to arrive at the wrong conclusion should not mean that one judges the lesser duty rule simply on that.
Bill Esterson
Of course that is right. My hon. Friend deserves credit for taking the time and effort to go and meet the ITC and to make the case with the trade unions and others from this country. The lobbying that he and others were involved in played no small part in delivering for workers and business in the UK. He deserves a lot of credit for that. I will return to my speech—
Matt Western
This reminds me of Saturday afternoons watching wrestling. [Laughter.] The crucial thing about the TRA is that it is a facilitator, not a barrier, to ensure the needs of sectors and those involved in the sectors, whether workers or businesses. That came across very clearly in the representations from witnesses last week as something they want. My hon. Friend mentioned the chairmanship. As with the Office for Budget Responsibility, it is crucial that the chair is seen as an important role and not some political lackey.
Bill Esterson
Yes, that is exactly right. The point is to get the balance between how the Conservative Government under David Cameron blocked attempts to use appropriate trade remedy measures to defend our steel industry and the excessive use of them by the Americans. That is what the new TRA should do and that is why it needs to have the right balance of membership.
The message from the evidence given by the witnesses last week was loud and clear: stakeholders want representation on the TRA. They want their voices to be heard and their concerns taken into account, and they want that guaranteed in statute, not through ad hoc discussions with the Government. George Peretz QC told us that the composition of the TRA
“ought to be balanced by statute and that it ought to reflect a variety of different perspectives.”––[Official Report, Trade Public Bill Committee, 23 January 2018; c. 55, Q105.]
We also heard from James Ashton-Bell of the CBI, that:
“In anything where you are making choices about trade and how it will impact the wider economy, you should have a wide and balanced group of people advising Government, or an independent authority, about how to make those choices.”––[Official Report, Trade Public Bill Committee, 23 January 2018; c. 25, Q54.]
Chris Southworth of the International Chamber of Commerce concurred, saying that
“the representation is a critical point. An independent body, yes, but there must be representation within that independent body to represent all the important voices”.––[Official Report, Trade Public Bill Committee, 23 January 2018; c. 25, Q54.]
That responds to the question by my hon. Friend the Member for Warwick and Leamington.
If the Minister will not listen to me, will he at least listen to business associations, industry representatives, trade unions, academics, QCs and civil society? They are all coming out against how he and his Department are going about this. I urge Members on all sides to support our three amendments, but if the inevitable happens and the Minister leads them into voting us down, I look forward to him bringing forward his alternatives later in proceedings.
Hannah Bardell
It is a pleasure to serve under your chairmanship once again, Mr Davies. It has been a fascinating debate. I want to say at the outset that we absolutely support our colleagues in the Labour party in their amendments, but have also tabled amendments 39, 38, 40 and 41, which I will speak to.
The legislation needs to be strengthened. Amnesty’s response was interesting. It said that an independent body with appropriate expertise should be established with a remit to conduct or commission assessment impacts of future free trade agreements on human rights, equality and the environment in the UK and of trading partners. This could be the proposed Trade Remedies Authority if it were given the resources, remit and powers.
On powers, it is important to remember that we are 20 years on from devolution. Devolution delivered huge changes across the nations of the UK. I can understand that many in England perhaps feel somewhat left behind, because we have moved on in Scotland, Wales and Northern Ireland. I have some sympathy with that but the point of the amendments is respecting devolution, and recognising the nations of the UK and the relationship that they have developed directly with the EU, and the importance of trade.
The Scottish Parliament was established to be accountable and answerable to the people of Scotland, to be open and encourage participation, to be accessible and to involve all the people of Scotland in its decisions as much as possible, and to have power sharing. That is an important point: power should be shared among the Scottish Government, the Scottish Parliament and the people of Scotland.
On the decisions about where the Trade Remedies Authority is physically located and about whether it will have non-exec members, decisions about the businesses and the people of each of the nations of the UK are best made as close to those people as possible. We understand that the functions of the Trade Remedies Authority will be reserved and it will undertake trade remedies investigations across the UK, but it is important that Scottish, Welsh and Northern Ireland Ministers have a role in the Trade Remedies Authority.
Amendment 39 requires the Secretary of State to secure the consent of each of the devolved nations before appointing a chair to the Trade Remedies Authority. We feel it is only fair that we have a say in that matter. It is common practice for interview panels to be made up of people from a range of disciplines. The hon. Member for Hertford and Stortford said that there will be a range of people, but I am sure he will have sympathy with my view that, although the west midlands is a very important part of the UK, it is not a country in the way that Scotland is. Since 2007, Scottish exports to the EU have grown by more than 25%. The EU market is eight times larger than the UK’s alone. Scotland exported £12.3 billion-worth of exports to the EU in 2015, and that figure is growing, so the EU is a hugely important market for us. It stands to reason that Wales and Northern Ireland must have a fair and proper say in who is appointed.
Mr Prisk
On a point of order, Mr Davies. I have been listening to the hon. Member for Sefton Central and the hon. Member for Livingston, and it is clear that these are broad subjects. Will you confirm that it is not your intention to have an additional debate on schedule 4, and that given the scope of what is being discussed—not just the amendments but wider issues—this is in effect a stand part debate on schedule 4?
The Chair
That decision is at my discretion. It may actually end up being at the discretion of one of my fellow Chairs, and I do not want to commit them to anything, but I certainly hear what the hon. Gentleman says.
Hannah Bardell
I feel that it is important to make these broader points, because they are germane to the issue and to the amendments.
For us, the bottom line is ensuring that the devolved nations and the devolution settlements that were agreed on a cross-party basis are respected. That is absolutely at the heart of these amendments. I hope that we are able to get support for them, cross-party—and certainly from our Labour colleagues.
Greg Hands
May I start by correcting an inadvertent error I made earlier? I mentioned an agreement that was signed by the Secretary of State for International Trade with South Africa and SADC in August or September. It was actually earlier than that. It was signed in July by Lord Price. I know that the hon. Member for Brent North takes an interest in South Africa, so I will quote briefly from what was said:
“The Southern African Customs Union…has welcomed the UK’s intention to prevent disruption of trade relations with other countries as it leaves the European Union”.
I think that clears up where we are with South Africa.
Let me start by stressing that the Government recognise the important role that Parliament, industry stakeholders and the devolved Administrations play in building the UK’s future independent trade policy. We look forward to working with all those groups and organisations on the establishment and operation of the Trade Remedies Authority to ensure that their views and interests are taken into account where appropriate. However, these amendments are not appropriate to the creation of that new function.
Decisions on trade remedies cases can have profound effects on markets, so we need to create an independent and objective investigation process in which businesses and consumers have full confidence. That is why we are setting up the Trade Remedies Authority as an arm’s length body with the appropriate degree of separation from the Department for International Trade. The hon. Member for Sefton Central said that trade remedies are inevitably political. That is precisely why we are ensuring that investigation and evidence-gathering must be done independently.
Faisal Rashid
James Ashton-Bell of the CBI told us that the fundamental question it has about the Trade Remedies Authority is
“who makes the ultimate decisions about when to take action and when not to take action.”––[Official Report, Trade Public Bill Committee, 23 January 2018; c. 24, Q52.]
Given the lack of clarity about that, does the Minister agree that it is vital that appointment to and operation of the Trade Remedies Authority is as transparent as possible?
Greg Hands
Yes, and the authority is very transparent in its operation. A lot of how the authority operates is outlined in the Taxation (Cross-border Trade) Bill, which is being debated down the corridor. I strongly feel that there is really good transparency in the arrangements we have made regarding the authority’s independence, arm’s length nature and specialist and independent evidence-gathering. We are also ensuring that it is accountable to the Government and that, at the end of the day, a political decision is still taken about whether to impose trade remedies.
Barry Gardiner
I think we would all welcome a sense that this body was independent, so can it be right that one person with a particular view of trade should be empowered under the Bill to appoint every single member of the TRA, including the chair? Depending on the order in which they make the appointments, that is entirely possible under the Bill.
Barry Gardiner
The Minister is shaking his head, but under the Bill, so long as the Secretary of State appoints the chair last—there is nothing to prevent him doing that—he is empowered, absolutely on his own, to put his friends, cronies and the people who have his view of trade in every single position. He would then appoint the chair. If he appoints the chair first, he has to do the rest in conjunction with others.
Greg Hands
Let me be of assistance to the hon. Gentleman. It is quite clearly laid out in the appointments procedure that the Secretary of State appoints the chair, and the other non-executives in consultation with the chair. In exceptional circumstances, the Secretary of State can appoint the chief executive, but only if the chair has not yet been appointed. That is laid out in the legislation. The executive members are not appointed by the Secretary of State. It is important to understand that the Secretary of State does not appoint the whole body.
On top of that, the appointments process of course follows good governance principles and rules on public appointments. For the benefit of the Committee, I will outline those rules. First, the Government are responsible for setting out the processes and principles that underpin the management of public bodies. Secondly, there are explicit rules on the roles of Ministers and Departments in the public appointments process. The rules outline the role of the Commissioner for Public Appointments, who is the independent regulator of public appointments. I am sure they would take more than a casual interest in the TRA, were the case that the hon. Member for Brent North outlined to transpire.
The rules also include the governance code for public appointments. We have worked with governance experts in the Cabinet Office and HM Treasury to ensure that the TRA complies with those governance rules and others. The rules include guidance on managing public money and all the usual protections we would expect to see in an appointments process.
Barry Gardiner
Will the Minister, in the light of his remarks, comment on schedule 4(2)(1)? It states:
“The TRA is to consist of…a Chair appointed by the Secretary of State…other non-executive members appointed by the Secretary of State…a chief executive appointed by the Chair with the approval of the Secretary of State or, if the first Chair has not been appointed, by the Secretary of State, and…other executive members appointed by the Chair.”
In other words, the majority of the Committee—all the non-executive members, the chair and the chief executive—can be appointed by one individual: the Secretary of State.
Greg Hands
I refer the hon. Gentleman to later in the schedule. If he would care to turn over the page, it states:
“The Secretary of State must consult the Chair before appointing the other non-executive members.”
He is being highly selective in choosing elements of the Bill that appear to suit his argument.
Most importantly, these are public appointments, so we will of course have a standard competitive process following good governance principles and rules on public appointments. The successful candidates will be selected based on whether they have the right skills and experience to deliver this new UK-wide function effectively. The arrangements are broadly consistent with those of equivalent arm’s length bodies.
On the role of Parliament and amendments 21 and 22, it is important to ensure that the TRA’s senior leadership, and particularly its chairman, are in place as early as possible to enable the TRA to be operational by the time the UK leaves the EU. That will ensure continuity for UK industry. Giving the International Trade Committee a role in the appointment of members to the TRA, including its chair, would add additional stages to the appointment of non-executive members, thereby delaying the process. More significantly, referring back to the point made by my hon. Friend the Member for Hertford and Stortford, it would risk politicising the appointment process, thereby undermining the TRA’s status as an independent and impartial body.
Alan Brown
To be clear, people appointed on merit by the UK Government will be completely impartial, but people appointed by devolved Governments will suddenly have such conflicts of interest that it will pull the whole TRA system down a hole?
Greg Hands
I appreciate the hon. Gentleman’s point, but the point is to have a UK-wide perspective, and for the appointments to be based on expertise in that space, and made following good governance principles. That is the objective for the membership of the TRA.
On trade remedies, I think the hon. Member for Sefton Central impugned my hon. Friend the Member for Corby by saying that he was not sufficiently interested in the steel industry. I have known my hon. Friend for some time, and he is incredibly passionate about the steel industry. He takes a keen interest in the operations of the TRA, and is quite expert in this space. He knows that much of the detail of the operation of the TRA is not in this Bill but in the Taxation (Cross-border Trade) Bill.
Bill Esterson
The Minister really should not make such accusations; he knows that is not what I said or what I meant. I am well aware that the hon. Member for Corby takes a keen interest in the subject, along with all Members representing constituencies across the country with a steel industry presence; they work together extremely hard, cross-party, to try to support the steel industry. It was a completely inaccurate accusation, and I hope the Minister will withdraw it. My criticism was entirely of the Government and their failure in the European Union to support the measures that were needed.
Greg Hands
I think we are in one of those cycles; I am alleged to have impugned the hon. Gentleman by saying that he impugned my hon. Friend the Member for Corby. I will just leave it on the record that my hon. Friend is a doughty defender of the steel industry in the House, and through his influence with the Government.
I think the hon. Member for Sefton Central suggested that the Secretary of State should not appoint members at all. We need the Secretary of State to appoint the non-executive members in order to ensure that they are directly accountable to an elected representative with responsibility for the whole UK, because ultimately trade remedy measures will be taken across the UK. That person is quite properly the Secretary of State, who is accountable to Parliament. That is broadly in line with what happens in other arm’s length bodies.
The hon. Gentleman also talked about putting in place the right framework for the TRA. We are clear that we will operate a robust trade remedies regime to protect UK industry from injury caused by unfair trading practices and unforeseen surges in imports. I said of the TRA at the very beginning that free trade does not mean trade without rules. Rules are incredibly important, and making sure we have a strong defensive capability is a key part of that. That is why there will be a presumption in favour of measures in all dumping and subsidies investigations—that is in the Taxation (Cross-border Trade) Bill.
It is right that there is a mechanism for identifying whether measures are likely to have a disproportionate impact on other economic actors in the UK, such as downstream industries and consumers, and whether they might have a regional impact or an impact in one of the nations of the United Kingdom. The economic interest test ensures that the trade remedy system takes into account wider economic considerations in addition to the interests of UK producer industries. It is a chance to step back and consider whether measures would be in the best economic interests of the UK and will ensure that measures are not imposed where that is not the case.
Points were raised about different balances within the board. We have to come back to the overriding factor that should prevail to ensure that we comply with good governance principles: appointments are made following an open, competitive process on the basis of merit and on the basis of being able to discharge the function of looking at the whole question of a particular issue that might be prompting a trade remedy on a UK-wide basis. That is why it is important that we have built appropriate processes into the framework set out in the Taxation (Cross-border Trade) Bill to ensure that impacts on Scotland, Wales and Northern Ireland are given due consideration.
Barry Gardiner
The Minister is being extremely generous in giving way. Before he finishes his peroration, would he agree with me that there is a sensible distinction to be made between the executive members and the non-executive members of the TRA? Executive members are expected to be specialists. They are expected to have specialist trade knowledge or specialist knowledge that could determine whether dumping has taken place and so on. The non-executive members have more of a representative function. In that context, would he not see that that distinction in the amendments and others we support has some purchase?
Greg Hands
I thank the hon. Gentleman for that intervention because it allows me to say that I do not agree. The non-executive members are not intended to be representatives of particular interests or particular parts of the United Kingdom, or particular sectors or producers or consumers or trade unions. The idea is that all members of the board have the ability to think right across the question of what is happening in terms of the injury that has been created or reported to have been created. What is the best way of assessing all the evidence? What is the best way of doing, for example, the economic interest test? I entirely disagree with him. These people are not representatives. They are able to take a dispassionate, evidence-based and informed decision, looking at all of the available evidence.
The TRA will consider the wider impact of trade remedy measures as part of the economic interest test. As part of that process, the TRA will consider the impact of measures on different groups across the UK, including any regional or distributional consideration. It is important to understand that its members do not have to be, and in fact should not be, representatives of those regional distributional considerations or producer or consumer and so on. They are designed to look at the evidence and come to a recommendation based on the overall evidence in front of them. It will also consider the likely impact on affected industries and consumers. We would expect the TRA to gather information where relevant to inform the economic interest test. For those reasons, I ask the hon. Gentleman to withdraw the amendment.
Bill Esterson
I will not be withdrawing the amendment. The Minister talks about good governance. Non-executives often, on many boards, in many situations, come from membership organisations. They then use their judgment on a wide range of issues, but they come from those membership organisations. I am afraid he is wrong about that. He speaks of the risk of political appointments. There is one way to ensure that this is a politicised series of appointments: to leave everything in the hands of the Secretary of State. That is for sure. If the appointment process is so watertight, why is there a whole section in the Bill dedicated to what happens if the chief executive is appointed by the Secretary of State? It is being anticipated as, I guess, a quite likely scenario.
The Minister talked about accountability to Parliament, but there is none under the Bill. There are a number of examples of parliamentary scrutiny of appointments. Select Committees play a significant role in a number of appointments to public office. The Treasury Committee gives its consent to the appointment and dismissal of members of the Budget Responsibility Committee. The Digital, Culture, Media and Sport Committee has the power of veto over the appointment of an Information Commissioner, and there are a number of examples of pre-appointment hearings for significant public appointments.
When something is so crucial to our economic and international trade future, why do the Government not care to involve the Select Committee in the appointments? If they will not support the amendments, I look forward to them coming forward and dealing with the point that the Minister made in his summing up about how he expects accountability to be delivered to Parliament. I will put our three amendments to the vote.
Question put, That the amendment be made.
Trade Bill (Seventh sitting)
Tuesday 30th January 2018
(6 years, 9 months ago)
Public Bill CommitteesRead Full debate Trade Bill 2017-19 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 30 January 2018 - (30 Jan 2018)
The Committee divided: - Ayes: 9 / Noes: 10 - Question accordingly negatived.
The Committee divided: - Ayes: 9 / Noes: 10 - Question accordingly negatived.
The Committee divided: - Ayes: 9 / Noes: 10 - Question accordingly negatived.
The Committee divided: - Ayes: 9 / Noes: 10 - Question accordingly negatived.
The Committee divided: - Ayes: 9 / Noes: 10 - Question accordingly negatived.
The Committee divided: - Ayes: 9 / Noes: 10 - Question accordingly negatived.
The Committee divided: - Ayes: 9 / Noes: 10 - Question accordingly negatived.
The Committee divided: - Ayes: 9 / Noes: 10 - Question accordingly negatived.
The Committee divided: - Ayes: 9 / Noes: 10 - Question accordingly negatived.
The Chair
I call Hannah Bardell, who is not in her place—[Interruption]—unless she is!
Schedule 4
The Trade Remedies Authority
Hannah Bardell (Livingston) (SNP)
I beg to move amendment 42, page 18, line 39, at end insert
“and to each devolved authority”.
This amendment would require the TRA to send its annual report to each devolved authority.
The Chair
With this it will be convenient to discuss the following:
Amendment 43, page 18, line 40, after “Parliament” insert
“and shall supply copies to—
(a) the Scottish Parliament,
(b) the Welsh Assembly, and
(c) the Northern Ireland Assembly.”
This amendment would require the Secretary of State to supply copies of the annual report to the Scottish Parliament, the Welsh Assembly and the Northern Ireland Assembly.
Amendment 24, page 18, line 40, at end insert
“no later than 1 August of the calendar year in which the last day of the financial year covered by the report falls”.
This would ensure that the Secretary of State must lay the annual report of the Trade Remedies Authority before Parliament within a reasonable time frame.
Amendment 25, page 18, line 40, at end insert—
“Recommendation reports
31A (1) The TRA must prepare a report on each of the individual recommendations it makes to the Secretary of State in connection with the conduct of an international trade dispute.
(2) The report must accompany the recommendation submitted to the Secretary of State.
(3) The Secretary of State must lay the report before Parliament as soon as reasonably practicable, and not later than five days from the time it is submitted to the Secretary of State by the TRA.”
This would ensures that Parliament is kept informed, in a timely fashion, of the individual recommendations made by the Trade Remedies Authority to the Secretary of State in connection with cases of dumping, foreign subsidies and import increases causing injury to UK producers.
Hannah Bardell
I apologise for my lateness, Ms Ryan. I will be brief, because I know that time is of the essence. Amendments 42 and 43 are fairly straightforward, and seem to me to be a sensible and rational approach. Amendment 42 would require the Trade Remedies Authority to send an annual report to each of the devolved authorities; it is vital that we have those reports. Similarly, amendment 43 would require the Secretary of State to supply copies of the annual report to the Scottish Parliament, the Welsh Assembly and the Northern Ireland Assembly. In doing so, I hope that Ministers will also consider appearing, as they already do, before their Committees, particularly in relation to trade remedies. I cannot imagine why there would be opposition to that; it seems like an entirely sensible approach. I hope that the amendments will command support across the Committee.
Bill Esterson (Sefton Central) (Lab)
I will speak to amendments 24 and 25, which stand in my name and those of my hon. Friends. As the explanatory statement makes clear, the amendments would ensure that our Parliament is kept informed in a timely fashion about the work of the Trade Remedies Authority.
Parliament should be able to scrutinise the work of the TRA to ensure that it is working in the best interests of the UK economy and UK producers. Such requirements are nothing new in the realm of trade remedies. At European Union level, the Commission is obliged to report to the European Parliament and to give MEPs statistics on the cases opened and the number of measures adopted. Members of this Parliament should be given the same information from our TRA once it is up and running, so that they can scrutinise its work. MPs should be able to see how many cases have been initiated and measures adopted and so judge whether the TRA is taking measures to defend our industries or mostly putting consumer interests first at the expense of British producers, jobs and the regions.
Tom Reynolds of the British Ceramic Confederation pointed out that he would be more comfortable if there were a more rigorous approach for parliamentarians to get involved in the setting of the rules for the system. Just as in the rest of the Bill, the Government propose nothing in the schedule about parliamentary oversight or scrutiny of the TRA. Yet again, they want to make decisions that will have profound impacts on key sectors of British industry, thousands of jobs and many regions, behind closed doors and without any scrutiny or accountability to Parliament. The Minister and his colleagues might talk the talk on returning sovereignty to this Parliament, but when it comes to it, they once again fail to respect the very principles of parliamentary democracy.
Giving parliamentarians oversight powers over the work of the TRA will ensure proper scrutiny and accountability. A weak trade remedies regime is of benefit to nobody in our country. If anybody thinks that having a weak regime will open up trade opportunities with international partners, they are mistaken. Partner countries will take advantage of that, and we will once again see the loss of jobs, as we did in the steel sector in 2015 and 2016. It is only right that this House gets to scrutinise the work of the TRA to make sure that it is doing its job properly.
The Minister for Trade Policy (Greg Hands)
Welcome back to the Chair, Ms Ryan. May I start by congratulating the hon. Member for Livingston on redefining the term “moving an amendment”? She was actually in motion as she did it, so I commend her on her dexterity.
It is important that we create an independent and objective investigation process in which businesses and consumers will have full confidence, as I referred to previously. For this reason we are setting up the TRA as an arm’s length body with the appropriate degree of separation from the Department for International Trade. The Trade Bill requires the TRA to produce an annual report on the performance of its functions during each financial year. That must then be sent to the Secretary of State, who must lay the report before Parliament.
Let me deal with the four amendments. Amendments 42 and 43 are concerned with the sharing of the reports, requiring the TRA to submit annual reports on the performance of its functions to each devolved Administration, in addition to sharing copies with the Scottish Parliament, the Welsh Assembly and the Northern Ireland Assembly. Much as I strongly endorse our consulting with and involving devolved Administrations at all stages of this process, and expect the TRA to pay due heed to the devolved Administrations and to involve them as well, I must tell the hon. Lady that the amendments are unnecessary. The Bill already requires the Secretary of State to lay a copy of the TRA’s annual report before the UK Parliament, and at that point it will be a publicly available document for all to see right across the United Kingdom, including in Scotland, Wales and Northern Ireland.
Amendment 24 is on the annual report itself. The Bill already requires the annual report to be produced
“as soon as reasonably practicable after the end of the financial year to which it relates.”
The amendment, which seeks to impose an arbitrary fixed deadline for when the TRA is required to produce the report, is therefore also unnecessary. We are balancing giving the TRA a statutory requirement to produce the report on time, while recognising the importance of safeguarding operational flexibility, which is particularly important for a new organisation.
Amendment 25, on the investigation report, is interesting. I have referred a few times to the Taxation (Cross-border Trade) Bill, which is in Committee in another room. As laid out in that Bill, the TRA will be responsible for making recommendations on trade remedies cases to the Secretary of State. However, the amendment could lead to recommendations made by the TRA being released publicly before the Secretary of State has reached a final decision. Indeed, it is unlikely that the Secretary of State would make the decision in five days given the potential need to consult across Government. In my view, this could undermine the impartiality of trade remedies recommendations by increasing lobbying of Ministers by any parties affected by the TRA’s recommendations, be they producers, consumers or other stakeholders.
Faisal Rashid (Warrington South) (Lab)
Does the right hon. Gentleman agree that the amendment seeks a role for MPs that is akin to the role that MEPs have with regard to trade remedies?
Greg Hands
I thank the hon. Gentleman for that intervention. It is right that MPs have a role and that the TRA reports to Parliament. That is why the TRA publishes the annual report and is answerable to the Secretary of State, who is answerable to Parliament. Publishing the TRA’s recommendations before the Secretary of State has made the decision based on them is not a good idea, for reasons I will outline.
Barry Gardiner (Brent North) (Lab)
Does that explain why the Government were so backward in making representations to the US International Trade Commission with respect to Bombardier? The Minister said that it would be inappropriate to lobby such an organisation. Is it the Government’s position that it is inappropriate for lobbying to take place when a trade remedies authority is considering whether dumping has taken place or what remedies might be appropriate? Is that his approach to defending British industry when it faces trade defence measures abroad?
Greg Hands
The hon. Gentleman is confusing different processes. The British Government made extensive representations to the parties and the ITC during the investigation process in the United States. That is the key difference. Of course people will be expected to make representations during the investigation process in the UK, but my point was about publication of the TRA’s recommendations between the investigation process and the Secretary of State’s pronouncement.
In any case, I dispute the hon. Gentleman’s point. The UK Government have put in enormous efforts: my boss, the Secretary of State for International Trade, spoke at length with Wilbur Ross, and the Business Secretary also made representations. Very extensive and successful representations were made to US authorities, to Boeing and other companies, and to the US Administration.
Amendment 25 could lead to unnecessary disruption of the market in the key period between the TRA’s recommendations and the Secretary of State’s decision.
Greg Hands
Let me make a little more progress.
Amendment 25 could delay the Secretary of State’s decision. The evidence base for the TRA’s recommendations should be made available to the public after, not before, the Secretary of State accepts or rejects them, as required by World Trade Organisation agreement. That is the right time for the evidence base to be put in the public domain.
Barry Gardiner
It is only the one he deferred a few moments ago. I am grateful to the Minister, because he has engaged in debate and the Committee has been the better for it. However, he mentions the appropriate point for intervention. The American situation involved two decisions: the US Department of Commerce made an initial determination and then the US International Trade Commission had to look at whether any damage had been caused and recommend any appropriate charges. The situation was somewhat akin to a recommendation being made to the Secretary of State and the Secretary of State deciding what to do about it. There is a real parallel here that the Minister is denying. As I am sure he acknowledges, amendment 24 would not set an arbitrary deadline; it would ensure that the Secretary of State laid the report before Parliament in a timely fashion.
Greg Hands
May I end—again—by saying that I do not think it is right to make an exact comparison between the UK and US situations? As I said earlier, the design of the Trade Remedies Authority in the UK has been informed by international best practice, but it is fundamentally a different system. The right time for representations to be heard from businesses, consumers, MPs and other stakeholders is while evidence is being gathered, not between the TRA recommendation and the Secretary of State’s determination. On that basis, I ask the hon. Member for Livingston to withdraw amendment 42.
Question put, That the amendment be made.
Bill Esterson
I beg to move amendment 26, in clause 7, page 4, line 32, leave out subsection (1) and insert—
“(1) The Commissioners of Her Majesty’s Revenue and Customs may, by regulations, request any person to provide, or make provision authorising officers of Her Majesty’s Revenue and Customs to disclose, prescribed information for the purposes of assisting the Secretary of State to establish the number and identity of persons exporting goods and services from the United Kingdom”.
This would ensure that, where HMRC already has this information, it may be shared with the Secretary of State.
The Chair
With this, it will be convenient to discuss the following:
Amendment 27, in clause 7, page 4, line 38, at end insert—
“(2A) For the purposes of subsection (1) “prescribed information” means the names and addresses of persons who have exported goods covered by a prescribed code.”
This would ensure that the information to be collected pertains only to exports recognised as such for official purposes, in line with the Small Business Enterprise and Employment Act 2015.
Amendment 28, in clause 7, page 4, line 38, at end insert—
“(2A) For the purposes of subsection (2A) “prescribed code” means the commodity code or other identifier applied to a category of goods or services in connection with the preparation of statistics on exports from the United Kingdom (whether or not it is also applied for other purposes).”
This further qualifies what “prescribed information” means.
Amendment 29, in clause 7, page 5, line 3, at end insert—
“(3A) Regulations under subsection (1) may not make provision that could be made by regulations under section 10 of the Small Business Enterprise and Employment Act 2015.”
This would avoid duplication, in respect of the collection of information from exporters, with the Small Business Enterprise and Employment Act 2015.
Amendment 32, in clause 8, page 5, line 17, leave out from “trade” to end of line 19.
This would remove the power granted by the Bill to Her Majesty’s Revenue and Customs, or anyone acting on their behalf, to disclose information on United Kingdom exporters to any public and private body within or without the United Kingdom.
Bill Esterson
We recognise that it is essential to the efficient performance of the Department for International Trade and to the future delivery of trade policy that the Government have access to appropriate information about our imports and exports. We are also very aware of the impact on businesses, particularly small and medium-sized enterprises, of any increased burden in administration and mandatory reporting.
Clause 7 seeks to ensure that the Secretary of State may have access to such information, as collected by Her Majesty’s Revenue and Customs, that would establish the number and identity of exporters. What exactly the information is that will be required is not disclosed and the clause does not limit HMRC in terms of what information may be sought, only setting out that the information may be used for
“the purpose of assisting the Secretary of State”
in his endeavour. HMRC could, in theory, use the power to request significant volumes of information that might be subsequently determined not to be needed for the purpose of assisting the Secretary of State, but that none the less requires disclosure under this provision.
This is not a trivial matter. Businesses and business organisations have expressed their concern about the provision, because much of this information is already collected by HMRC and businesses do not want to have to provide it more than once, because of the time that that would require and the impact it would have on their day-to-day operation.
That prompts the question of why powers must be awarded that would replicate that which is already being done. If existing legislation does not provide for the Secretary of State to access this data, one may very well understand the need to stipulate that such information may be shared with his Department. However, if such information exists already, the burden should not be put on businesses to furnish the same information in a different format, simply because of a failure to collate the information that is already in the possession of Government Departments or agencies.
That is why we tabled amendment 26, which would allow the Commissioners for Revenue and Customs to authorise their officers to disclose such information to the Secretary of State for the purposes described in the Bill, and amendment 29, which would prevent the potential creation of duplicate or conflicting regulations.
Amendment 29 recognises that section 10 of the Small Business, Enterprise and Employment Act 2015 contains provisions on the disclosure of exporter information by HMRC. SMEs are, after all, the backbone of our economy and we should encourage them to increase exports and not bog them down with tax forms and administration that may put some businesses off exporting.
Currently, much of the information is contained in the various documents and forms that must already be furnished to HMRC. For example, there is mandatory Intrastat reporting, which requires goods exporters to submit on a monthly basis details of goods and exports within the European Union, subject to minimum annual thresholds. Of course, that measure is enforceable by the European Union, but perhaps the Minister will confirm whether it will continue to be enforceable under the terms of the European Union (Withdrawal) Bill. I imagine a note will wing its way to him about that shortly. [Interruption.] He already knows—impressive. There is always a first time.
Similarly, VAT-registered exporters are required to supply HMRC with EC sales lists that detail their EU customers, the respective country codes and the value of goods supplied to them. On top of that, customs declarations must be made that record product codes, transport modes, duties levied and other relevant information for the purposes of accumulating information on the number and identity of exporters.
The much-trumpeted new customs declaration service will allegedly be operating by March 2019. Will the Government be incorporating this reporting requirement into it, or will additional systems be needed? In other words, how does the Minister intend to avoid duplication? HMRC has already acknowledged that there is a risk that the new customs declaration service is unlikely to be in place by exit day, so it will be phased in, which will result in limited functionality and scope when launched. That prompts the question about whether the new customs declaration service will be geared up in time for the reporting requirements of the Bill. Will the Government consider additional resources for HMRC to carry out additional duties for all these additional reporting requirements?
Our amendments recognise that where such information may not otherwise be available, regulations may be passed to require other persons to disclose it. However, the Government must clarify whom the Commissioners for Revenue and Customs may so instruct. The provision is extremely vague and potentially awards sweeping powers to HMRC to request information from persons entirely unconnected to an exporter or indeed trusted agents and advisers who might otherwise be bound by a duty of confidentiality.
Clearly, as some of our witnesses suggested, many existing reporting obligations are applicable to the export of goods rather than services. That gap needs to be addressed. Unlike goods exports, which have commodity codes for export purposes, there are not the same proper definitions and appropriate attributable codes for services, which means that it is difficult to determine when a service becomes an export. If the Minister does not have the full detail on that, I will not be entirely surprised, but perhaps it is something for his officials to persist with. The service exports to which these provisions will apply must be qualified, particularly as the definition of what constitutes a service may be vague. Many businesses have significant group operations and may provide services between subsidiaries, which would be treated as intra-group charges. Do the Government intend to inflate service export figures by including those details?
Amendments 27 and 28 are designed to prevent services that should not or would not be considered to be exports from being considered such by requiring that only exports with appropriate codes and identifiers can be considered for those purposes; that includes new codes where needed. However, we also recognise and welcome efforts by HMRC to tackle abusive transfer pricing and aggressive tax planning. Can the Minister tell us whether HMRC will use that information for such purposes in addition?
Greg Hands
I thank the hon. Gentleman for his set of questions, which I will answer as far as I can. Let me start with why we need the data collection and sharing powers.
It is important that the Government have a more comprehensive understanding of UK exporters. The powers will allow the Trade Remedies Authority to fulfil its function by using full and proper data on the UK business population. They will also equip my Department with robust data to develop trade plans globally, and help us better to understand the impact of future trade agreements and policies so that we can direct our resources appropriately. Ultimately, that will provide better value for money for the taxpayer by enabling more targeted approaches to Government intervention and support for existing and potential exporters.
Clause 8 sets out the powers necessary for HMRC to share the data with the Department for International Trade and other Departments and organisations, for those bodies to carry out their public functions related to trade. I will come to the points raised by the hon. Gentleman in a moment, but those powers need to be wide enough to be able to withstand future institutional developments, so the clause will also allow HMRC to share the data with, for example: other bodies that DIT sets up to cover specific functions, such as the Trade Remedies Authority; bodies that carry out a public trade function, to ensure that the UK is able to put in place and maintain an independent trade policy as we leave the EU; and bodies outside the United Kingdom, such as the World Trade Organisation, with which the UK will be obligated to share data as part of our international obligations. That is currently done through the European Union; there is no change to the effect of that provision.
Amendment 32 would restrict the Government’s ability to take on functions related to trade formerly carried out by the European Commission, such as those related to trade remedies. You will know, Ms Ryan, that the European Commission currently does trade remedies investigations, a lot of which are data-driven. The amendment would hinder our ability to take such a data-driven approach ourselves.
Amendment 26 duplicates in clause 7 the necessary data sharing powers already set out in clause 8. Looking ahead to this country leaving the European Union, the amendment’s requirement to seek HMRC commissioner approval before any data is shared would also restrict the Government’s ability to share data at speed. It may be necessary, for example, to share data with the Trade Remedies Authority quickly or immediately when dealing with a trade defence case. I would not want the Trade Remedies Authority to be prevented from taking urgent action—sharing data about an important trade remedy quickly and efficiently, for example—in relation to a sector such as steel or ceramics because the Opposition had imposed an artificial delaying power with their requirement to seek HMRC commissioner approval before any data is shared.
Faisal Rashid
I understand what the Minister says about speed and things that have to be done, but many businesses, particularly small businesses, often struggle to stay on top of their reporting and administration requirements. There is a risk that any increased burden on them could put them off exporting. How do the Government intend to collect this information while ensuring that they do not place an unfair burden on small businesses?
Greg Hands
First, in the long run, small businesses will benefit from the Government being informed by a full set of data on the exporter community. It is difficult for the Government to set policy in relation to exporters without having a full picture of how many exporters there are and in which sectors. In the medium to long run, our ability to collect that data would help small businesses considerably. Secondly, the provision of that data will of course be voluntary. If a small business did not want to participate, for whatever reason, it would not be compelled to do so. It is very important to recognise that.
Anna McMorrin
What does the Minister intend to do with the information that is collected? Also, what international bodies do the Government believe that information—much of which may be commercially sensitive —should be shared with, and why should they require such data?
Greg Hands
On the international bodies, I refer the hon. Lady particularly to the WTO, with which we are actually obliged to share a lot of that data. Much of that data sharing is currently done through the EU, but once we are outside the EU we will be obliged to share that data with the WTO on a stand-alone basis. Domestically, sharing a lot of the data with the Trade Remedies Authority will enable it to be well informed as it looks at the impact of alleged dumping on UK domestic industry, which is, after all, the purpose of the TRA.
I will take an intervention from the hon. Member for Warwick and Leamington. [Interruption.] Oh, he had the same intervention.
Greg Hands
It is good to see people thinking similarly. Sharing data quickly and immediately may be necessary for, as I say, the TRA dealing with a trade defence case, or where data is immediately required in a fast-moving future trade agreement negotiation.
Clause 7 sets out the powers needed for the Government to collect data to establish the number and identity of UK businesses exporting goods and services. Amendments 26, 27 and 28 would narrow the ability of the Government, both now and in the future, to determine what data we wish to collect and how we may collect it. The Government should retain the ability to determine in the future what relevant trade information they may need to request from businesses, although I stress that providing that information is voluntary. At this time, we are not able to anticipate precisely what those needs will be.
On some of the individual points, I think the hon. Member for Sefton Central claimed that HMRC is unrestricted in what data it can source. I stress that the power in the Bill is to request information. The Treasury will specify what information will be requested, and will do so by regulations that will come before Parliament. There is no obligation on businesses to provide that information, although we say, and strongly believe, that it is in their interests to do so, to help to inform the Government’s export policy.
On additional resources at HMRC, I rather feel that that might be a debate for another day in another place. However, the resources given to HMRC post Brexit to deal with Brexit are already there. Various announcements have been made by the Chancellor of the Exchequer and the Chief Secretary to the Treasury over the last 18 months on that. I point out that the power has been assessed and its likely cost looked at. It has been deemed to be relatively inexpensive and overall will not add a cost burden on HMRC.
On inflating exporter numbers, I do not think that that would be accurate. The hon. Gentleman seems to think that there is some kind of Government plot to artificially boost the number of exporters, so that we can suddenly say what a great job we have done because the number has gone up. No—the purpose of collecting the data is to have an accurate picture of the number of exporters. For example, we know there are 5.7 million private sector businesses in the UK. HMRC collects export data from 1.9 million VAT-registered businesses. There are 2.2 million VAT-registered businesses in the UK. We therefore think that the Government do not collect any export data from about 4 million UK businesses. That is what we want to do. Our analysis suggests about 300,000 businesses in the UK could and should export but do not do so. The key is to find where those businesses are and encourage them to export, so that the UK does a much better job on exports.
The hon. Gentleman asked whether Intrastat will continue. When the UK leaves the EU, Intrastat will not be applicable for exports and will not continue in this case. Finally, there were questions relating to the interaction with the Small Business, Enterprise and Employment Act 2015. Similar to my response to amendments 26 to 28, the Government should retain the ability to determine in the future what relevant trade information they may need to request from businesses. At this time, we are not able to anticipate that precisely, but I have given some indication of the sort of areas we might look at and what all those needs would be.
Amendment 29 refers to powers in section 10 of the 2015 Act. Those powers relate to disclosure of existing exporter information by HMRC officials and therefore are not directly relevant to the powers in clause 7 relating to the collection of data. In other words, it is different data. Bearing all of this in mind, I ask the hon. Members not to press their amendment.
Bill Esterson
I thank the Minister for his answers. I was puzzled by one thing. Why does the Bill not specify that the data would be for sharing with the Trade Remedies Authority if that is the primary purpose in collecting it at this point? He says there will be other organisations, but it is a bit odd that the Bill does not say as much.
Our concern—a concern that comes from business—is about giving HMRC the power to request. That is an interesting phrase. Anyone who has had any dealings with HMRC as a business tends to experience that as a fairly strong power to request. If we asked most people who run businesses, they would say it is a bit more than a power to request; they interpret it as not having any choice in the matter. That is one of our big concerns, and I hope the Minister will take that on board.
The Minister made the point that this is about the medium to long run and there will be improvements for smaller firms over that period. By implication, that leaves out the short term. I would welcome a brief intervention to confirm the implication I gathered from what he said—that there may be a hit or an increase in the demands and burdens on smaller firms while the new system is settling down. I will give way to him if that is what he thinks is going to happen.
Greg Hands
I thank the hon. Gentleman for allowing me to intervene. I do not accept that there will be an increase in the burdens for anybody involved in this process, because it is a voluntary and essentially very limited process. I would say to him that the data could be extremely helpful in informing Government policy, and that is why he should withdraw his amendment.
Bill Esterson
I am grateful for that clarification. We are keen to avoid unnecessary reporting requirements and an adverse impact, especially on smaller firms, as this country needs them to do well in trade and exports. We are supportive of the right approach and the right level of data collection in achieving such an objective. In that spirit, I will not press amendments 26 to 28. We will press amendment 29 to a vote because we still think it is important to avoid the duplication of powers in the 2015 Act. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Amendment proposed: 29, in clause 7, page 5, line 3, at end insert—
“(3A) Regulations under subsection (1) may not make provision that could be made by regulations under section 10 of the Small Business Enterprise and Employment Act 2015.”—(Bill Esterson.)
This would avoid duplication, in respect of the collection of information from exporters, with the Small Business Enterprise and Employment Act 2015.
Question put, That the amendment be made.
Bill Esterson
I beg to move amendment 30, in clause 7, page 5, line 4, leave out subsections (4) and (5).
This would remove the Henry VIII power allowing for the modification of an Act of Parliament in respect of the collection of exporter information.
The Chair
With this it will be convenient to discuss amendment 31, in clause 7, page 5, line 10, leave out subsection (6) and insert—
“(6) Any statutory instrument containing regulations under subsection (3) may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, each House of Parliament.”
This would require Treasury regulations that make provision for exporters to supply information on their exports of goods or services to be subject to the affirmative resolution procedure.
Bill Esterson
The amendments would remove yet more Henry VIII powers, this time bestowed on Her Majesty’s Revenue and Customs and allowing for regulations to be made that may modify primary legislation. Using the powers, HMRC may change the nature of the information being sought under the regulations and the persons from whom such information may be requested, such that the resultant requirements on business may ultimately be substantially different from the scope implied under the clause. We are entirely opposed to the use of Henry VIII powers, as we have repeatedly said, and we do not believe it appropriate that any agent of Government has the powers to amend primary legislation by way of secondary legislation.
Amendment 31 would ensure that any regulation to which clause 7 applied must be subject to the affirmative procedure in this House, giving Parliament the proper opportunity to scrutinise any changes. There can be no good reason for allowing Henry VIII powers or the negative procedure to be used in those circumstances. I mentioned in my speech on the previous group of amendments the Small Business, Enterprise and Employment Act 2015 but it is worth drawing the Committee’s attention to section 10 of that Act, in particular subsection (6), where such regulations are subject to the affirmative procedure. Logic and consistency might suggest that that would be appropriate in this Bill too. Perhaps the Minister will explain why that was appropriate in the 2015 Act but is not in this one, despite the similar circumstances. In advance of the 2015 Act, HMRC published an explanatory memorandum on the use of the powers, noting that such information could well be sensitive and thus recognising a need to limit the scope of the information collected and subsequently shared:
“This is deliberately tightly drawn and specifies the categories of information that may be disclosed under the regulations, and is limited to less sensitive but nonetheless useful information.”
That brings us to amendment 32, which would remove HMRC’s power to share the information freely with other bodies or institutions, whether in the United Kingdom or overseas. We recognise the need to accumulate comprehensive statistics. We are mindful of the evidence from our witnesses, Professor Alan Winters of the UK Trade Policy Observatory and Anastassia Beliakova of the British Chambers of Commerce, both of whom called for the greater sharing of information. However, that is not the same as calling for the sharing of commercially sensitive information. In the light of HMRC’s explanatory memorandum to the 2015 Act, such sharing must be subject to limitations to prevent sensitive information from being shared freely.
The Chair
Order. We debated amendment 32 under the previous group of amendments and are now debating amendments 30 and 31. The hon. Gentleman needs to confine himself to comments on those amendments. I hope that is helpful.
Bill Esterson
Thank you for bringing me back on track, Ms Ryan.
I trust that the Committee recognises the impact that poor application of those powers might have on businesses. It may even result in entirely opposite outcomes to those intended. I look forward to hearing the Minister’s response to such concerns. I hope that he will address my questions about how some of the powers will be exercised and what measures will be put in place to protect our exporters.
Greg Hands
The clause sets out the powers that will enable the Government to establish for the first time ever the number and identity of UK businesses exporting goods and services. HMRC currently collects export data from approximately 70% of the 2.2 million businesses that are registered for VAT. As I said earlier, there are 5.7 million private sector businesses in the UK. That means we do not collect export data from about 4 million businesses. Our data does not include certain sectors, smaller enterprises and many exporters of services.
Why is it important that the Government have a more comprehensive understanding of UK exporters? First, the information will allow the Trade Remedies Authority to fulfil its function using full and proper data on the UK business population. Secondly, it will equip my Department with robust data to develop trade plans globally and will help us better to understand the impact of future trade agreements and policies in order to direct our resources appropriately. Ultimately, it will all provide better value for money for the taxpayer by enabling more targeted approaches to Government intervention and support for existing and potential exporters.
We are not able to anticipate all the data that we might need in future, including for those functions that I have just described to the hon. Gentleman. It is therefore vital that we retain the ability to specify the type of information to collect now and in the future to ensure that the Government are able to discharge fully all relevant trade functions.
Should amendment 30 be passed, it would not be possible to collect trade data through the tax return. We do not know whether the collection of such currently unknown data might, for example, require the modification of an Act of Parliament. I confirm to the hon. Gentleman that at such time as the Government specify what information we wish to collect and how we will collect it, we will return to this House, as is already set out in clause 7(5). I also assure him that any information collected and the way we request it will be done in such a way as to cause minimal cost to Government and business. I therefore ask him to withdraw his amendment.
Bill Esterson
I wish to press the amendment to a vote.
Question put, That the amendment be made.
Alan Brown (Kilmarnock and Loudoun) (SNP)
I beg to move, That the clause be read a Second time.
It is a pleasure to serve under your chairmanship again, Ms Ryan. The good news at this stage is that there are fewer notes written in advance—the Committee might be quite relieved about that. New clause 3 was originally drafted by colleagues from Plaid Cymru, and my hon. Friend the hon. Member for Livingston and I were more than happy to add our names in support. Actually, we have been completely vindicated on that given how events have panned out today. There have been no concessions to any Scottish Government or Welsh Government amendments. The Government voted down the Labour amendment that would have allowed impact analysis to be undertaken and at least understood. They have excluded any provisions for devolved authorities to be involved in the Trade Remedies Authority.
The new clause is quite simple: it seeks to propose a sub-committee of the Joint Ministerial Committee, to look at effects in the devolved nations of any international trade agreement implemented by the powers in the Bill. It is simple, effective and it does not create a whole new body, because it just creates a sub-committee of the existing JMC. In terms of administration, it should not be excessive, and so I ask members of the Committee to support the new clause.
Greg Hands
I can be brief. The Government have made it clear that they seek to maintain the effects of the UK’s existing trade agreements. We make this commitment in relation to all parts of the United Kingdom, which means that we do not intend Scotland, Wales, Northern Ireland, or indeed England, to be disproportionately impacted by our transitioning of these agreements. As we have committed to seeking continuity in the effects of existing agreements, the impact of the transition should be neutral on all parts of the UK.
In relation to consultation with the devolved Administrations, as we have laid out frequently on Second Reading and in Committee, the Department for International Trade ensures that each of its Ministers, as well as directors and other senior officials, visit the devolved Administrations regularly and continually look for further opportunities to engage with a range of stakeholders across the UK.
Hannah Bardell
The Minister will forgive me if I find his comments somewhat ironic given what has been in the press over the last couple of days about impact assessments. Does it not seem reasonable that the Joint Ministerial Committee—which, as my hon. Friend says, is already in place—should have a sub-committee? He may think that as things stand there may not be an impact on the devolved nations, but I am sure that, like the rest of us, he does not have a crystal ball. Would it not make sense to put into legislation the ability for the devolved nations to have a sub-committee of the JMC to make it the best possible legislation that it can be?
Greg Hands
I accept the hon. Lady’s intervention, and she makes a case, but my point is that it is not necessary to have the review. These are existing agreements that, in a huge number of cases, are already in place. Some have been in place for a long time. The hon. Member for Kilmarnock and Loudoun says that an additional review process will be simple and effective, but I am not quite so sure. For example, the amendment makes neither reference to the intended product of such a review—how the review process would work—nor to the continued role of the devolved Administrations in the review after it has been reported.
I think it is much better that we stick with our position of consulting frequently and engaging with the devolved Administrations, without an extra review of agreements that are already in place. We have been clear that we will continue to engage with the devolved Administrations as we transition these agreements, therefore we do not need to commit this kind of review to legislation. I therefore ask the hon. Gentleman to withdraw the clause.
Barry Gardiner
It is appropriate to once again read out the long title of the Bill:
“To make provision about the implementation of international trade agreements”.
Everything that the Minister is saying ignores that the scope of the Bill precisely admits that we should be able to put into statute the procedure that the hon. Members for Livingston and for Kilmarnock and Loudoun have suggested.
The Minister has told the Committee that the Government
“will continue to engage with the devolved Administrations as we transition our current agreements”
and that:
“The Department for International Trade engages regularly with the devolved Administrations”.––[Official Report, Trade Public Bill Committee, 25 January 2018; c. 128.]
It is therefore surprising that the Government have not proposed any formal engagement procedure to ensure a statutory footing for consultation on the issues presented by the Bill—particularly given the Government’s approach to consultation thus far, which has been little more than lip service and press releases. An example of that was when the consultation for the Bill closed on 6 November and the Bill was published a few hours later on the morning of 7 November.
Modern trade agreements have extensive coverage, with chapters setting out substantial provisions in a range of areas, many of which might well be considered to touch upon matters that otherwise would be within the competence of the devolved authorities. We have gone over this ground in previous sittings, when we considered how trade agreements impact on our fishing industry, food standards, services regulation, agriculture, public services, procurement and so on. The day-to-day oversight and administration thereof may be wholly within aspects of devolved competence; however, the obligations that arise from a trade agreement might require changes to the way that those matters are managed. A question might then arise regarding when such a matter ceases to be a trade matter within the exclusive competence of the UK and becomes a matter within the competence of the respective devolved Administration.
That is why many other countries have set out formal consultation frameworks with their own constituent administrations, which may also have a degree of devolved competence. Indeed, the United States has such an engagement process to ensure that state-level representations can be fed into the negotiating process—albeit it is a process that is subject to controversy in various states that have sought to implement a much more robust consultation process, and have derailed the extension of the fast-track trade negotiating authority.
Canada has a similar process in order to ensure that, once an agreement has been concluded using the federal Government’s exclusive competence, it does not come unstuck at implementation stage. In his response to questions about the need for stakeholder engagement as early as possible in trade negotiations, our witness, Nick Ashton-Hart, noted that
“the political economy demands that you have the backing, as a negotiator, at home when you are sitting across the table from your counterparties and that they know that you have that…People know that you have to get to a sustainable deal also, and sometimes you have to do a concession at the right time to solve a problem in a domestic constituency for your counterparty”.––[Official Report, Trade Public Bill Committee, 23 January 2018; c. 10, Q12.]
The hon. Member for Kilmarnock and Loudoun touched on the concerns raised by another of our witnesses, Professor Winters of the UK Trade Policy Observatory, who noted that we cannot have a situation in which a trade agreement might be unpicked once it had been concluded. Therefore, he said,
“Parliament and the devolved Administrations need to have an important role in setting mandates, and there need to be consultation and information during the process.”—[Official Report, Trade Public Bill Committee, 23 January 2018; c. 58, Q111.]
The United Kingdom is clearly not unique in facing this matter; that is also the experience of other countries, many of which the Secretary of State is alleged to have identified as prospective gold trading partners. Those very countries may well wish to see a similar framework formally constituted in the UK before we come to the negotiating table. The European Union levelled that request at Canada prior to commencing negotiations on the comprehensive economic and trade agreement. The JMC appears to be an entirely appropriate forum for such consultation in the UK’s case. It would provide us with an off-the-shelf committee with the express purpose of seeking to avoid such complications.
The memorandum of understanding between the UK and the devolved Administrations notes that the four respective Administrations agreed
“to alert each other as soon as practicable to relevant developments within their areas of responsibility, wherever possible, prior to publication”—
of course, the GPA, which the Minister did not refer to, is one such case that is quite specifically about implementation within the devolved Administrations’ competence—
“to give appropriate consideration to the views of the other administrations; and…to establish where appropriate arrangements that allow for policies for which responsibility is shared to be drawn up and developed jointly between the administrations.”
Furthermore, in recognition that a commitment to engage may not be sufficient in certain cases, the memorandum of understanding sets out provisions for a formal consultation framework to ensure that engagement on such matters is more than just lip service.
Acknowledging that there will, of course, be matters relating to international issues that will touch on devolved matters, the memorandum of understanding requires the fullest possible engagement on such matters and sets out the framework for the Joint Ministerial Committee. Its terms of reference are
“to consider non-devolved matters which impinge on devolved responsibilities, and devolved matters which impinge on non-devolved responsibilities…where the UK Government and the devolved administrations so agree, to consider devolved matters if it is beneficial to discuss their respective treatment in the different parts of the United Kingdom…to keep the arrangements for liaison between the UK Government and the devolved administrations under review; and…to consider disputes between the administrations.”
The Government could have considered their own appropriate framework or forum for a proper consultation process with the devolved authorities and other key stakeholders in advance of beginning trade negotiations. The Secretary of State has, for example, reconvened the Board of Trade, of which he has appointed himself the president. Of course, for the Board of Trade to be effective, it would likely require significant expansion of its membership. Currently, I believe it has the sum total of one person—namely, the Secretary of State himself.
The creation of a formal consultation forum is essential before and during the negotiating process. In that respect, we will support the new clause. Of course, I wish to draw the Committee’s attention to our new clause 11—I hope it will be considered in a later sitting—which seeks to ensure that the JMC is convened for all trade agreements, including new trade agreements that correspond to existing EU agreements.
I hope that Government Members recognise from the Committee’s deliberations that this Bill contains a serious threat to the powers of the devolved Administrations, and that the installation of an appropriate consultation procedure to address such matters will assist Ministers in concluding agreements. Although this amendment seeks to mitigate any complications that might present at implementation stage after an agreement has been concluded, the Bill still fails to address the very serious concerns about the dilution of the devolved authorities’ powers in matters that may be considered within their devolved competence. In that respect, I ask the Government to address this matter either by supporting the new clause or by way of their own amendments to the Bill before it proceeds, with such amendments making clear that powers afforded to Ministers of the Crown under the Bill will not, and cannot, be used to undermine the rights and powers of the devolved Governments. If the Government do not seek to do that before the Bill progresses to its next stage, I assure the Minister that the Opposition will.
Greg Hands
Very briefly, in response to that long speech I have only three points to make. First, there is no serious threat to the devolved Administrations. What we are talking about is the transition of existing free trade agreements. The hon. Gentleman’s points—his parallels with the United States and so on—seemed to relate entirely to future trade agreements and not to the continuity of existing trade agreements. I also point out to him that the Secretary of State for International Trade has not appointed himself President of the Board of Trade. The Prime Minister has appointed him President of the Board of Trade.
Most importantly, the Bill is all about continuity and the technical transition of existing free trade agreements. The hon. Gentleman’s points seem to relate to future trade agreements, which will be a matter for another day.
Alan Brown
I take on board what the Minister says and know that logically it is correct in theory: this is just the roll-over of existing EU agreements into UK law. However, as the hon. Member for Brent North said, and as we heard from witnesses, there is still a risk that, even in trying to move over existing agreements, some matters come up for renegotiation. It is not crystal clear how matters will pan out and the new clause would at least give the protection of full analysis of the impact on the devolved nations in terms of any adjustments that end up happening in due process when we move over the existing agreements.
We have previously expressed our concerns about the UK Government getting competency in devolved matters, and the new clause would wrap up that aspect. For that reason, I will press the new clause to a vote.
Question put, That the clause be read a Second time.
Judith Cummins (Bradford South) (Lab)
I beg to move, that the clause be read a Second time.
The new clause calls for a process of review to examine the operation and impacts of all free trade agreements to which the Bill applies. Once again, let me make it clear that this applies to those comprehensive free trade agreements that are notifiable under GATT article XXIV and GATS article V. It does not apply to the many other trade agreements that fall under the undefined category of clause 2(2)(b).
We have already pressed for sustainability impact assessments to be conducted in advance of the start of negotiations towards those future UK free trade agreements that do not have a corresponding EU agreement. The new clause calls for there to be a parallel process of review after our free trade agreements have been in force for 10 years, and subsequent reviews every 10 years thereafter, which is essential to see how the agreements have worked and their effects. It will apply to all free trade agreements that fall within the scope of the Bill.
The call for regular reviews mirrors our earlier call for sustainability impact assessments in respect of the sectors to be covered, which would be a full disaggregation of the economic and social impacts of each free trade agreement, including the various regional impacts in different parts of the UK, as well as the impact on human rights, the environment, animal welfare and the interests of developing countries. Although the sustainability impact assessments to be carried out prior to new negotiations are ex ante, the reviews should represent a parallel process as far as possible ex post.
We have resisted the call from some quarters to require the reviews to take place every five years. Although we are keen to ensure regular monitoring of the impacts of any free trade agreements, we believe it will be more effective, given their reach and potential long-term consequences, to undertake fully comprehensive reviews less frequently, although the new clause provides for the option of holding earlier reviews when there is obvious social or economic harm as a result of a particular agreement.
The UK has an opportunity to establish best practice when it comes to the evaluation of international trade agreements. The EU produces annual reports on the workings of free trade agreements and can mandate a specific focus where there are particular concerns. For instance, the EU-Korea free trade agreement requires its annual monitoring reports to focus on sensitive sectors in addition to the standard implementation review. The EU also commissions more comprehensive external evaluations on a less regular basis—a major evaluation of the same EU-Korea free trade agreement is currently being conducted by two independent German institutes. It is examining a wide range of economic, social and environmental impacts of the agreement, including its impact on developing countries.
In addition, many countries have subjected their bilateral investment treaties to a thoroughgoing review in light of problems encountered as a result of the inclusion of investor-state dispute settlement clauses in previous treaties. Those reviews have led a number of Governments to question their previous agreements and in some cases to introduce radical alterations to the investment protection regime. Bilateral investment treaties have typically been subject to fixed terms of duration, after which it is possible to terminate them unilaterally, with reduced notice.
The Government will appreciate the wisdom of setting up a longitudinal system so that we can learn from the experience of our free trade agreements. Setting up such a system at the moment when the UK once again reclaims responsibility for trade policy will allow us to build a comprehensive set of data through which to register what has worked best and what still needs to be improved.
Hannah Bardell
I commend the hon. Lady on an excellent speech and an excellent new clause. Given the mess that the Government have got themselves in over impact assessments—it is making headline news around the world and we are becoming an international embarrassment as a result—does she agree that putting it in legislation that Governments of whatever colour must make proper impact assessments relating to whatever trade deals they have now or in future is absolutely vital?
Judith Cummins
I wholeheartedly agree with the hon. Lady that this is a straightforward example of best practice. We have a unique opportunity to get this right from the outset, and our new clause would allow us to do just that.
Greg Hands
The trade White Paper stated that our future trade policy would be transparent and inclusive, and we are committed to working with Parliament and the wider public to ensure that that is the case. It is important that the potential effects of trade agreements are considered as part of our trade policy, which is why the Government already conduct impact assessments on EU trade agreements where appropriate. However, it is not appropriate to legislate for that requirement in this Bill, which deals only with our existing trade arrangements.
I have to say that the new clause is not particularly well thought through. It calls for a review on each of the 40-plus agreements not just once, but twice. In 10 years —renewable in 20 years—there could be 80 or more reviews of these agreements, most of which are already in operation. Come 2039, the new clause might entail the Government conducting a review of an agreement that by then would already have been in place for 40 years. Therefore, the new clause should be withdrawn; it is not necessary.
Judith Cummins
I am struck by how limited the Minister’s ambition is for the UK. As I said in my speech, we have a unique opportunity to get this right and therefore I will press the new clause to a vote.
Question put, That the clause be read a Second time.
Alan Brown
I beg to move, That the clause be read a Second time.
The new clause is about how the Bill will be managed through the transitional period upon leaving the EU. To date, the Government have not clarified how a transitional period will affect the various legislation related to the UK’s withdrawal from the EU. To be fair to the Government, there is an obvious reason why they have not clarified that: as yet, there are no arrangements in place in terms of a transitional agreement, so they do not know what form a transitional period will take, how long it will be or if there will actually be one.
Assuming that the extreme Tory Brexit is averted and a deal concluded with the EU that includes an agreement on a transitional period, the new clause requires the Secretary of State to lay a report before Parliament ahead of the UK’s EU withdrawal on the application of this Bill during such a transitional period. The Minister might argue that the Bill relates only to existing EU agreements and to bringing legislation over. There have already been discussions about what happens if deals are signed but not ratified or further deals come on board with the EU. Those matters might need to be considered in terms of a transitional period, because they all relate to the terms of that period. This new clause aims to ensure that Parliament fully understands the impact of the transitional period and how the legislation will work.
Greg Hands
I am surprised that the official Opposition do not have anything to say to this clause. I thought that they took quite an interest in the application of the implementation period, but it appears not.
In any case, new clause 9 would require the Government to report to Parliament on how the Bill will be applied during the implementation period. I recognise the desire for clarity on how an implementation period will work and, specifically, how the powers in the Bill will be used in that period.
Irrespective of the exact terms of the implementation period, which need to be negotiated with the EU, as it stands the UK will no longer be part of existing EU FTAs or the government procurement agreement on leaving the EU. We will need the powers in the Bill to ensure continuity in our trading arrangements.
I also recognise the desire for clarity specifically on how trade remedies will work during an implementation period. We want to provide continuity to British industries, including retaining meaningful access to trade remedies.
Parliament will have plenty of opportunity to scrutinise an agreement between the UK and the EU, including on an implementation period. We have already committed to a vote on the final deal, and major policies in the withdrawal agreement will be enacted through primary legislation in the form of the withdrawal agreement and implementation Bill. I therefore ask the hon. Member for Kilmarnock and Loudoun to withdraw his new clause.
Barry Gardiner
The idea that the official Opposition have nothing to say on the matter is entirely wrong, but we have little to say because we agree with the new clause that is being proposed. We believe that it is eminently sensible. We are entering into a transition period, and it is right that Parliament should be brought up to date with what the Government’s intentions are. The new clause would do that. It is perfectly sensible.
Alan Brown
I listened to the Minister, who says that there will be lots of opportunity to debate the implementation period elsewhere and that, ultimately, we will have the take-it-or-leave-it vote in Parliament, but I would rather have security on these matters in the Bill. For that reason, I will press the new clause to a vote.
Question put, That the clause be read a Second time.
Trade Bill (Eighth sitting)
Thursday 1st February 2018
(6 years, 9 months ago)
Public Bill CommitteesRead Full debate Trade Bill 2017-19 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 1 February 2018 - (1 Feb 2018)
The Committee divided: - Ayes: 8 / Noes: 9 - Question accordingly negatived.
The Committee divided: - Ayes: 6 / Noes: 9 - Question accordingly negatived.
The Committee divided: - Ayes: 5 / Noes: 9 - Question accordingly negatived.
The Chair
We resume line-by-line consideration of the Bill. Proceedings must finish by 2 pm. The selection list for the sitting is available in the room.
New Clause 10
HMRC: impact
“No later than 12 months after this Act has come into force, the Secretary of State shall lay a report before Parliament on the impact of the provisions of sections 7 and 8 of this Act on the expenditure and staffing of HMRC.”—(Alan Brown.)
This new clause would require the Secretary of State to lay a report before Parliament on the impact of Part 3 of this Act on the expenditure and staffing of HMRC.
Brought up, and read the First time.
Alan Brown (Kilmarnock and Loudoun) (SNP)
I beg to move, That the clause be read a Second time.
It is a pleasure to serve under your chairmanship, Mr Davies. I will try to assist the Committee with concluding proceedings before 2 pm.
The new clause is all about the Bill’s impact on Her Majesty’s Revenue and Customs. The history so far is that, instead of taking back control, the Brexit process appears to be an interdepartmental bun fight for resources, both cash and human. Right now, there is a Brexit gravy train for consultants, and experts are suddenly back in demand. That was confirmed by the Chancellor, when in the autumn Budget he allocated a further £3 billion over the next two years to Brexit preparations.
Brexit will cause an unprecedented rise in workload for HMRC, whatever customs and tariff arrangements are made. In addition, goods traded with the EU will need to be accounted for as international exports. That is all happening at a time when, as all Members know, the Tory Government are slashing staff and closing HMRC offices across the nations of the UK.
At the same time, HMRC is launching a new customs declaration service, starting in August 2018, with the intention that it will be implemented in full by January 2019. That will replace the customs handling of import and export freight system, which is nearly 25 years old and cannot be easily adapted to new requirements. I think everyone on the Committee will be cynical about that—who has ever heard of a massive IT project that goes live on time and is easily adaptable to suit future processes?
There are serious concerns about whether the system can be put in place properly just a few months before Brexit, given that customs declarations are expected to more than triple once the UK leaves the EU. The National Audit Office has said that the number of customs declarations could increase from 55 million to 255 million if tax and duties must be collected on trade between the UK and EU.
Hannah Bardell (Livingston) (SNP)
My hon. Friend is making an excellent speech. Does he agree that what we have seen across the UK, including from the National Audit Office and the Public Accounts Committee, is huge criticism of the UK Government’s change programme? In my constituency, they want to centralise the Livingston HMRC office to Edinburgh. There will be a devastating impact on communities and the continuity of services will be impacted just a moment before these other plans take place. The Government should rethink the process wholesale.
Alan Brown
It will come as no surprise that I completely agree with my hon. Friend. The closing of HMRC offices is yet another example of the left hand not knowing what the right hand is doing and of a complete lack of strategic thinking.
Jon Thompson, the chief executive of HMRC, has warned that border and tax checks post-Brexit could require an additional 5,000 staff, with new customs checks costing the taxpayer up to £800 million. Given the uncertainty about future customs arrangements, the fact that HMRC is already undertaking a system overhaul, that the number of declarations could increase fourfold and that transitional arrangements are still unknown, it makes complete sense to assess the impact on HMRC, which is responsible for the taxing and checking of trade that will arise from the Bill.
The new clause would allow for greater parliamentary scrutiny and force an internal departmental impact assessment. This week alone has shown that it takes much effort to force the Government’s hand on impact assessments and for them to be up front about what the impact of Brexit will be. That is why I move the new clause.
Bill Esterson (Sefton Central) (Lab)
Welcome back to the Chair, Mr Davies.
May I say how much I agree with the comments of the hon. Member for Kilmarnock and Loudoun? The impact of HMRC closures, which the hon. Member for Livingston mentioned, on communities and on those losing their jobs was well stated. The same is true of my constituency, with the closures in Bootle and Liverpool.
The Minister advised the Committee in an earlier sitting that
“the resources given to HMRC post Brexit to deal with Brexit are already there.”
He also said that
“the power has been assessed and its likely cost looked at. It has been deemed to be relatively inexpensive and overall will not add a cost burden on HMRC.”––[Official Report, Trade Public Bill Committee, 30 January 2018; c. 261.]
I therefore trust that Government Members will support the new clause, as the hon. Member for Kilmarnock and Loudoun said. The Opposition will support it.
Of course, the Minister may well see fit to release the cost analysis he referred to in order to allay not only our concerns but those of the business community about the impact of additional duties on HMRC, given the significant task it faces in preparing for Brexit and in the light of the up to 40% cuts in staffing levels it has faced over recent years. The Minister referred to funding that has been made available to HMRC to support its preparedness to be Brexit ready. Will he tell us what that funding is, or confirm that it is the £250 million that the Government have made available to the cross-departmental and inter-agency border planning group?
Faisal Rashid (Warrington South) (Lab)
Does my hon. Friend share my concern that HMRC is already significantly understaffed? There have been widespread complaints over the last two years about poor customer service and the closure of hundreds of offices across the country.
Bill Esterson
Absolutely. I know that many of my hon. Friend’s constituents in Warrington are affected by those closures. We clearly cannot on the one hand see cutbacks, and on the other hand expect an expansion of HMRC’s work commitments.
The Public Accounts Committee recently published its report, following an inquiry into our Brexit readiness, in respect of the border planning group. It raised concerns that
“HM Treasury’s usual business model is inadequate for allocating Brexit funding to departments who are forced to operate together, at pace, to a hard deadline.”
That seems pretty clear to me. When giving evidence to that Committee, representatives of the relevant bodies on the border planning group explained that funding was released on a case-by-case basis, and demonstrated that much of the funding had yet to be drawn down.
HMRC is still wrangling with HM Treasury over a £7.3 million drawdown to cover upgrades to the CHIEF customs system—I think that is what the hon. Member for Kilmarnock and Loudoun was referring to—in order to level up functionality. HMRC also told the Committee that it was not expecting any shift in the risk profile of goods coming into the UK from the EU, and that it had “no evidence to suggest” that there would be increased trade flows with non-EU countries after Brexit. Will the Minister confirm whether his Department’s assessment matches that of HMRC, and that our standards and regulations will match entirely those of the EU, such that the risk profile of goods in or out remains the same?
HMRC has planned operating resources for no change after we leave the EU, per the evidence it gave to the PAC. Will the Minister confirm that it is Government policy for there to be no change in the regulations? Will he also confirm whether HMRC was right to say that there is “no evidence to suggest” that there will be increased trade flows with non-EU countries after Brexit? He is looking at me with a puzzled look, as he often does.
Bill Esterson
I was not taking it personally. I have seen him with that puzzled look on many occasions, not just when I am speaking—often it is in response to comments from those his own side.
If the Department for International Trade has any purpose, it is surely to absolutely change the volume of trade after Brexit. That, in turn, suggests that HMRC was not right to say that there would be no changes in trade flows. It also suggests that HMRC is significantly under-resourced, which is more to the point, if it is operating on a no-change assumption. HMRC’s new customs declarations service is geared up for a fivefold increase in customs processing once we leave the EU. Surely the Minister accepts that that is likely to put severe strain on HMRC’s capacity and significant strain on its resourcing.
What the Government and HMRC have said appears to be at odds when it comes to standards and regulations, and whether they will match—especially the comment about there being “no evidence” of increased trade flows. [Interruption.] I thought that the hon. Member for Livingston was trying to intervene, but she is not.
Faisal Rashid
I will give my hon. Friend a rest. Does he share my concern that if HMRC is not adequately resourced to collect and disseminate data in relation to our exports, placing any additional burdens on businesses to furnish that information is entirely unhelpful?
Bill Esterson
Absolutely. We made that point earlier in our proceedings and my hon. Friend makes it extremely well.
Coming back to what the hon. Member for Kilmarnock and Loudoun said, HMRC has suggested to the Public Accounts Committee that it will need 3,000 to 5,000 extra staff to perform effectively post-Brexit, but that will depend on the level of risk that Ministers are willing to take. The Public Accounts Committee received written evidence suggesting:
“There are very few International Trade businesses, both importers and exporters, who take Customs compliance seriously”
and that businesses need more support from HMRC to deal with post-Brexit requirements.
If that is the case, clearly a voluntary information disclosure, which the Minister has assured us the Trade Bill makes provision for, would be entirely futile as a means of gathering the information his Department requires. I note, as I did on an earlier occasion, that the Bill does not suggest that it is voluntary, and we are not aware of any business that would ever consider a request from HMRC to be voluntary in nature. The second point—that businesses require more support from HMRC to deal with post-Brexit requirements—is more telling; it further suggests that there will be a significant strain on HMRC’s resources if it is to carry out its existing functions, let alone carry out new ones.
If those new functions are subject to voluntary application, will they also be subject to voluntary roll-out from HMRC? In that case, perhaps there will be nothing to report in 12 months’ time. The additional burdens being placed on civil servants to prepare for Brexit are significant, and with limited resources being made available to support those endeavours, we are right to be concerned about the ongoing operability of HMRC, and indeed other public bodies. That is why we shall support the new clause.
Barry Gardiner (Brent North) (Lab)
Very briefly, I commend the hon. Member for Kilmarnock and Loudoun for tabling the new clause.
We have seen in recent days that the Government are usually reluctant to release any impact assessments or reports of any substance, for fear that they will prejudice negotiations and put the Government in the most awkward position. However, I am sure that the hon. Gentleman will take heart from the fact that it is now usual for the Government, 24 hours after saying that they will not publish a report, to decide that they will do so anyway. I confidently expect the Minister to stand up and say that those on the Government Benches cannot support the new clause—we will support it, as my hon. Friend the Member for Sefton Central said—but the hon. Member for Kilmarnock and Loudoun should not worry or be discouraged, because I have no doubt that within 24 hours, the Government will see sense.
Greg Hands
Welcome back to the Chair, Mr Davies; it is a pleasure to serve under you, as ever.
Clause 7, as we know because we debated it at length on Tuesday, sets out the powers that are needed for the Government to collect data to establish the number and identity of UK businesses exporting goods and services. Clause 8, in turn, sets out the powers that are needed for HMRC to share data with the Department for International Trade and other Departments and organisations in order for those bodies to carry out their public functions in relation to trade. Any trade information collected or shared by the Government under clauses 7 and 8 will come at minimal cost to business and the taxpayer—I will go into a bit more detail in a moment—and will be below the threshold needed for an impact assessment and review.
To deal with some of the points raised in the debate, the hon. Member for Kilmarnock and Loudoun asked about the impact on HMRC. I can confirm that HMRC will not require additional staff or resources for this function as a result of the data provision in the Trade Bill. From what the hon. Members for Sefton Central and for Brent North said, it sounded as if they are going to vote for the new clause. The different Opposition parties seem to be attacking the issue from different angles. Although the hon. Member for Kilmarnock and Loudoun said that too much resource is going to some places—I think that he called it the “Brexit gravy train”—the hon. Member for Sefton Central seemed to say that resources were too limited. However, I think that they are both coalescing around voting for the new clause.
Alan Brown
To clarify, I was talking about the Brexit process as a whole. It is certainly a gravy train for consultants, because the Government do not have the expertise in house.
Greg Hands
Well, I guess we will leave it at that. I accept the hon. Gentleman’s intervention to clarify precisely what he meant by the “Brexit gravy train”, but let us look at the truth.
The truth is that collecting the data will involve minimal cost to Government and business. The cost will certainly be below the level at which an impact assessment must be published, which is £1 million. I do not know what the cost of the hon. Gentleman’s assessment might be, by contrast, but the cost of the provision in the Bill will be less than £1 million. The Regulatory Policy Committee confirmed to my Department during the course of our analysis that no impact assessment was therefore needed, due to the low costs associated with the provision.
Matt Western (Warwick and Leamington) (Lab)
Does the Minister accept the interpretation that businesses will need additional support and that that is what is being proposed? HMRC will need additional capacity to help small businesses. Given that the Government and the Secretary of State are determined that businesses will look for new markets to diversify, those businesses will have a lot to do, so we need to give them as much assistance as possible.
Greg Hands
I agree, which is why we have made additional resources available for HMRC. We recognise that it will require additional staff, and that is being discussed. However, that does not relate to this Bill and this power. That is the most important thing to realise. The hon. Gentleman’s points about the generic nature of HMRC are well made, but my point is that this power will be introduced at minimal cost and will not affect the overall equation. The point that he raised about additional resources being needed for HMRC overall is not in dispute.
Matt Western
The Minister is being most generous. My point was that the report that we are requesting would help us to better understand the implications for HMRC.
Greg Hands
I do not think that that is necessary. The work that has been done shows that the cost would be less than £1 million. The new clause is all about trying to work out the cost of this particular measure, not about the wider implications for HMRC.
The hon. Member for Sefton Central asked whether this is a futile exercise. I say to him that we will be able to target support directly and ensure that UK business is at the forefront of post-Brexit opportunities, thanks to the data that this provision may well realise.
Finally, I remind the Committee that the Government currently do not collect any export data at all from about 4 million UK businesses. Our analysis elsewhere suggests that about 300,000 businesses in the UK could and should export but do not. We need this limited data collection and sharing power to be able to find and help them. I therefore urge the hon. Member for Kilmarnock and Loudoun to withdraw the new clause.
Alan Brown
I listened to what the Minister said. Clearly, if we stick to the existing trade agreements, nothing will change and everything will be much the same. Although there may be a logic to that, I will press the new clause to a vote because it would allow the Government to print an impact assessment that shows that nothing will change, that everything will be okay and that there will be no impact on HMRC. I would have thought that the Government would be happy to do that, and that it would not take too long.
Question put, That the clause be read a Second time.
Barry Gardiner
I beg to move, That the clause be read a Second time.
I made brief reference to this new clause during our discussion of new clause 3, but let me set out in a little more detail why we believe it is required. We have heard from the Minister about the Government’s intention to engage with the devolved authorities in respect of matters that may fall within devolved competences. However, if the Government are to demonstrate that they are serious in this regard, they must ensure that such a consultation framework is established in the Bill.
Modern trade agreements are increasingly broad and comprehensive, and extend into all aspects of governance, public policy and commerce. Inevitably and invariably, trade agreements will impact on matters that have long been, and rightly are, considered to be matters of devolved competence, albeit that our obligations to date have been determined at European level. The Government need to give clarity in the Bill about when an obligation ceases to be a trade matter that is within the exclusive competence of the UK and becomes a matter that is within the competence of the respective devolved Administrations.
We have heard that this matter is not unique to the United Kingdom. It is an emerging issue around the world, so we must consider it from an international perspective and ask ourselves not just what satisfies immediate domestic policy objectives but what we would demand from would-be trade partners who face similar issues and, perhaps more importantly, what they would expect from us.
I again refer the Committee to Nick Ashton-Hart’s evidence:
“the political economy demands that you have the backing, as a negotiator, at home when you are sitting across the table from your counterparties and that they know that you have that. They can watch your processes of consent and agreement and evaluate where your weaknesses are—where there are buttons they can push, but also where you are likely to need support.”—[Official Report, Trade Public Bill Committee, 23 January 2018; c. 10, Q12.]
We would be nothing short of foolish to allow our trade negotiators to commence talks without first having consulted and engaged with our constituent interests, which absolutely must include the devolved authorities. Trade negotiations can be brutal. The Americans have no qualms in telling us that they refer to counterparties to such talks not as “partners” but as “adversaries”. Any weakness in position or failure to come prepared can be extremely costly and damaging—especially so if complications are presented later when the Government seek to ensure implementation and compliance with the obligations stemming from the concluded trade agreement. A whole-of-Government approach is required, not only to avoid later difficulties but to ensure the democratic will is represented fully in the determination of our international outlook and the relationships we will form with other states.
Other countries have sought to create a consultation framework to mitigate any such complications at the earliest possible stage of the process. The US has its Trade Promotion Authority, born of the fast-track scheme. There are problems and complications with it, but it is there. The Government of Canada have given a much greater role to the country’s provinces in setting mandates and consulting in negotiations, as a result of the EU’s refusal even to begin trade talks unless it had confidence that the provincial governments would ultimately agree to implementation. Will the Minister tell us whether any of the trade working groups and dialogues that the Government have established with would-be trade partners have yet covered that issue, or whether the issue has been raised in the provisional soundings taken of the third countries with which we seek a trade agreement that corresponds with one they might have with the EU?
It is rumoured that the Government’s preference is to mirror as much as possible the Australian trade policy model. In Australia, no such formal consultation exists with state governments. They have the same rights as any other lobbyist: they can submit responses to open consultation in advance of the conclusion of trade agreements. Of course, that approach presents entirely different problems, and it would be foolhardy to believe otherwise. We have seen the Queensland state government implement policy that ignores obligations under Australia’s trade agreement with New Zealand in order to deliver on Queensland’s public interest and economic performance duties.
Will the Minister tell us what discussions his Department has had with each of those countries in this respect? Have concerns been raised about consultation with our devolved authorities? Conversely, have we asked about theirs? Perhaps the Government have given assurances that they intend not to consult with the devolved authorities and will use the powers in the Bill to override devolved competence. Perhaps it is a case of “put up and shut up”.
Faisal Rashid
On that point, is my hon. Friend aware that the Institute for Government found that in other countries, such as Canada, buy-in from provinces is crucial to make trade agreements such as the comprehensive economic and trade agreement work? The institute states that, otherwise, it is “political hell”. Does he agree that, similarly, the political buy-in of the devolved Administrations in the UK is necessary to implement trade agreements, and that early consultation and involvement is necessary to avoid political hell?
Barry Gardiner
Absolutely. My hon. Friend uses language that I would not wish to use in the Committee, but it is certainly a political mess. I think we can see that other countries have taken their responsibilities to their trading partners seriously, as well as their responsibilities to their constituent states, provinces and members. That is what we are seeking to do through the new clause.
Matt Western
It is a privilege to serve under your chairmanship, Mr Davies. I was particularly struck by what Elspeth Macdonald, the deputy chief executive of Food Standards Scotland, said. Perhaps my hon. Friend agrees with her. In giving evidence, she said:
“The principal issue with the Bill that causes us great difficulties is the way in which it constrains the ability of the Scottish Parliament and Scottish Ministers, and consequently our ability, to act and regulate in ways that are considered appropriate for businesses and the public in Scotland.”—[Official Report, Trade Public Bill Committee, 25 January 2018; c. 95, Q172.]
Barry Gardiner
I thank my hon. Friend, because that evidence is absolutely apposite to the new clause. All we are seeking to do is assist the Government in any future negotiations they may have as they seek to roll over agreements to corresponding agreements. We want to make it easier for them to persuade a trading partner that there will be no problems in implementing the agreements.
The Joint Ministerial Committee has already been the vehicle for similar engagement in respect of EU negotiations on the withdrawal deal, by way of sub-committee, establishing a clear precedent for a similar sub-committee in respect of trade agreements. That would be extremely helpful. It is therefore entirely appropriate that the Bill ensures that a similar forum is legislated for to ensure that the democratic will of the entire population of the country is represented fully throughout the trade agreement process and without threatening the devolved competencies.
I take this opportunity to remind the Government that they must not allow the Bill to afford Ministers of the Crown powers that would undermine the competence of the devolved authorities and the devolution settlements. While instituting a formal consultation framework through the JMC would go some way to protecting the rights of the devolved Administrations, it would not and cannot be considered as addressing the other concerns presented by the Bill, which I have previously adverted to in our proceedings. If the Government fail to address those concerns, the Labour party will return with further amendments.
Anna McMorrin (Cardiff North) (Lab)
The Trade Bill fails to set out a suitable framework for future trade agreements. The arrangements included in the Bill are insufficient and leave a lot to be desired on several important issues that I and many MPs raised in the debates on the European Union (Withdrawal) Bill. Just like that Bill, the Trade Bill puts restrictions on the Executive capacity of the Scottish and Welsh Governments, while placing no restrictions on the capacity of the UK Government. Essentially, under the Bill, Ministers of the UK Government will be able to legislate in devolved areas.
Wales is an outward-facing, globally trading nation and remains open for business.
Greg Hands
Could the hon. Lady outline to the Committee why she did not vote last week for the Welsh Government’s sponsored amendment in this area?
Anna McMorrin
I thank the Minister for asking that question. As he will recall, I spoke widely in support of that amendment. We will discuss that at a later stage.
In Wales, our economy offers great opportunities for both trade and investment. The Bill must not put that at risk. As I just mentioned, I spoke last week on the principles of devolution. Today, I want to reiterate that the Bill seriously lacks consideration of the principle of devolution and the appropriate frameworks to make it work. It is unacceptable that the Government expect the Welsh and Scottish Administrations to be content with handing over power on devolved areas to Whitehall.
The Bill in its current state hands over an unnecessary amount of power to the Government of the day, whoever they may be, and in no way does it safeguard the principles of devolution that people in Wales and Scotland have fought so hard for. I want to stress, once again, that my reservations with the Bill’s lack of consideration for devolution have nothing to do with extending the powers of devolution.
Faisal Rashid
Mr Southworth of the International Chamber of Commerce said that the devolved Administrations have cause for concern due to
“vulnerabilities on a whole range on different industries.”—[Official Report, Trade Public Bill Committee, 23 January 2018; c. 35, Q80.]
Does my hon. Friend therefore agree that there is greater need for consultation with the devolved Administrations?
Anna McMorrin
That is exactly what I am saying. I absolutely agree that we need that consultation and agreement with the devolved Administrations, in order that we do not jeopardise future trade agreements on an international level.
Our concern is that devolution is being rolled back because UK Ministers would be allowed to use Henry VIII powers to reach across into legislation within devolved competence and make changes. The Joint Ministerial Committee was created with the purpose of giving the devolved Administrations the chance to give their input. So far, it has been used sparingly: there have been few meaningful discussions, it has met rarely and little has come out of it. That needs to change.
Good governance requires co-operation between the UK Government and the devolved Administrations, as my hon. Friend the Member for Warrington South just set out. That was also set out in the devolution settlements. The Bill as written is unacceptable. It must contain appropriate frameworks that respect the devolution settlement. We will not agree to the rolling back of devolution and to seriously risking damaging our future trading agreements. Unfortunately, that is what the Government seem to want to do.
Alan Brown
I welcome the spirit of the new clause, but from my perspective, we should have something stronger than just consultation; we would be looking for the consent of the devolved Administrations. That is in line with some of our amendments that have been defeated. I certainly welcome the hon. Member for Brent North’s saying that the official Opposition will revisit some of the amendments on Report. We will certainly look to co-operate on this matter.
Barry Gardiner
I hope that that will all be unnecessary, because I trust that the Government will see the error of their ways and introduce those amendments themselves. If they do not, I reiterate my assurance to the hon. Gentleman that the Opposition will.
Alan Brown
Far be it from me to suggest that the hon. Gentleman may be a tad naive, but he is certainly optimistic if he thinks the Government have seen the light on this. I have made this point several times, but the devolved Administrations have said that they will withhold legislative consent motions if the Bill is not amended, so realistically, the Government will need to consider further amendments.
Greg Hands
The Government have made it clear that we seek to maintain the effects of the UK’s existing trade agreements. We make that commitment in relation to all parts of the United Kingdom, which means that we do not intend Scotland, Wales, Northern Ireland or, indeed, England to be disproportionately impacted by the transitioning of those agreements. Given that we have committed to seeking continuity in the effects of existing agreements, the impact of the transition should be neutral on all parts of the UK.
Hannah Bardell
While I take what the right hon. Gentleman says with the greatest of respect—I want to believe him—can he not see that, from the perspective of those of us from the devolved nations, the written and oral evidence given to the Committee paints a very different picture from that which he paints here today? Our concerns are legitimate, yet we have nothing. The Government have supported none of our amendments, despite promises made on the Floor of the House.
Greg Hands
I will come on to outline the engagement that we have had with the devolved Administrations and to talk about what that engagement might look like in the future. I stress to the hon. Lady that the Bill is about transitioning agreements that, in most cases, are already in place.
Matt Western
Gordon MacIntyre-Kemp, the chief executive of Business for Scotland, put it very simply. He said that the Bill
“puts the power to act almost unilaterally in the hands of a single Minister… At worst, it looks like a deliberate attempt to delay the transfer of EU-held powers…until after the UK Government has had free rein to agree deals that you could say run roughshod over the devolution agreements”.––[Official Report, Trade Public Bill Committee, 25 January 2018; c. 99, Q184.]
Greg Hands
Again, if I recall correctly, the evidence was almost all about future trade agreements that the UK may wish to enter into. To reiterate, the Bill talks about our existing trading arrangements.
Matt Western
Does the Minister not accept that they will technically be new agreements?
Greg Hands
As I have laid out frequently, the substance of the agreements will be the same. That is what we are looking to transition; that is the continuity factor of these agreements. There will of course be the opportunity in the future to come to new trade agreements with the same countries, but we are talking about the continuity of our existing trading arrangements—the 40-plus agreements with 70-plus nations.
On consultation with the devolved Administrations, the Department for International Trade ensures that its Ministers, as well as its directors and other senior officials, visit the devolved Administrations regularly and continually looks for further opportunities to engage with a range of stakeholders across the UK. Indeed, the hon. Member for Livingston knows that, because on a previous visit to Edinburgh I actually went to her constituency. The Secretary of State has engaged with the Scottish and Welsh Governments and with the Northern Ireland Executive.
Hannah Bardell
We were very glad to welcome the Minister to Livingston and I have been glad to engage with him on issues in my constituency. However, does he not recognise that engagement and consultation are very different from consent? The importance of consent and the devolution settlement being rowed back on are very different issues.
Greg Hands
I do not mean for us to keep throwing questions at each other, but I again stress that the Bill is about the existing trading arrangements of the United Kingdom as a whole. We will engage extensively with the devolved Administrations about what the future arrangements might be. We are being clear that we will continue to engage with the devolved Administrations as we transition these agreements as well. The devolved Administrations will, of course, have a role in implementing transitioned trade agreements in devolved areas, including, where appropriate, by amending retained EU law.
We have committed to consulting the devolved Administrations on the most appropriate way to implement the transitioned trade agreements and the agreement on government procurement in areas of retained direct EU law that have effect in otherwise devolved areas. We will welcome their input on the best way to do that so that the agreements are implemented effectively for the whole of the UK. We will also work closely with the devolved Administrations on the role they will play in shaping the UK’s future trade negotiations. It is right that we should have the opportunity to take these discussions forward and to engage the devolved Administrations to understand their views.
Alan Brown
I welcome the fact that the Minister is outlining the engagement he has had with the devolved Administrations, but can he confirm what the views of the devolved Administrations are on the provisions of the Bill?
Greg Hands
I do not think the hon. Gentleman needs me to confirm that. He has said himself what the position of the devolved Administrations is, including on the legislative consent motion. We have listened to them and will continue to listen to them very closely. He has put his point of view on the record as to the perspective of the Scottish Government.
I will come back to some of the points raised in the debate. The hon. Member for Brent North wanted to put devolved Administration engagement on the face of the Bill. I stress again that these agreements are about continuity, not future trade agreements. We have been clear in the White Paper that we will engage. We therefore do not require statutory engagement structures in the Bill.
Barry Gardiner
One of the trade agreements that we have repeatedly come back to, which makes it quite clear that this is not the simple roll-over of the existing trading arrangements that the Minister is talking about, is the treaty we currently have with Norway. Fisheries are an important part of Norway’s economy. It is almost inconceivable that in the roll-over of that agreement, there will not need to be some provision in that regard. Surely the Minister must address those points, because they are pertinent to the Bill and to the Government’s capacity to do what they seek to do, which in large measure the Opposition believe to be right and proper: to try to make the transition as seamless as possible. However, there will be areas where it is not, and Norway is one of them. We must address that and not simply gloss over it by saying, “Well, we’ll have to deal with that once we know what we’re doing with the EU final deal.”
Greg Hands
Of course we value our trade relations with Norway very strongly and closely. By geography alone, let alone the amount of oil and gas coming from Norway, we have incredibly strong trade relations. For the record, I met the Norwegian Trade Minister last autumn. I am perhaps going to sound like déjà vu all over again, but I repeat that the future trading relations with Norway will be very dependent on the future UK negotiations with the European Union. That is not a matter for this Bill; it is a matter that is being scrutinised on frequent occasions in this House and elsewhere.
The hon. Member for Brent North said that we need an engagement structure for future trade agreements. The Government agree that we need to engage the devolved Administrations in our future trade agreements for the benefit of the whole of the UK, as was made clear in the White Paper. We are talking to the devolved Administrations about what that will look like. The new clause would pre-decide that discussion.
The hon. Gentleman talked about international examples for consultation models with the devolved Administrations and gave us a quite interesting exposition of the position in Australia and other parts of the world. It was fascinating stuff, but our constitutional arrangement is very different from any of the international examples raised. As was made clear in our White Paper, we therefore need to design our own engagement structures, in consultation, that work for the benefit of the whole of the UK.
The hon. Members for Warwick and Leamington and for Cardiff North claimed that we were putting a constraint on the devolved legislatures. To be clear, the Bill will allow the devolved Administrations to make regulations that they consider appropriate for the purpose of implementing trade agreements in devolved areas, including in areas of retained EU law.
The hon. Member for Cardiff North said that devolution is being undermined. That is not at all the case. The Bill introduces new powers for the devolved Administrations to work collaboratively with the UK Government to secure continuity in our current trading relationships. Under the Bill, the devolved Administrations will be able to make every decision after exit that they can make before exit. We therefore do not need to commit to such a review or role for the Joint Ministerial Committee in legislation.
The official Opposition’s tabling at a late stage of this emergency extra new clause, which emerged earlier this week, seems to be more about Labour members of the Committee messing it up last week by controversially not supporting the Welsh Labour Government’s amendments, when everyone expected them to do so. When the hon. Member for Warrington South talked about a “political hell”, he might have been referring to the political hell we see all day, every day in the official Opposition in this House and elsewhere. On that basis, I urge the hon. Member for Brent North not to press the new clause.
Barry Gardiner
Had I been disposed not to press the new clause, the Minister’s final remarks would have made me all the more determined to do so. However, I was not so disposed, and we will press the new clause to a vote.
Question put, That the clause be read a Second time.
Barry Gardiner
I beg to move, That the clause be read a Second time.
This is the last new clause we will deal with in Committee, and it is our last attempt in Committee to introduce a high-level principle into the Bill. We have tried to establish the legal framework for an ethical trading policy that respects human rights, labour standards, environmental integrity and the needs of countries and communities poorer than our own. The Government turned down every single amendment and new clause that tried to enshrine those principles in law. None the less, we will have one final push. We are trying to establish the principle of animal welfare and sentience at the heart of our trade policy. Perhaps the Government will agree to stand up for those species that share our planet with us, but that have no representatives of their own to speak for them.
My hon. Friend the Member for Bradford South spoke persuasively—though not persuasively enough to get Government Members to agree—about the importance of maintaining high food standards in all our trade agreements. She referred to the connection between high food standards and the call for animal welfare, whether in respect of the general requirement for food hygiene or the specific target set by the Veterinary Medicines Directorate for a reduction of antibiotic use in agriculture. We also argued for animal welfare to be included in any impact assessment of the UK’s trade agreements, whether it is carried out ex ante or ex post. That call stands, and we will continue to press the point until we are satisfied.
I am pleased that the Minister saw fit to agree with us about the importance of this issue. I quote from the Hansard report of our sitting a couple of days ago:
“The Government have always been clear that we will maintain our very high standards on food and animal welfare, and for protection in that space. There will be no race to the bottom. Nothing in free trade agreements precludes a Government from regulating in the domestic environment. I hope that that is enough reassurance for the hon. Gentleman.”––[Official Report, Trade Public Bill Committee, 30 January 2018; c. 196.]
Greg Hands
The hon. Gentleman was a Minister in the Department for Environment, Food and Rural Affairs under Tony Blair. Can he point to specific occasions when he raised concerns about animal sentience with respect to trade agreements that were going through at that time?
Barry Gardiner
That is one on which I will probably write to the right hon. Gentleman. I am convinced that there were a number of occasions when I did exactly that. I will try to dig them out from my records and send them to him. I am delighted that he did not stand up to repudiate the remarks recorded in Hansard, as he did the other day. Given that, I take it that he stands by them.
Sadly, the Minister’s reassurance on this matter is not enough. The right of parties to regulate in favour of animal life and animal health is regularly mentioned in the text of international trade agreements, yet that same right is typically circumscribed by requirements that any measures to protect animal health must be undertaken while facilitating trade. Governments may take any measure they like to protect animal health so long as it does not create an “unjustified barrier to trade”. It is left to a tribunal of trade lawyers, who examine the justification of the measure in relation to international trade law, to decide whether it is justified or unjustified.
There is sometimes a clause in the general exceptions chapter of a free trade agreement that affirms that a state may introduce whatever measures are necessary to protect animal life or health, but the meaning of “necessary” is left up to another tribunal of trade lawyers to decide. They may rule that an alternative measure is available that would be less burdensome on trade and therefore conclude, even if the alternative would be less effective, that the measure that was taken does not qualify as necessary after all.
This is familiar territory to anyone who has looked into the history of international trade disputes, both before and since the founding of the World Trade Organisation. There is an entire sub-discipline of trade lawyers and academics who have written about what they call the “necessity test” that is employed to ascertain whether a measure is necessary and thus allowed under international trade law, or unnecessary and thus prohibited.
Let me take as a specific example a free trade agreement that was mentioned in written evidence by the RSPCA, because it contains a fleeting reference to animal welfare. The Government are keen to replace the EU-Korea free trade agreement with a new UK-Korea agreement, which would be implemented using the powers afforded to the Government by the Bill. The chapter of the EU-Korea agreement devoted to sanitary and phytosanitary measures includes specific clauses about enhanced co-operation between EU and Korean authorities on animal welfare issues—anyone who wishes to look them up will find them in article 5.9—yet those fine sentiments are thoroughly undermined by the clause at the outset of the chapter, which states that the objective of the chapter as a whole is
“to minimise the…effects of sanitary and phytosanitary measures on trade”.
The health and welfare of animals—and of humans, for that matter—is already subordinated to commercial interests. That is precisely the problem.
Mrs Kemi Badenoch (Saffron Walden) (Con)
I will be brief. We all believe in maintaining the very highest standards in animal welfare and food production; I do not think that is in dispute. The Government have done quite a lot in the last few months—we know about the ban on microbeads, to protect marine wildlife—but this is one of the areas in which we are able to go further and do better than we ever could while we were in the EU.
There is much to agree with in the statements from the hon. Member for Brent North; I, too, am against the export of live animals. However, we must remember the Bill’s purpose: ensuring the smooth roll-over of existing trade agreements. It is not about future trade agreements, so I do not believe that the Bill is the appropriate place for the new clause. In fact, if I were being cynical, I would say that this looks like a mischievous attempt to reignite the debate on new clause 30 that was proposed to the European Union (Withdrawal) Bill, in order to generate press releases.
Our job is to make good law. The draft Animal Welfare (Sentencing and Recognition of Sentience) Bill was published on 12 December. It sets out to do exactly what the new clause would do, but even better. If Labour Members were serious about raising animal welfare standards, rather than virtue signalling, they would focus on the draft Bill. We should not tack on to the Trade Bill a new clause that is outside its scope.
As it happens, the Environment, Food and Rural Affairs Committee yesterday released its report on the draft Bill. It made several recommendations for improving it, including bringing forward a new and completely separate Bill on animal sentience. The Government have to reflect on that report and its recommendations, and it would be inappropriate for us to pre-empt the Select Committee’s report and the Government’s reaction.
Alan Brown
As the hon. Lady said, nobody can argue against the new clause’s intentions: maintaining animal welfare and food production standards when entering into international trade agreements. I am sure that the Minister will say that the new clause is not needed, because existing agreements will roll over and they comply with all the legislation, but as we heard from witnesses, in the roll-over process everything is up for grabs, so there is an argument for protecting animal welfare and food production standards in the Bill, and I understand why the proposal has been made.
One concern that I have about the new clause is that it refers to UK law and does not recognise that law is devolved; animal sentience should also be a devolved matter once we withdraw from the EU. From my perspective, the new clause does not take cognisance of the Scottish Government and the devolved Administrations, so that causes me concern about how it is written.
The hon. Member for Saffron Walden said that the Tory Government are bringing in good law, but then admitted that the Environment, Food and Rural Affairs Committee has made recommendations against the draft Animal Welfare (Sentencing and Recognition of Sentience) Bill. As a member of that Committee, I can say that witnesses have basically said that the current proposal as regards recognising animal sentience is not good law and not fit for purpose, and the Committee is recommending that the Government think again on that Bill in terms of sentience, so they are a long way from making good law.
I support the principles of the new clause, but as stated, I have concerns about it not recognising the devolved Administrations.
Faisal Rashid
I commend my hon. Friend the Member for Brent North for his excellent opening remarks in support of a very important new clause. I hope that the Government will agree with me and my hon. Friends that it is vital that we protect animal welfare and food production standards when building our trade policy. We must prioritise a sustainable, long-term future for our farming, fishing and food industries. We cannot allow Brexit to be used as an excuse to reduce food standards or to allow cheap and inferior produce to flood the UK market. We have a moral duty to protect animals and their welfare, and that should go hand in hand with the protections that we must afford to our farming and production industry and to British consumers.
Anna McMorrin
Does my hon. Friend agree that this is not a partisan issue, but a question of the kind of society we want to live in?
Faisal Rashid
Absolutely. That is a crucial point, which I hope Government Members will take into account.
Mr Mark Prisk (Hertford and Stortford) (Con)
Is it not actually the case that good law is not made on the rush? The very nature of the new clause that we are debating is on the rush, and that is why we should reject it.
Alan Brown
I completely agree with the previous intervention: good law is not made in a rush. But that is exactly what the Government did in reaction to voting down amendments to the European Union (Withdrawal) Bill: they rushed out legislation that is really poor.
Faisal Rashid
I thank the hon. Gentleman for that intervention. I ask the hon. Member for Hertford and Stortford how the new clause would prevent the easy roll-over of EU trade agreements. This issue is controversial, but I will move on.
There are real concerns that if we produce trade agreements that allow the UK market to be flooded with cheap and poor-quality food, we will be forcing our farming and food production industries to make an impossible decision. Either they face becoming uncompetitive and being undercut by cheap and poor-quality imports, thus risking the jobs of the 3.9 million people employed in the industry, or they are pressured to cut corners and their own standards, putting at risk the welfare of the animals and potentially of consumers.
Many health risks are associated with poor-quality produce, and often such produce is consumed without knowledge, especially given the mass catering in schools, hospitals and takeaways. British people deserve to feel confident that they will be eating high-quality produce, wherever it has come from, following our departure from the European Union.
Nick Dearden of Global Justice Now told the Committee that
“we probably all now know more than we would like about chlorinated chickens”––[Official Report, Trade Public Bill Committee, 23 January 2018; c. 6, Q3.]
That is true, but it is important that we are aware of the potential negative impacts of failing to build a strong and sustainable future trade policy. Have the Government considered the negative impact on animals, on the farming and production industries, and on consumers of not supporting this new clause?
UK farmers have made great strides in recent years to improve animal welfare, and we are proud to have some of the highest animal welfare and food standards in the world. We have heard many times that our departure from the European Union is an opportunity for the UK to return to being a world leader in international trade. That prompts the question of why the Government are not committed to legislating for animal welfare protections to ensure that the rug is not pulled out from under the food and farming markets and to help the British farming industry to continue to lead the way in animal welfare and international trade.
There has already been much controversy surrounding the Government’s approach to animal welfare and sentience. It is no secret that the Prime Minister has faced difficulties in getting the Cabinet to agree on much in recent weeks, but she claims that it remains unified. The Secretary of State for Environment, Food and Rural Affairs said that there will be
“no diminution in our environmental or animal welfare standards in pursuit of trade deals.”
In that case, I am hopeful that we can expect Government support for this new clause, which would legislate for the protection of animal welfare standards—or is the Cabinet no longer unified on that position?
Matt Western
I rise to speak to new clause 12, and I thank my hon. Friend the Member for Brent North for proposing it. It would ensure that we provide important safeguards for not just livestock but our farming communities and our consumers by specifying animal welfare and sentience in the legislation.
In November, as we have heard, the Secretary of State for Environment, Food and Rural Affairs promised to make “any necessary changes” to UK law to ensure that it recognises that animals can feel pain. That came after proposals to accept that they are sentient beings were voted down. Now the Government are apparently looking at making UK law that specifically recognises animal sentience. I remind the Committee that the first sentence of the Bill says that it will
“Make provision about the implementation of international trade agreements”.
That is why—when we have spoken at previous sittings about ensuring that it is a comprehensive Trade Bill—we have said that this issue should be included.
According to the written evidence from the RSPCA, the EU has 19 farm animal welfare laws that the UK has implemented, giving a high degree of consistency on standards and a level playing field for trade in farm products. That will not be the case when the UK starts to negotiate FTAs with other countries. Thankfully, the UK has some of the highest farm animal welfare standards in the world, although it is well documented that Canadian and American farm welfare standards tend to be based on corporate standards rather than federal law, as we heard in the International Trade Committee yesterday.
Likewise, an FTA may include sectoral chapters on cosmetics, pharmaceuticals, chemicals and pesticides. The UK needs to be careful that it does not compromise any existing UK laws, such as cosmetics regulation, or risk that those laws are as sensitive to change as the farm animal ones that I have mentioned.
Greg Hands
The hon. Gentleman is making a good speech. One of the points he raises surely gets to the nub of the matter. When he says that we should not do anything contrary to domestic law in trade agreements, he rather makes the point for me that the Government and the country will have a right to regulate most of these matters domestically, which is the important thing. We can introduce protections domestically in our laws that would not be subject to the trade agreement.
Matt Western
I thank the Minister for his intervention. There is the law that goes through this place, and there is the role and power of the Minister, and very much at the nub of this debate over the Bill is the control the Minister has, as opposed to the controls we and other bodies will have, in influencing any trade agreements.
Anna McMorrin
It is imperative that animal welfare rights are protected after we leave the EU and that animals keep their status as sentient beings under UK law, which is why this new clause is absolutely vital.
I wrote to the Secretary of State for Environment, Food and Rural Affairs after the defeat in the House of Commons on this very issue. That letter was signed by over 100 MPs. It is disappointing that the Trade Bill neglected to make it clear that the UK will not enter any trade deals in the future that will require us to water down animal welfare standards. It is clear from the reaction of the public, and from the campaigns and letters that I am sure all MPs have received from constituents and organisations, that people have no interest in seeing chlorinated chicken in our supermarkets, are not happy to see live animal exports and are not willing to compromise in any way on animal rights to please the likes of the current US President or any other leader of a country that does not share the same concerns and views as us on animal welfare and animal sentience. Any trade negotiation or deal will impact on UK animal welfare standards.
Under article 13 of the Lisbon treaty, the UK recognises animals as sentient beings—that they are not just goods but have the capacity to feel pain, hunger, heat and cold—and that the Government must pay full regard to their welfare requirements. Recognising animals as sentient beings is accepted across animal welfare science and means that we acknowledge that animals are capable of feelings such as pain and are deserving of our respect. It is appalling that this Government could not vote in favour of maintaining—let alone progressing—existing animal welfare standards during the European Union (Withdrawal) Bill.
Greg Hands
I am not accusing the hon. Lady of spreading misinformation, of course, but a lot of the reactions to that vote spread a lot of misinformation. Various otherwise reputable news outlets such as The Independent and Evening Standard had to retract and withdraw and to print clarifications and apologies for putting out misinformation about the Government’s view on animal sentience. The Government strongly believe in animal sentience, and the European Union (Withdrawal) Bill vote was not contrary to that.
Anna McMorrin
I thank the Minister for his intervention, but the fact remains that this Government did not vote for that amendment, so are we to keep that trust that this UK Government will introduce those welfare standards post-Brexit? I for one do not find that trust. I struggle to understand this decision by the Government, which is a massive blow for the welfare of wildlife, pets and livestock alike.
Mrs Badenoch
There is a draft Bill on sentencing and animal sentience coming in. Why does the hon. Lady feel that there will be no commitments in that Bill, given what it is called? What are her concerns about that Bill?
Anna McMorrin
I thank the hon. Lady for her intervention, but does she not realise that this Bill is about the rules and regulations during trade? That is why we need the new clause in the Bill.
Only domestic animals are covered by the Animal Welfare Act 2006; animals in the wild and laboratory animals are expressly exempt. As we seek new deals in our negotiations with countries that perhaps have much lower animal welfare standards, we are particularly concerned that there will be the temptation to lower our standards. The Bill needs strengthening to better protect UK animal welfare standards. I hope the Government will see some sense and support the new clause to ensure that we do not water down those standards.
Greg Hands
The Government have made clear that we intend not only to retain our existing standards of animal welfare once we have left the European Union but, indeed, to enhance them. We are proud to have some of the highest animal welfare standards anywhere in the world, and they will not be watered down when we leave the EU.
Our food is held in high repute thanks to our animal welfare standards. The withdrawal Bill will transfer on to the UK statute book all EU animal welfare standards— it is very important to understand that in the context of the withdrawal Bill, which was raised by the hon. Member for Cardiff North. Our current high standards, including import requirements, will apply when we leave the EU.
Similarly, the Government are committed to retaining the EU’s recognition of animal sentience. That is why, as has been referred to quite a few times in this helpful debate, at the end of last year the Government published the draft Animal Welfare (Sentencing and Recognition of Sentience) Bill, which sets out how we can go even further and better enshrine in domestic law the recognition of animals as sentient beings. That point was capably made by my hon. Friend the Member for Saffron Walden and others.
Barry Gardiner
Does the Minister understand that the new clause’s intention is not to run counter to or prevent what we hope the Government will bring forward in that Bill? It seeks to establish the hierarchy of principles in international trade so that a necessity test or any other precursor in the clauses and paragraphs that deal with such issues cannot mean that animal welfare is of a lower order in that hierarchy.
Greg Hands
Let us try to separate out those two issues. We will deal with animal sentience in the draft Animal Welfare (Sentencing and Recognition of Sentience) Bill. What we are talking about here is transitioning existing trade agreements. I will return to the intervention I made on the hon. Gentleman in relation to existing trade agreements, but let me first point out a few more things in the draft animal welfare Bill. It proposes a new obligation on Ministers of the Crown to have regard to the welfare needs of animals as sentient beings when formulating and implementing Government policy. A public consultation on the draft Bill has recently closed and DEFRA is considering all the responses received.
We are absolutely clear that all existing commitments relating to animal welfare will remain when these agreements are transitioned—I cannot be any more definitive than that. That is in line with our clearly articulated principle that it is our intent to transition solely the existing effects of the current agreements.
On current agreements, Mr Davies, you and I were elected in 2005, and in a couple of those early years we shared in Parliament I distinctly remember the hon. Gentleman being a DEFRA Minister. I was intrigued when he was seemingly unable to offer any single occasion when, as a Minister in DEFRA—the Department with primary responsibility in this area—he had raised any objection to EU trade agreements going through the House in relation to animal welfare or animal sentience.
I look forward to receiving the hon. Gentleman’s letter, in which he will explain in detail those occasions he was unable to remember today—he may have time to dig through his filing cabinet from 12 or 13 years ago to find them. I remember well that it was very rare for any Government Minister in Tony Blair’s regime to go against the word of Mr Blair, and very rare for any Government Minister to go against the word of the European Union, so I am interested to see if the hon. Member for Brent North managed to do both at the same time. I very much look forward to getting this letter. May I suggest that he shares it with the whole Committee, because I do not think that it is something I should abuse by keeping it private to myself? I look forward to that letter.
Barry Gardiner
May I just point out to the Minister that I voted for the ban on hunting mammals with dogs? I believe that most of the Conservative party voted to retain hunting mammals with dogs. I also voted to secure an end to cosmetic testing on animals, to ban fur farming and to introduce the Animal Welfare Act 2006. So there were a number of occasions on which my voting record on animal welfare and animal sentience stands up very strongly. I suspect that it would it be in marked contrast to many Members on the Government side of the House.
Greg Hands
I thank the hon. Gentleman for that intervention, because I now find it even more illuminating. He has now been able to remember all these other occasions when he stuck up for animal welfare, but he still cannot remember a single occasion when, in relation to EU trade agreements, which is what the Bill is all about—
Greg Hands
Perhaps the hon. Gentleman has now remembered the single occasion. I will give him another opportunity to tell us all about this disagreement he had with Tony Blair or the European Union.
Barry Gardiner
It is not about a disagreement with Tony Blair or the European Union, because actually we did vote to ban the export of animals on the hoof in that Government. That was precisely about trade—it was banning live exports. The Minister has to accept that I have a very clear record on animal welfare in terms of not only domestic legislation in this country but international trade.
Greg Hands
I am still looking forward to the letter. The hon. Gentleman has still not remembered a single occasion when he raised this in relation to a European Union trade agreement. He has an opportunity. I am sure he will take a little bit of time to prepare the letter, and I am sure that all members of the Committee will look forward to receiving it.
The hon. Gentleman did mention live animal exports, which is an interesting subject. He says that he was concerned about live animal exports, but you and I know, Mr Davies, that while we remain an EU member we are unable to ban live animal exports. I do not know whether, at that point, he was taking an early Eurosceptic turn. Perhaps he mentioned to Tony Blair that he had this fundamental problem with the European Union. It was just after Tony Blair had promised a vote on the EU constitution, which was not delivered, so it may have been an interesting time to have made these Eurosceptic points that he now says that he has.
Matt Western
Far be it from me to talk about what happened five or 10 years ago and under a different ministerial dispensation, but my recollection was that in the 2000s there was a huge issue about veal being transported in crates, and it was EU legislation that was introduced that actually put an end to that. I would like to think that the UK Government were in support of that, but I do not know—I will defer to either the Minister or my hon. Friend the Member for Brent North.
Greg Hands
If the hon. Gentleman is a strong believer in EU law, surely he should be voting, and have voted, for the European Union (Withdrawal) Bill, which seeks to take all of this retained EU law into the UK domestic environment.
To return to the issue, we have a manifesto commitment to take early steps to control live animal exports as we leave the European Union. The hon. Member for Brent North claimed that FTAs contain provisions stating that animal health measures must
“not be unjustifiable barriers to trade”.
Again, that returns to the point I made in my intervention on the hon. Member for Warwick and Leamington, that it importantly does not prevent states from imposing their own high animal welfare standards, which is what we currently do and will expect to enhance in the future.
My hon. Friend the Member for Saffron Walden made an excellent and succinct speech, outlining why the Bill is about existing trade agreements and why the Government have separate proposed legislation relating to animal sentience. I can tell her that the consultation closed yesterday and we will consider the 9,000 responses, as well as the report by the Environment, Food and Rural Affairs Committee, in due course.
The hon. Member for Kilmarnock and Loudoun raised a relevant point when he said that the issue of animal sentience is devolved. I can tell him that the Department for Environment, Food and Rural Affairs is speaking to the devolved Administrations regarding animal sentience. The clause in the draft Animal Welfare (Sentencing and Recognition of Sentience) Bill refers only to UK Ministers and the role they play, but I would be interested to see what proposals the Scottish and Welsh Governments might bring forward in this space as well.
I hope that is sufficient reassurance to the hon. Member for Brent North. I very much look forward to his letter, but on that basis I ask him to withdraw the new clause.
Barry Gardiner
The Minister can ask, but he will not be successful. We will press it to a vote.
Question put, That the clause be read a Second time.
Greg Hands
Mr Davies, I thank you and everybody concerned with this Bill. I am delighted that we have so thoroughly scrutinised this short yet important Bill over the last five Committee sessions. I thank Committee members for the constructive way in which they have engaged in the debate. I am pleased that we have completed proceedings within the allotted time. In fact, we have a little time to spare.
This has been an unusual Bill Committee. The Bill, in my view, is relatively uncontroversial and certainly quite short. Indeed, on Second Reading, I think a little unfairly, the hon. Member for Brent North called it a
“hollowed out little embarrassment of a Bill, which extends to just six pages and four schedules.”—[Official Report, 9 January 2018; Vol. 634, c. 223.]
I think he was calling it small and unimportant; I am interpreting the words “hollowed out little embarrassment” in that way. Therefore, I find it all the more remarkable that the Opposition have called some 37 votes on the Bill so far. I am not trying to make a wider political point—or maybe I am—but it was clear on Second Reading and now that they are against the UK having its own trade remedies, against the UK being able to benefit from the more than 40-plus EU trade agreements, and against UK companies participating in the £1.3 trillion global procurement market. I hope they will change their minds on Third Reading.
I also thank the Government Whip and the Opposition Whip, who have ensured that the Committee has run smoothly and effectively. We have had a helpful and constructive consideration of the Bill, and the debate has been superbly conducted by you, Mr Davies, and by Mrs Ryan and Mr Gray, in the Chair. I am very grateful for your and their guidance during our deliberations.
Further, I would like to pay tribute to the usual channels, who I know quite well from previous experiences in this House, for their help and guidance throughout. I also recognise in particular the hard work of Hansard in recording everything. I thank the Clerk for his advice, the Doorkeepers for keeping good order, and my excellent team of officials for their support. This is the Department for International Trade’s first ever piece of legislation, and the officials have done the Department very proud indeed.
Barry Gardiner
I, too, would like to express, on behalf of all my team, my thanks to you, Mr Davies, to Ms Ryan and Mr Gray, and to all the officials who so ably supported the Minister. We tried to throw as many difficult questions at him as possible, and they tried to field them and provide him with answers as quickly as possible. I have to say we were not always convinced by the answers he came up with, but we recognise the work that went into them and hope that we did not cause the officials too much trouble.
I pay particular tribute to Kenneth Fox, the Clerk of the Committee. He is an exemplary Clerk, and he aided us in ensuring that our amendments were substantive and all in good order. It was extremely helpful to us to be assisted by someone of his experience and wisdom—and calm. I say that because, as you know, Mr Davies, amendments are worked on until the last moment to ensure that they are tabled in good time, and Mr Fox did so with the greatest humour.
I am grateful to all my team: my hon. Friends the Members for Bradford South, for Sefton Central, for Cardiff North, for Warrington South, for Blaenau Gwent and for Warwick and Leamington. It has been an excellent team effort. I am delighted that they were all able to contribute to debate in a most positive way. I also thank the Government Members. I thank the Minister, who I think took every intervention he was offered, for his courtesy. I know that serving on such Committees is often a thankless task for Government Back Benchers, who are told by the Government Whip to sit quietly and not to take up too much of the proceedings, but when they did intervene, they did so with courtesy.
We have scrutinised the Bill in great detail. We have not come to an agreement—that much is clear. There are lacunae in the Bill that need to be remedied, and we will return to it on Report and subsequently. I thank everyone associated with the Committee and in particular you, Mr Davies, for conducting proceedings with absolute fairness and impeccable order.
The Chair
I am very grateful to the Minister and the shadow Minister for their kind words. I thank the House authorities, including the Doorkeepers, who have been very busy with Divisions, and the Clerks. I reiterate the thanks to Kenneth Fox, the principal Clerk, who has guided me throughout these proceedings with his normal efficiency and courtesy. I thank all Members for making it so easy to chair the Committee. You have all been a credit to your respective parties.
Question put and agreed to.
Bill accordingly to be reported, without amendment.
Trade Bill
Tuesday 17th July 2018
(6 years, 4 months ago)
Commons ChamberRead Full debate Trade Bill 2017-19 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Consideration of Bill Amendments as at 17 July 2018 - (17 Jul 2018)
15:29 - The House divided: - Ayes: 284 / Noes: 314 - Question accordingly negatived.
15:44 - The House divided: - Ayes: 37 / Noes: 316 - Question accordingly negatived.
15:59 - The House divided: - Ayes: 285 / Noes: 315 - Question accordingly negatived.
16:54 - The House divided: - Ayes: 248 / Noes: 315 - Question accordingly negatived.
17:08 - The House having divided: - Ayes: 37 / Noes: 318 - Question accordingly negatived.
18:01 - The House divided: - Ayes: 295 / Noes: 314 - Question accordingly negatived.
18:15 - The House divided: - Ayes: 305 / Noes: 301 - Question accordingly agreed to.
18:30 - The House divided: - Ayes: 301 / Noes: 307 - Question accordingly negatived.
19:00 - The House divided: - Ayes: 317 / Noes: 286 - Question accordingly agreed to.
Mr Speaker
In calling the Minister to move the new clause—he is one of the most courteous Members of the House and therefore it may seem almost unnecessary to say this—I simply ask, not least in the light of what the Father of the House has just said, that he recognise that, although of course he must set out the Government’s position, possibly on a miscellany of different matters, we are short of time and that others wish to speak. In all propriety, if this debate is to be meaningful, they must be able to do so.
The Minister for Trade Policy (George Hollingbery)
I beg to move, That the clause be read a Second time.
Mr Speaker
With this it will be convenient to discuss the following:
Government new clause 13.
Government new clause 14.
New clause 3—Free trade agreements: Parliamentary scrutiny and consent—
“(1) The Secretary of State shall not commence negotiations relating to a free trade agreement unless—
(a) a Minister of the Crown has laid before Parliament a sustainability impact assessment conducted by a credible body independent of government following consultation with—
(i) each devolved authority,
(ii) public bodies, businesses, trade unions and non-governmental organisations which, in the opinion of the Minister, have a relevant interest, and
(iii) the public,
and the assessment shall include both qualitative and quantitative assessments of the potential impacts of the proposed trade agreement, including social, economic, environmental, gender, human rights, labour, development and regional impacts,
(b) a Minister of the Crown has laid before Parliament a draft of a negotiating mandate relating to the proposed trade agreement, setting out—
(i) all fields and sectors to be included in the proposed negotiations,
(ii) the principles to underpin the proposed negotiations,
(iii) any limits on the proposed negotiations, and
(iv) the desired outcomes from the proposed negotiations, and
(c) the House of Commons has approved by resolution a motion, drafted in terms which permit amendment, setting out a proposed negotiating mandate and authorising the Secretary of State to enter negotiations on the proposed trade agreement on the basis of that mandate, and the House of Lords has approved a resolution in the same terms as that approved by the House of Commons.
(2) The United Kingdom may not become a signatory to a free trade agreement unless—
(a) during the course of the negotiations, the text of the trade agreement as so far agreed or consolidated has been made publicly available within ten working days of the close of each negotiating round,
(b) between each round of negotiations, all documents relating to the negotiations have been made available for scrutiny by select committees in both Houses of Parliament,
(c) upon conclusion of the negotiations, the House of Commons has approved by resolution a motion, drafted in terms which permit amendment, setting out the text of the trade agreement as negotiated and authorising the Secretary of State to sign the proposed agreement, and the House of Lords has approved a resolution in the same terms as that approved by the House of Commons, and
(d) the text of the trade agreement includes provision for a review of the operation and impacts of the agreement no later than ten years after the day on which the agreement comes into force.”
This new clause would ensure that all new free trade agreements are subject to parliamentary scrutiny and consent.
New clause 6—Regulations: Parliamentary procedure—
“(1) If the Secretary of State considers it appropriate to proceed with the making of regulations of a type which fall under section 2(4A)(a) or (b)), he or she must lay before Parliament—
(a) a draft of the regulations, and
(b) an explanatory document.
(2) The explanatory document must—
(a) explain under which power or powers in this Act the provision contained in the regulations is made;
(b) introduce and give reasons for the provision;
(c) identify and give reasons for—
(i) any functions of legislating conferred by the regulations; and
(ii) the procedural requirements attaching to the exercise of those functions;
(d) contain a recommendation by the Secretary of State as to which of the following should apply in relation to the making of regulations pursuant to the draft regulations—
(i) the negative resolution procedure (see subsection (6)) or
(ii) the affirmative resolution procedure (see subsection (7)); and
(e) give a reason for the Secretary of State’s recommendation.
(3) Where the Secretary of State’s recommendation under subsection (2)(d) is that the negative resolution procedure should apply, that procedure shall apply unless, within the 20-day period, either House of Parliament requires that the affirmative resolution procedure shall apply, in which case that procedure shall apply.
(4) For the purposes of this paragraph a House of Parliament shall be taken to have required a procedure within the 20-day period if—
(a) that House resolves within that period that that procedure shall apply; or
(b) in a case not falling within subsection (4)(a), a committee of that House charged with reporting on the draft regulations has recommended within that period that that procedure should apply and the House has not by resolution rejected that recommendation within that period.
(5) In this section the ‘20-day period’ means, for each House of Parliament, the period of 20 days on which that House sits, beginning with the day on which the draft regulations were laid before Parliament under subsection (1).
(6) For the purposes of this section, the ‘negative resolution procedure’ in relation to the making of regulations pursuant to a draft of the regulations laid under subsection (1) is as follows—
(a) the Secretary of State may make regulations in the terms of the draft regulations subject to the following provisions of this subsection;
(b) the Secretary of State may not make regulations in the terms of the draft regulations if either House of Parliament so resolves within the 40-day period;
(c) for the purposes of this paragraph regulations are made in the terms of the draft regulations if they contain no material changes to the provisions of the draft regulations; and
(d) in this subsection the ‘40-day period’ means, for each House of Parliament, the period of 40 days on which that House sits, beginning with the day on which the draft regulations were laid before Parliament under subsection (1).
(7) For the purposes of this section the ‘affirmative resolution procedure’ in relation to the making of regulations pursuant to a draft of the regulations being laid under subsection (1) is as follows—
(a) the Secretary of State must have regard to—
(i) any representations;
(ii) any resolution of either House of Parliament; and
(iii) any recommendations of a committee of either House of Parliament charged with reporting on the draft regulations, made during the 40-day period with regard to the draft regulations;
(b) if, after the expiry of the 40-day period, the Secretary of State wishes to make regulations in the terms of the draft, he must lay before Parliament a statement—
(i) stating whether any representations were made under subsection (7)(a)(i); and
(ii) if any representations were so made, giving details of them;
(c) the Secretary of State may after the laying of such a statement make regulations in the terms of the draft if they are approved by a resolution of each House of Parliament;
(d) if, after the expiry of the 40-day period, the Secretary of State wishes to make regulations consisting of a version of the draft regulations with material changes, he must lay before Parliament—
(i) revised draft regulations; and
(ii) a statement giving details of—
(a) any representations made under subsection (7)(a)(i); and
(b) the revisions proposed;
(e) the Secretary of State may, after laying revised draft regulations and a statement under sub-paragraph (d), make regulations in the terms of the revised draft if they are approved by a resolution of each House of Parliament;
(f) for the purposes of sub-paragraph (e) regulations are made in the terms of the draft regulations if they contain no material changes to the provisions of the draft regulations; and
(g) in this paragraph the ‘40-day period’ has the meaning given by subsection (6)(d).
(8) The provisions of this section shall apply to all agreements for which regulations would be of a type which falls under section 2(4A)(a) or (b)), notwithstanding that they constitute retained EU law and may be governed by the provisions of the European Union (Withdrawal) Act 2018 or any other legislation with regard to Parliamentary scrutiny of regulations under this Act.”
This new clause would set up a triage and scrutiny system under the control of Parliament for determining how Orders under Clause 2 will be dealt with, in circumstances when the new UK FTA or international trade agreement is not in the same terms as the existing EU FTA or international trade agreement.
New clause 16—Transparency in trade negotiations—
“(1) The Secretary of State shall not make regulations under section 2(1) of this Act for the implementation of an international trade agreement (subject to sections 2(3) and 2(4)) unless the condition in subsection (2) of this section has been complied with.
(2) The condition is that the Secretary of State has provided to Members of both Houses of Parliament any information specified in subsection (3) relating to the agreement, within seven days of any meeting to which subsection (3)(a) applies.
(3) The information is—
(a) minutes of any meeting, whether formal or informal, between a representative of the United Kingdom and a representative of any other signatory state to discuss the agreement;
(b) any points of divergence between the terms of the proposed agreement between the United Kingdom and the other signatory (or each other signatory) and the terms of the agreement in place before exit day between the European Union and the other signatory (or each other signatory), that were discussed at the meeting; and
(c) measures that the Secretary of State considers will be necessary in consequence of any points of divergence under paragraph (b) of this subsection.
(4) The Secretary of State may specify conditions under which the information shall be made available under subsection (2).”
This new clause would require the Secretary of State to give MPs and Peers access to details of negotiations towards trade agreements with third countries if and when third countries seek changes to existing bilateral trade deals which the UK currently has through the EU.
New clause 20—Approval of negotiating mandates (devolved authorities)—
“(1) No negotiation towards an agreement that falls within section 2(2) shall take place unless—
(a) a draft negotiating mandate in respect of that agreement has been laid before—
(i) a committee including representatives from each devolved authority and constituted for the purpose of considering the draft, and
(ii) each devolved legislature,
and
(b) the draft negotiating mandate has been approved by resolution of—
(i) the committee constituted under (1)(a)(i) and
(ii) each devolved legislature.
(2) The committee in (1) shall be called the ‘Joint Ministerial Committee on Trade’ (‘JMCT’) and—
(a) may not approve a draft mandate other than by consensus,
(b) shall have the power to make its own standing orders,
(c) may include a Minister of the Crown or representative thereof,
(d) may be consulted on a draft mandate before it is finalised (but in such a case must also approve the finalised version), and
(e) shall only include a representative of a devolved authority if that representative has been appointed by the relevant devolved executive.
(3) The ‘devolved legislatures’ are—
(a) the Scottish Parliament,
(b) the Welsh Assembly, and
(c) the Northern Ireland Assembly.
(4) The devolved legislatures shall approve the draft mandate according to their own standing orders.
(5) If the negotiating mandate changes substantively during the process of negotiations then negotiations shall not proceed until the revised mandate has been approved by the JMCT.
(6) Each person who is—
(a) a member of the JMCT, or
(b) a Minister of the Crown
must co-operate with every other person who is within subsection (a), or (b) in any activity that relates to the drafting of a negotiating mandate as referred to in subsection (1).
(7) In particular, the duty imposed by subsection (6) requires a person—
(a) to engage constructively, actively, and on an ongoing basis in any process by means of which a negotiating mandate as referred to in subsection (1) is prepared; and
(b) to have regard to representations by any member of the JMCT or of a devolved executive in any process by means of which a negotiating mandate as referred to in subsection (1) is prepared.
(8) The ‘devolved executives’ are—
(a) the Scottish Government,
(b) the Welsh Government, and
(c) the Northern Ireland Executive.”
This new clause would ensure that any negotiating mandate is first approved by the devolved legislatures and creates a joint ministerial committee to encourage co-operation between the devolved administrations and the UK Government in drafting the negotiating mandates. It imposes a duty of co-operation on all parties in the preparation of the negotiating mandate.
New clause 22—Right of devolved legislatures to scrutinise trade negotiations—
“(1) A Minister of the Crown shall provide a devolved authority with such information relating to an agreement falling within section 2(2) as is reasonably necessary for the purpose of subjecting that agreement to scrutiny in relation to—
(a) all areas of that devolved authority’s competence; and
(b) anything falling outside an area of that devolved authority’s competence but having an impact within the territory over which that devolved authority presides.
(2) The information in (1)—
(a) shall be provided at the request of a devolved authority;
(b) may relate to international trade agreements at any stage of development including—
(i) before negotiations begin,
(ii) during negotiations,
(iii) after negotiations have been completed.
(3) An appropriate authority shall not rely on Part II of the Freedom of Information Act 2000 in relation to a request made under this section.
(4) If information requested by a devolved authority would fall within Part II of the Freedom of Information Act 2000, a Minister of the Crown may provide it exclusively to a committee of the relevant devolved legislature.
(5) A Minister of the Crown shall adhere to any reasonable time limit placed by a devolved authority on the provision of information under this section.”
This new clause would ensure that the devolved legislatures will have sufficient information to effectively scrutinise trade agreements and negotiations, without compromising negotiations or sensitive information.
New clause 23—Devolved consent—
“(1) No agreement that falls within section 2(2) shall be ratified without the consent of the devolved legislatures to any parts of that agreement that fall within subsection (3) of this section.
(2) The ‘devolved legislatures’ are—
(a) the Scottish Parliament,
(b) the Welsh Assembly, and
(c) the Northern Ireland Assembly.
(3) The parts of an agreement to which the devolved legislatures must consent are—
(a) any part concerning an issue that falls within the competence of a relevant devolved authority as defined in paragraph 7 of Schedule 1, and
(b) any part concerning an issue not falling within subsection (3)(a) but having an impact within the territory over which the relevant devolved authority presides.”
This new clause would create a right for the devolved legislatures to approve those aspects of an ITA that fall within their competence.
New clause 24—Review of international trade agreements (devolved authorities)—
“(1) No agreement that falls within section 2(2) of this Act shall be ratified unless it complies with subsection (2) of this section.
(2) An agreement that falls within section 2(2) shall include a clause which provides for that agreement to be—
(a) submitted for review by the appropriate bodies after five years from the date of ratification,
(b) submitted for review by the appropriate bodies every five years after the first review, and
(c) ended or amended based on the outcome of the reviews in subsections (2)(a) or (2)(b),
without sanction under the agreement.
(3) For the purposes of (2) the ‘appropriate bodies’ are—
(a) the UK Parliament,
(b) the Scottish Parliament,
(c) the Welsh Assembly, and
(d) the Northern Ireland Assembly.
(4) The appropriate bodies shall determine the procedure for the review in subsection (2) according to their own standing orders.
(5) Each international trade agreement shall be submitted to a review by the appropriate bodies according to the terms in subsection (2).
(6) A Minister of the Crown shall have regard to any representations made by an appropriate body resulting from a review undertaken under this section.”
This new clause would provide for Parliament and the devolved legislatures to review a trade agreement every five years and for the UK to bring an end to that trade agreement based on the outcome of those reviews without sanction under the agreement.
Government amendments 36 and 37.
Amendment 6, in clause 2, page 2, line 20, at end insert “, and”.
This amendment would provide that the Henry VIII provisions in Clause 2 may only be used when a new UK free trade agreement is in the same terms as an existing EU free trade agreement.
Government amendments 38 and 39.
Amendment 7, in clause 2, page 2, line 29, at end insert “, and”.
This amendment would provide that the Henry VIII provisions in Clause 2 may only be used when a new UK international trade agreement is in the same terms as an existing EU international trade agreement.
Amendment 8, in clause 2, page 2, line 29, at end insert—
“(4A) In circumstances where—
(a) a free trade agreement in respect of which regulations are to be made does not make the same provision, subject only to necessary changes in terminology, as a free trade agreement referred to in subsection (3)(a) or (b); or
(b) an international trade agreement in respect of which regulations are to be made does not make the same provision, subject only to necessary changes in terminology, as an international trade agreement referred to in subsection (4)(a) or (b);
an appropriate authority must not make regulations under subsection (1) unless the requirements of section [Regulations: Parliamentary procedure] have been met.”
Government amendment 42.
Amendment 19, in clause 2, page 2, line 40, at end insert—
“(a) No regulations may be made under subsection (1) in respect of a free trade agreement unless the text of that agreement has been subject to consultation prior to its ratification by Parliament, in line with any guidance or code of practice on consultations issued by Her Majesty’s Government.
(a) A consultation under paragraph (a) shall actively seek the views of—
(i) Scottish Ministers,
(ii) Welsh Ministers,
(iii) a Northern Ireland department,
(iv) representatives of businesses and trade unions in sectors which, in the opinion of the Secretary of State, are likely to be affected by the proposed free trade agreement, and
(v) any other person or organisation which appears to the Secretary of State to be representative of interests affected by the proposed free trade agreement, including local authorities.”
This amendment would require the Government to have published the text of each UK free trade agreement and opened it to consultation with business, trade unions, the devolved administrations and other parties prior to its ratification.
Government amendment 4.
Amendment 9, in schedule 2, page 12, line 5, after “2(1)” insert
“(unless the regulations are of a type which fall under section 2(4A)(a) or (b))”.
This amendment is consequential on NC6.
Amendment 2, in schedule 2, page 12, line 6, at end insert—
“(1A) A statutory instrument containing regulations of a Minister of the Crown under section 2(1) may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, each House of Parliament.”
Government amendments 71 to 74.
Amendment 10, in schedule 2, page 12, line 20, at end insert
“(unless the regulations are of a type which fall under section 2(4A)(a) or (b))”.
This amendment is consequential on NC6.
Government amendments 75 and 79.
George Hollingbery
I am delighted to tell you, Mr Speaker, that I can accord with your wishes and those of my right hon. and learned Friend the Member for Rushcliffe (Mr Clarke).
The Government have been consistently clear that the priority for the UK’s existing trade relationships as we leave the EU is continuity. Our partner countries are clear on that, too, and this Bill is about continuity. Specifically, clause 2 creates a power to help with the implementation of obligations of the trade agreements that we are seeking to transition into UK-only agreements as we leave the EU. I recognise that Members are seeking reassurance that the Government will be transparent about the content of these transitioned agreements and about what might need to change to deliver this continuity, which we have championed for so long.
Indeed, I understand the purpose of the new clause 6 and the associated amendments, tabled in the names of my hon. Friends the Members for Huntingdon (Mr Djanogly), for Wimbledon (Stephen Hammond) and for Bromley and Chislehurst (Robert Neill). My predecessor, my right hon. Friend the Member for Chelsea and Fulham (Greg Hands), and I held constructive discussions with my hon. Friend the Member for Huntingdon to ascertain how best we could help that transparency. As a result, the Government have tabled new clauses 12 to 14 and amendments 4, 36 to 39, 42, 71 to 75 and 79. I will now explain them in a little detail.
New clause 12 and the associated Government amendments will place a duty on Ministers to lay a report in both Houses of Parliament. This report will explain any changes made to the continuity agreements when compared with the existing EU third country agreements. The report will be laid in Parliament before the continuity agreements are ratified or at least 10 Commons sitting days before any implementing regulations are laid under clause 2, whichever comes first. We want these reports to be as helpful as possible. That is why they will signpost any significant changes being made, to ensure that existing trade agreements can function effectively in the UK-only context. Implementing regulations made under clause 2 will also now be subject to the affirmative resolution process, which will further enhance parliamentary scrutiny. I have also committed that, for each statutory instrument made under the clause 2 power, the accompanying explanatory memorandum will be explicit in referencing which of the changes identified in the report it plays a part in implementing.
With amendments 44 to 47, we are reducing from five years to three years the length of the period for which the implementing power can be used. The period will be renewable by agreement in both Houses of Parliament.
I hope that my hon. Friend the Member for Huntingdon agrees that these amendments address the spirit of the issues he was seeking clarity on and provide enhanced parliamentary scrutiny.
Bill Esterson (Sefton Central) (Lab)
We raised concerns in Committee about the Government’s power grab in the Bill. For 40 years, we have subcontracted our responsibility for trade agreements to the EU, while scrutiny has been delivered through the European Parliament and by our own European Scrutiny Committee, yet the Government are not proposing any equivalent scrutiny processes for agreements that will replace those we currently have through our membership of the EU. This lack of scrutiny is a major issue, and we raised the concerns of business, trade unions, civil society, consumers and many more in Committee.
The Labour party submitted a series of amendments in Committee that embodied a full process of parliamentary scrutiny and extra-parliamentary consultation. The Government responded by saying that the new UK agreements would just roll over the terms of existing EU agreements and would thus need no process of scrutiny, having already been scrutinised.
Greg Hands (Chelsea and Fulham) (Con)
Does the hon. Gentleman not accept that we are dealing with existing EU agreements that have already been scrutinised in both Houses of Parliament and that in many cases have already been in effect for a long time—in some cases, decades? It is important to have the ability to scrutinise the agreements if they have changed, but in general I think that he is barking up the wrong tree in alleging that this is an attempt to avoid parliamentary scrutiny.
Bill Esterson
The former Minister should have waited, because he anticipated my remarks: the Government’s delegated powers memorandum told a different story. Paragraph 46 noted that the new UK agreements would not just be legally distinct but could include
“substantial amendments, including new obligations”.
In other words, these will not just be roll-overs; they will be new treaties that can introduce wholly new terms of trade between the UK and our trading partners—terms that will be binding on us for years to come.
Government new clause 12 is confirmation that Labour was right to identify the problem here. It will require a report to be laid before Parliament before the ratification of any free trade agreement that will highlight and explain any significant differences between the new agreement and the corresponding EU agreement on which the new agreement is based. It is disappointing, therefore, to see this concession wiped out immediately by Government new clause 13, which will allow them to sidestep the obligation to lay such a report. It will also allow the Government to ratify new agreements without having produced the report in question. Government new clause 14 picks up the same point prior to implementation, but by this time the trade agreement will already have been ratified.
We will support new clause 12, but if the Government really mean what they say, they should withdraw new clause 13. We will also support new clause 3, which pays us the compliment of replicating the amendments that we tabled in Committee and which sets out the scrutiny process that should be adopted for new trade agreements.
Mr Jim Cunningham (Coventry South) (Lab)
My hon. Friend has just raised a serious issue. There is a great deal of concern among businesses and trade union organisations, which fear that the Government are trying to slip things through without proper scrutiny. Does my hon. Friend agree that that is the nub of the problem?
Bill Esterson
My hon. Friend is absolutely right. Following the Committee, six major business organisations —the CBI, the British Chambers of Commerce, the Engineering Employers Federation, the International Chamber of Commerce, the Institute of Directors and the Federation of Small Businesses—took the unprecedented step of issuing a joint statement with the TUC, Unite, the Trade Justice Movement, the Consumers Association, or Which?, and other industry bodies, calling for a proper model of consultation and scrutiny to govern the UK’s policy-making process in future.
The Secretary of State delivered his statement to the House yesterday, telling us about future plans for a more transparent and inclusive UK trade policy, but at the same time reminding us that the future process would not apply to the Bill or the agreements that correspond to our existing EU agreements. That is why our amendment 19 is so important: it provides for proper consultation on any substantive new elements in the 40 trade agreements that we need to replace the EU’s existing trade deals. The involvement of the widest possible group of stakeholders is essential if we are to ensure that the new trade agreements are properly designed to give our businesses, consumers, workers and public services what they need.
We argued in Committee that any regulations made under the Bill should be subject to the affirmative procedure in Parliament, not the negative procedure, as originally stipulated in schedule 2. I am pleased to see that the Government have agreed that we were right to insist on parliamentary accountability, as their amendment 75 provides that any regulations made under clause 2(1) will indeed be subject to the affirmative procedure. That is not the further extension to which the Minister referred; it is entirely new, and it removes the need for the triage and scrutiny system proposed in new clause 6. However, it leaves any regulations to be made under clause 1(1), in relation to the World Trade Organisation’s Government procurement agreement, subject to the negative procedure. The Minister did not explain the logic behind that, and I should like him to do so, especially given that amendment 32 will grant the Government the power to extend the disciplines of the GPA to new bodies if they so choose, not just to renamed or merged Government entities.
Worse still, Government amendment 34 will introduce what is effectively a further Henry VIII clause, in that it will grant the Government the power under clause 1
“to modify retained direct EU legislation”
in respect of GPA implementation. Members should note that that is a power in perpetuity, as there is no sunset clause in relation to clause 1. In Committee, we argued for the removal of all Henry VIII powers from the Bill, and we support the further attempt to limit those powers in amendments 6 and 7, tabled by the hon. Member for Huntingdon (Mr Djanogly).
The Government have told us:
“Retained direct EU legislation will operate in a different way to both primary and secondary legislation”,
with
“unique status within the domestic hierarchy.”
The European Union (Withdrawal) Act 2018 distinguishes between “minor” and “principal” types of retained direct EU legislation precisely so that Parliament can apply more rigorous powers of scrutiny to the more important elements. A modification of principal retained direct EU legislation, as envisaged in amendment 34, could therefore have a constitutional significance analogous to that of modifying primary legislation. Introducing to the Bill what is effectively yet another Henry VIII power, with no sunset clause to limit its future application, is a serious challenge to parliamentary democracy, and the Minister has not explained why the House should countenance such a move.
New clause 23 would give the devolved Administrations the right to veto a trade agreement before ratification. I simply point out that international agreements are a competence of the UK Government under the devolution settlement, which is why we will not support that proposal.
In his statement yesterday, the Secretary of State recognised the problems that are caused when Governments sign off trade deals that do not have public legitimacy. However, he has failed to follow the logic of his own statement in respect of the 40 agreements that we need to replace our existing EU deals. Even given the Government’s concessions, the Bill is still woefully lacking in transparency and scrutiny, and such a democratic deficit needs to be addressed. As the CBI representative asked us during the Committee, “If not now, when?”
Gillian Keegan (Chichester) (Con)
Thank you, Mr Speaker, for giving me the opportunity to speak in the debate.
I served on the Committee, and it is clear to me that we should pass the Bill in order to build the legal foundations that we need to support global trade by ensuring that existing trade agreements via the EU can continue, providing access to overseas procurement opportunities—an important market worth £1.3 trillion—and protecting our business from unfair practices via the new Trade Remedies Authority.
There is much debate about the shape of the future trading relationship between the European Union and the United Kingdom, but the Bill is required for every situation that our country will face as we leave the EU. It seeks to ensure that we will continue to enjoy the benefits of trade deals that the EU has done with more than 40 countries around the world. There is, however, an inherent assumption that the UK will reach agreement on the terms on which we continue trading with our biggest partner, the European Union. Any “no deal” scenario is likely to have an impact on how rules of origin are calculated in the trade agreements.
This is complex stuff. I think we all understand that we are making big decisions that will have an impact on businesses—both large multinationals and small and medium-sized enterprises—which export to or import from the EU. As someone who has worked in car manufacturing, financial services and technology for nearly 30 years, I am unfortunately burdened with some knowledge of how all this works and of the operating models that have emerged over the last 40 years, making many industries, such as car manufacturing, finally competitive. In the real world there is no such thing as a hard or a soft Brexit; there are just degrees of risk. The Prime Minister is seeking a low-risk Brexit in her Chequers White Paper—one that involves listening to businesses that have built highly integrated supply chains, such as Rolls-Royce in my constituency.
Of course it is possible to find examples of car parts coming from outside the EU without a problem, but the question is one of both scale and financial impact. Only a business will have a truly accurate view on this, but it is safe to assume that introducing costs will have a negative impact on businesses large and small throughout the country. They will want to avoid going back to the days when supply chains were not highly integrated and efficient. They will need to hold stocks in warehouses or lorry parks. I am probably the only person in the House of Commons who has sat in customs waiting to rescue a stranded part while a car production line lay idle. Delays are quite simply the difference between profit and loss. The same applies to agricultural goods. We have a thriving growers’ business in Chichester, and export more than £1 billion of perishable goods to the EU every year. Customs delays and perishable goods are two words that do not belong in the same sentence. That is why I completely support the pragmatic approach to goods set out in the Chequers White Paper and I believe it will also enable us to make future international trade agreements as envisaged in this Bill.
But as well as achieving these outcomes, we have to respect the referendum result. The British people voted to end freedom of movement and to get back control of their borders, laws and money. We can all have views on whether a better deal could be negotiated. These are views, not facts. However, I cannot help thinking that if we had been offered a deal a few years ago that ended free movement, stopped future payments to the EU, continued frictionless trade, and regained control over our fisheries and farming policies with no hard border in Northern Ireland, we would have readily agreed; in fact, we would have bitten the EU’s hand off.
Every successful negotiation requires compromise, and perhaps the Rolling Stones express our current predicament best in one of their greatest songs: “You can’t always get what you want, but sometimes you can get what you need.”
Several hon. Members rose—
Mr Speaker
Order. In calling in a moment the hon. Member for Brighton, Pavilion (Caroline Lucas), principally to speak to her new clause and in the knowledge that she is a celebrated and award-winning parliamentarian, I feel that I can say with total confidence that she will require no longer than five minutes to make her case.
Caroline Lucas (Brighton, Pavilion) (Green)
Indeed, I do rise to speak to new clause 3, which is in my name and signed by more than 50 Members of the House from four different parties, and I give notice that I would like to move it when it comes to the votes.
This amendment essentially seeks to remedy the Bill’s failure to provide for a proper role for parliamentarians in the scrutiny and approval of trade agreements. At present, trade agreements can be negotiated, or renegotiated as is likely to be the case with many of the existing EU trade deals covered by this Bill, entirely under royal prerogative powers, essentially giving the Government free rein to decide when and with whom to start negotiations, to set their own priorities and objectives, to conduct the negotiations in great secrecy, and to conclude the deal without any meaningful parliamentary scrutiny. That not only sidelines Members of this House, but it prevents valuable input by civil society organisations and the wider public. This Bill is supposed to help implement an independent trade policy following withdrawal from the EU, but it does nothing to put in place the kind of scrutiny and approval framework that should be required for an accountable trade policy in a modern democratic country. And this is the only legislative opportunity we are likely to have to put such a framework in place.
In his statement yesterday, the Secretary of State for International Trade once again sought to make a distinction between replacements for existing EU trade deals and future trade deals, but the fact is that effective parliamentary scrutiny and approval is needed for both, for it is increasingly clear that, contrary to the hope of Ministers, it is not going to be a simple case of transitioning, or “rolling over,” existing EU trade deals. Some or all of the countries in question are not simply going to be content to continue with the existing arrangements, and Ministers will have little choice but to negotiate a replacement deal. So while yesterday’s statement by the Secretary of State must be welcomed for its clear, if somewhat overdue, recognition of the current democratic deficit in the making of trade deals and the need to correct that if we are to have a modern, transparent and accountable trade policy, it needs to be applied much more fully and more extensively.
Unfortunately, the package of proposals set out yesterday falls well short of what is required, both because it does not apply to the existing EU trade deals covered by this Bill and because it does not go far enough. For example, it is welcome that the Secretary of State proposes a process for Ministers to set out their ambitions before embarking on a new set of negotiations, including scoping assessments, and the commitment to publish impact assessments is also a step forward, but the reality is that recent impact assessments by the Government on trade have focused purely on the impact for exporters, without taking into account at all the wider economic impacts, let alone social, environmental, gender and regional impacts and the effects on workers’ rights. So we need to see a much stronger commitment to transparency.
Most significantly of all, the Secretary of State’s proposals fail to give Parliament meaningful oversight of new trade deals. For that to happen, Members of this House need a guaranteed vote on the deal that emerges from the negotiations. Without that, all the other measures proposed by the Secretary of State yesterday risk being little more than window-dressing.
The Secretary of State contends that the Constitutional Reform and Governance Act 2010 is all that is needed. However, that process is an utterly inadequate rubber stamp: it gives Parliament a right to say whether a new trade deal should or should not be ratified, but does not enable Parliament to propose modifications. Moreover, as we know to our detriment time and again, Ministers can and do simply overrule Parliament and ratify the trade deal despite Parliament’s objections. In contrast, Members of both the European Parliament and the US Congress get an automatic vote. If this issue is about taking back control, why do we not take back some control in this Chamber and make sure we get the same kind of vote that other legislatures with whom we will be negotiating do?
Trade deals are not simply commercial negotiations; they are public policy negotiations and should be treated as such. Transparency, scrutiny and parliamentary approval should be embraced, not treated as a risk.
Mr Mark Prisk (Hertford and Stortford) (Con)
The hon. Lady’s new clause says the impact assessment should include
“both qualitative and quantitative assessments”.
Can she give an example?
Caroline Lucas
A qualitative impact would be the impact on the environment, for example. We want to know not just the economic quantity of the impacts in terms of how much trade gain we are going to get out of a negotiation, but the qualitative impact on the public policy areas that I am talking about. We cannot quantify necessarily the impact of a trade deal on our own environmental standards, but we can say whether qualitatively those standards are going to be degraded. That is why we need both those terms: we want to know the quantitative and the qualitative impacts. They are separate, and it is not that difficult to see the difference.
New clause 3 sets out the kind of framework we need. Before commencing the negotiation of a trade agreement, Ministers must bring before Parliament at the very least a sustainability impact assessment conducted by a credible independent body, covering not just the potential economic impacts, but the social and environmental ones. The devolved authorities, businesses, trade unions and the public must be consulted about the potential agreement, as is required in the US. If the decision is to go ahead, Parliament would be required to give its consent to a mandate for the negotiations, setting guidelines and boundaries, a process based on the Danish model. The Government would conduct negotiations transparently, releasing texts before and after each negotiating round, building upon the procedure in the EU and following practices common in other areas of international negotiation, such as climate talks.
My amendment is a very basic and simple one. It is asking for things that are common in many other countries around the world, and saying that we should do the same.
Mr Jonathan Djanogly (Huntingdon) (Con)
We are clearly in a very much better situation now with this Bill’s regulation scrutiny provisions than after the Second Reading in this House, and on that basis my recommendation will be that hon. Members do not vote for my new clause 6 or my amendments 6, 7, 8, 9 and 10, but that they vote for the alternative Government amendments, new clauses 12, 13 and 14 and all their tabled amendments to clause 2. If the Government amendments pass, Henry VIII will have been banished from this Bill and a sensible compromise scrutiny system will have been inserted. The Government have listened and done the right thing and we should support them for that, but there are still issues, so let me explain my thinking.
This Bill applies to around 40 existing EU trade-related agreements involving some 70-plus third countries. This actually also includes some agreements that are concluded but are still due to be implemented, which I shall call collectively FTAs. It is estimated that 10 of the UK’s top 50 export markets are served by these EU FTAs, accounting for 35% of UK trade. I can therefore understand why the Government are keen for the UK to adopt these FTAs post Brexit, or “roll them over” in the terminology used by Ministers. In addition, I understand the practicalities of the situation: the Government have limited negotiating capacity and the idea of dealing with all of these 70 third countries and starting deals from scratch is undoubtedly unrealistic in the immediate term. Indeed, the average time for negotiating an FTA is seven years and the recent Canada deal took more like 15 years. So I understand that there is a lot at stake here for the UK, and I appreciate that the International Trade Department is under a lot of pressure to deliver.
Having said that, I do not think that the Department has covered itself in glory in its handling of these roll-overs. To start, I would make the point that we have been given a wall of silence. The International Trade Committee back in March asked the then Minister to prioritise these negotiations more, to publish a detailed timetable of the work-streams involved, to produce a risk register identifying clearly the agreements concerned and to have contingency plans even for where third countries have only given an assent in principle. It took the Government until 15 May to respond to the Committee report, and to call their response bland and non-committal would be an understatement. In the meantime, various leaks and rumours have been appearing, maintaining that some of the negotiations with third countries have not been going quite according to plan and that the EU has not been as helpful as the Ministers had originally thought it might be. This would include the EU telling us that it will not ask its FTA trade partners to allow the UK to benefit from their existing deals until the UK signs the final legal text of the Brexit deal. That could leave us with only a few months up to next March in which to negotiate the roll-overs.
Given all this, I have some sympathy with new clause 16, tabled by the hon. Member for Swansea West (Geraint Davies), which demands further details of the status of these proposed roll-over deals, and the Minister should acknowledge the frustration on this that is shared by everyone outside his own Department. We have received vague assurances from the Department that the roll-over discussions are going according to plan and that everything will be all right on the night. We are also being told that the Government need to have this legislation in place so that they can action the roll-overs, and that they need the regulatory powers to make this happen quickly if need be, including in the situation of our Brexiting with a no-deal scenario.
I am trying to show that the Government have asked for sweeping Henry VIII powers while keeping people pretty much in the dark as to what they might be needed for, and while providing little hard evidence of what has been achieved to date. Of course, UK business has also been crying out to know where we stand as regards these important overseas markets. I hope that the Government are right and that the roll-overs will take place as planned with no or few changes, but that does not mean that it would be acceptable that any material changes to the deals should just be waved through by Ministers without any parliamentary scrutiny. For instance, let us say that one of the EU third countries with which we wish to roll over a deal says, “Yes, we agree that you can roll over, but let’s face it, you are a market of only 50 million people rather than 500 million, so we’ll agree to roll over, but only on condition that we also get 50,000 visas a year.” Under the Bill, that could be pushed through by Ministers on a negative order with no scrutiny at all. By the way, I do not see this as a remain argument or a leave argument; I see that as simply wrong. If Brexit is about returning power to Parliament, it is surely not about then just giving Ministers sweeping new powers, not least in a scenario where so little information has been given to hon. Members.
The Government have been maintaining that they wish to use these powers to roll over existing EU deals before possibly coming back to renegotiate substantive deals with the same countries, which would be subject to a scrutiny process yet to be proposed. However, I do not see why these same powers should not be capable of being used again after roll-over to make further changes to the same FTA during the five-year period—a sunset period which, with a possible further five-year extension, is in my opinion much too long.
All those reasons led me to think that we have a real problem with these provisions and I therefore tabled my amendments, looking for a triage and scrutiny system. However, since tabling the amendments, I have had an ongoing dialogue with Ministers, including my right hon. Friend the Member for Chelsea and Fulham (Greg Hands) and more recently the Minister for Trade Policy, my hon. Friend the Member for Meon Valley (George Hollingbery). Discussions have been courteous and positive, and I am pleased to say that the Government have listened and tabled their own amendments—I think more than 40 of them—to clause 2.
This will mean that the first proposed statutory instruments related to an FTA will need to be laid not less than 10 sitting days after the issuing by a Minister of an explanatory report. The changes proposed in the report will then be cross-referred to in the related SI’s explanatory memorandum. Further, it is now proposed that all related SIs will be subject to the affirmative procedure, however material or immaterial they may be. This effectively takes away any need for sifting provisions. Finally, the sunset period is proposed to be cut from five to three years, plus up to a possible further three years following an affirmative resolution.
Vicky Ford (Chelmsford) (Con)
I have received many hundreds of emails from my constituents asking me to support my hon. Friend’s amendments in order to bring more transparency to the trade process. Can he confirm that the amendments that the Government have tabled today will meet their requests? I have had four times as many emails on this as I had on the White Paper.
Mr Djanogly
Yes, the approach that has now been adopted is, I believe, a fair one, subject to some ironing out that might need to be done in the other place. Yes, it is a good deal for my hon. Friend’s constituents.
After no little discussion over the last few months, I think that the position is now very much improved. Let us keep in mind that a single FTA might have many SIs attached to it, so to have the report laid 10 sitting days in advance of the first SI, setting out all the changes in the proposed deal that will need to be considered, should be more transparent than just attaching a period for scrutiny to the SIs themselves. Furthermore, attaching the 10 sitting days’ time delay to the report will allow any comments that people wish to make to be made before the SI is laid, which is more effective from a review point of view.
I am concerned that these powers could be used multiple times on the same FTA—say, if different trading terms were agreed a couple of years after roll-over. I understand that this is not the Government’s intention and I believe that the effect of these Government amendments would be to prevent that, unless the proposed changes came within the scope of the initial report. However, if they did not come within the scope of the report, Ministers should be required to provide a further report. Clarification on this point, perhaps today from the Minister or in the other place, would be appropriate.
I note the insertion of a provision in new clause 13 saying that Ministers should not have to prepare a report on the proposed FTA in exceptional cases. Apparently the Constitutional Reform and Governance Act 2010 contains a similar provision. The Minister has assured me that this provision is unlikely ever to be used, and that if it was, a report would still need to be prepared and there would still be a need for an affirmative resolution. Again, I hope that the Minister will refer to this in his closing remarks.
A further issue is the need to confirm that the scrutiny provisions to be used on these FTAs will be those set out in this Trade Bill and not those in the European Union (Withdrawal) Act 2018. This is provided for in my new clause 6. From discussions with the Minister, I understand that he has been advised that all regulations relating to rolled over EU FTAs will necessarily need to be dealt with under the terms of this Bill, but again, clarification would be helpful.
Yesterday we debated the Taxation (Cross-border Trade) Bill, which itself contains its own powers to make orders. Although other colleagues have been focusing on that Bill, I remain concerned that the scrutiny system in today’s Bill ties in with that Bill. This is relevant because aspects of an FTA, which are customs related, will be dealt with by yesterday’s taxation Bill rather than by today’s Bill. The regulation provisions may therefore need to work in sync.
All hon. Members from both sides of the House have been involved in this, and I thank those who have supported my amendments. The outcome has not been a victory for any Brexit faction; it has been Parliament that has won this debate in upholding its right to review the actions of the Executive. Having said that, I would point out that more than 40 Government amendments were received within the last week. As welcome as they were, and while the principle of them is agreed, the details deserve a review by the other place. I have mentioned the interconnectivity between this Bill and the taxation Bill, and these would be good topics for further review.
Stewart Hosie (Dundee East) (SNP)
I should like to speak to new clause 20, which is in my name and those of my hon. Friends. I shall also speak to new clauses 22, 23 and 24 and make brief reference to new clause 21. New clauses 20 to 24 combined are an attempt to provide and further strengthen a comprehensive framework for future trade negotiations. This is to ensure that the devolved nations are respected, consulted and fully engaged in trade deals, and that their voices and national interests are properly reflected in trade deals, from determining the negotiating mandate right through to reviewing progress on deals after ratification and implementation.
That is important because although the UK devolution Acts grant Westminster full power over international trade, the domestic impact of many trade agreements extends beyond the competence of Westminster. The devolved Administrations have responsibility for a broad range of policy issues including health, education, agriculture and the environment, and many modern trade agreements include provisions with the potential to lower environmental standards, open up public services to privatisation, expand intellectual property rights or risk increasing the cost of medicines. Those agreements can encroach on the devolved Administrations’ policy space, restricting their ability to make public policy in those areas. That is something that none of us wants to see.
Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)
My hon. Friend is making an important point, and he is not asking to reinvent the wheel. In Canada, the International Trade Committee heard evidence from John Weekes, who is an ambassador to the World Trade Organisation and also a Canadian negotiator. He said that squaring off the provinces of Canada, though adding to complexity, made for better trade deals and a more harmonious Canada. Canada is obviously more interested in keeping itself together than the current United Kingdom is.
Stewart Hosie
My hon. Friend the Chair of the International Trade Committee makes an important point. We have already seen the impact of sub-state Parliaments in Europe on previous European trade deal discussions. Indeed, my hon. Friend is right that we have seen the impact of provincial governments in Canada, and we would do well to take that on board here. In a sense, that is what my new clauses are about.
New clause 20 sets the role of the devolved Administrations in helping to approve the negotiating mandate. It suggests that a joint ministerial committee on trade be set up with representatives from all the devolved Administrations, that that committee be required to reach consensus on any draft negotiating mandate, and that it be revisited if the mandate changes during the negotiations. New clause 20 also requires that the consent of the Scottish Parliament and the other devolved Administrations be secured specifically for areas under devolved control that may be affected by a trade deal. That is not a veto, as the Labour Front-Bench team would describe it; it represents responsibility for the areas that the devolved Governments have responsibility for. In short, new clause 20 ensures that any negotiating mandate is first approved by the devolved legislatures and that a joint ministerial committee is created to co-operate and agree the mandate.
Several hon. Members rose—
Mr Speaker
Order. We are very constrained for time, and I know that the hon. Member for Gloucester (Richard Graham)—great diplomat of international renown that he is—will not absorb the House’s attention for more than five minutes, but we will savour those five minutes.
Richard Graham (Gloucester) (Con)
Thank you, Mr Speaker. I welcome the Minister’s announcement that today’s debate is about continuity and transparency, but the truth is that it is laced with a cocktail of amendments with very different agendas. The two most popular agendas represent attempts to lock us into either the or a customs union, as in new clause 5, or to secure a customs union were the negotiations to fail to secure frictionless FTAs, which is in new clause 18. That would be the clearest invitation to the European Union to refuse those negotiations. The third one—[Interruption.] Be patient.
Geraint Davies
The hon. Gentleman is referring to new clause 18, which is in the next group. We have limited time and he is talking about the wrong section of the Bill.
Mr Speaker
Forgive me; because I was engaged in discussions at the Chair, I did not notice that. The hon. Member for Gloucester (Richard Graham) must focus with razorlike precision on the matters in this group. If he does not wish to do so, he must wait until we are discussing another group. If he can find a way of delicately relating his concerns to the group with which we are dealing, rather than one with which we are not, that would be in order.
Richard Graham
Thank you, Mr Speaker. If the hon. Member for Swansea West (Geraint Davies) had waited but two seconds, he would have realised that I was precisely there with my third illustration of today’s agendas: the attempts to avoid free trade agreements altogether, of which new clause 3 is the most striking example, or to scrutinise them to death, as set out in new clause 20.
I wish to linger on new clause 3. It may appear to those outside this House that it contains reasonable requirements. It states that Ministers of the Crown should lay a draft of the negotiating mandate, setting out fields, sectors, principles, limits and desired outcomes of agreements that may well be an exact and absolute rollover of existing agreements that were negotiated decades ago. The truth is that this is the “we do not want any free trade agreements” clause. It would frankly be absurd to pretend that we could ever get anything done, given the requirement to ensure that
“between each round of negotiations”
of some 40 agreements
“all documents relating to the negotiations have been made available for scrutiny by select committees”,
unnamed and unnumbered. Those who drafted that new clause would clearly have been against the anti-corn laws of 1832 and against Adam Smith’s “The Wealth of Nations”. They would be against this country actually receiving anything at all in trade, specifically if we manufactured or produced it here in this country. Micro-management would run riot, and it would mean the end of all free trade agreements for all time. I therefore completely reject that approach.
My second point is that what we are talking about tonight ultimately comes down to difficult decisions about what type of nation we want to be when we leave the European Union. It has always been clear to me that if we are to leave the EU, we cannot stay in the or a customs union. It is bizarre that some Opposition Members do not see that our inability to decide our trade preferences, particularly with the poorer nations of the world that are currently disfavoured under the common external tariff regime, could not be significantly improved by having our own free trade agreements.
The next point—the right hon. Member for Twickenham (Sir Vince Cable) is a classic example of this particular school of thought—is that we will not be able to negotiate effective free trade agreements on our own once we have left the European Union and the customs union. I urge all those in this House who believe that to look closely at the potential of the Trans-Pacific Partnership and the warm interest from all those involved in that complicated and important agreement in an area of vital growth to the world. The opportunity for us there is significant. We should not listen to those who put up new clauses that would get rid of free trade agreements forever, and we should seize the opportunities that leaving the customs union will offer us if we are to leave the European Union, which we are.
Geraint Davies
I will be brief. The Trade Bill is of course the latest part of the Brexit fantasy built on the illusion that the trade we lose from the EU will be made up by the US and, in particular in this Bill, by the continuation, without any change, of the existing 14% of our trade with third countries. We know from Donald Trump that we cannot rely on the US. This is about whether we can rely on the 70 countries and 40 agreements to deliver the 14% of our trade in the same way, and the simple fact is that, rather than negotiating as team EU, any country now looking to negotiate against the UK alone is bound to want a new agreement, because we are a much weaker party.
That is why, in speaking to new clause 16, I simply ask that MPs have information about the countries that ask for changes in those agreements. The current Minister and previous Ministers have claimed that no one is asking for any changes, but we already know that both Chile and South Korea are asking for such changes. This is about transparency and scrutiny.
As it stands, the Trade Bill gives Ministers the power to amend domestic law to match any new trading arrangements, so we are talking about Ministers having the right, behind closed doors, to change standards, to change tariffs, to change human rights, to enable visas, to change environmental protections, to undermine public health and to change workers’ rights. [Interruption.] There is a bit of heckling, but the reality is that in bilateral trade agreements if Ministers decide there will be different standards, rights and protections, that may be permitted without the scrutiny of this House. Indeed, tribunals and mechanisms like the investor-state dispute system could be introduced behind closed doors. All new clause 16 says is that there should be scrutiny of that.
Geraint Davies
There is no time for me to give way. All I am asking with my simple amendment is that we have the power to know in advance when people ask for concessions. The Government should accept the amendment, because they claim that nobody is asking for any changes and that it is business as usual. If they deny the amendment, they will just be illustrating that, behind closed doors and under the cloak of darkness, we could see our protections and rights undermined.
Jeremy Lefroy (Stafford) (Con)
In speaking to the amendments on the transparency and scrutiny of free trade agreements, I ask the House to lift its eyes beyond the detailed scrutiny that will inevitably and necessarily take place in this House and consider whether we should not also be looking to join others not in the European Union but in free trade associations.
Pretty much every single country in the world is part of some kind of free trade association, whether a very close one or a much more loose-knit one—whether it is Mercosur in South America, the Common Market for Eastern and Southern Africa or the North American free trade agreement. I therefore ask the Government to look at the European Free Trade Association, which is not synonymous with the EEA or with Switzerland. If it will have us, as I very much hope it will, EFTA would provide the ideal vehicle for both the withdrawal agreement and the transition arrangement of 21 months, during which time we will be members of the EEA, and for the association agreement thereafter.
Angus Brendan MacNeil
The hon. Gentleman is fantastic in making the fundamental point that the rest of the world is in regional trade agreements. He is just about correct. Only five countries are not in regional trade agreements, which is what the UK is heading towards: East Timor, Somalia, South Sudan and, we think, Mauritania—
Mr Speaker
Order. We do not have time for these long interventions. Short question, one sentence. Thank you.
Angus Brendan MacNeil
Does the hon. Member for Stafford (Jeremy Lefroy) think it is incumbent on the UK to think again about being in that company?
Mr Chris Leslie (Nottingham East) (Lab/Co-op)
This group of amendments is about parliamentary scrutiny, and in a way it is a shame that some on this subject are in later groups. The key thing I want is to ensure that appointments to the Trade Remedies Authority are subject to confirmation by the International Trade Committee in the same way that the Treasury Committee has confirmation hearings on the Monetary Policy Committee and the Financial Policy Committee.
New clause 12 gives me a little tickle, a little laugh, because it says that Ministers will now come to report to the House when there are any significant differences in the free trade agreements we have as a member of the EU that will be rolled over. Apparently the agreements will be cut and pasted, and it was only at last year’s Conservative party conference that the Secretary of State for International Trade himself promised that, one second after midnight, all 40 agreements will be rolled over and available from March 2019. Well, it has not quite been going his way, because the Government have not got a single other jurisdiction to sign up legally to doing that.
Several hon. Members rose—
Greg Hands
I welcome the return of the Bill to the House and, perhaps not surprisingly, I support the Government’s approach, having been the Minister responsible for the Bill until about three weeks ago. I commend the approach taken by my successor in moving a number of these issues forward, particularly in his discussions with my hon. Friend the Member for Huntingdon (Mr Djanogly).
Parliamentary scrutiny is crucial for trade agreements, and we have seen the difficulties in recent years with trade agreements that have been insufficiently scrutinised, or where there was a feeling that there had been insufficient scrutiny—the Transatlantic Trade and Investment Partnership perhaps being the most important example.
I very much welcome the Secretary of State’s proposals yesterday for the scrutiny of new trade agreements. Returning to where we started, it is vital to distinguish between the 40-plus existing EU trade agreements and what may happen for future agreements. No one should underestimate the importance of those EU agreements. With Japan being in scope, too, the volume of our trade that is done with countries for which there is an EU trade agreement—that is not the same as saying the volume of trade that is dependent on those agreements—rises to around 16%, which is an incredibly important part of our trade. As we know, none of these countries is in principle opposed to doing and rolling over these agreements. I have had productive talks with South Korea and South Africa, as I am sure my successor has. Various memorandums have been signed agreeing to transition these agreements. So I refer anybody who says that these countries have problems doing that to those agreements that were signed, for example, the one signed with the South African Trade Minister, Rob Davies.
I welcome the approach taken by my hon. Friend the Member for Huntingdon and his agreement that we are now satisfied with and have coalesced around new clauses 12, 13 and 14. We are always trying to get a balance between ensuring that any significant change to a trade agreement is scrutinised by Parliament and not creating a laborious and cumbersome procedure that would potentially jeopardise the future of one or more of those 40-plus agreements. I am delighted that we seem to have reached that agreement. I have visited businesses that are directly impacted by some of these agreements, including the Ford factory just outside Johannesburg, which is very dependent on the EU-South African Development Community agreement, in terms not just of taking components for vehicles from the UK to South Africa, but exporting finished vehicles to the EU. The business voice is very much saying that it wants these agreements to continue—that is business’s principal concern.
Finally, I wish to argue against new clauses 3 and 16, and other proposals that seek to legislate now for future trade agreements. It is only fair that we look at the proposals made by the Secretary of State yesterday in this House and do not prejudge them by passing legislation today, as it would have an impact on future trade agreements. We must make sure we listen to all voices, so that they are included in consideration of where we take future trade agreements.
Several hon. Members rose—
Mr Speaker
Order. I want to call the Minister to wind up at 3.25 pm, and I hope that the hon. Member for Bath (Wera Hobhouse) will take account of that.
Wera Hobhouse (Bath) (LD)
Thank you, Mr Speaker. This Bill would not be needed if we remained in the customs union. The Government are repeating, like an old record, that, “Leaving the EU will transform us into global Britain, striking trade deals around the world. While striking them, we just carry over existing deals.” How realistic is that? Outside the EU, Britain is a much less attractive trading partner. Businesses invest in Britain because we are an entry point to the European market and the single market. Is it reasonable to think that the UK can negotiate alone the same deals it can when part of a bloc of 28 countries? Although some countries have indicated they are prepared to copy and paste over existing deals, others will be watching and waiting, reserving judgment to see exactly what access the UK will have to the EU after Brexit. For that reason, we simply cannot accept that existing trade deals will be copied and pasted; significant changes will come along.
I am pleased that the Government have recognised that Parliament needs some say in the matter by tabling amendment 75 and accepting my amendment 4. However, the Government’s understanding of parliamentary democracy remains pretty poor. Amendment 75 allows MPs to approve, by affirmative statutory instrument, any changes in the law required by one of these continuity deals. It is a take-it-or-leave-it vote. It is not amendable and it is not meaningful. That is why the Government need to meet the concern raised in new clause 3, which stands in the name of the hon. Member for Brighton, Pavilion (Caroline Lucas) and which I support. People voted leave for different reasons, but nobody voted to make themselves poorer, to lose their job or to have food and product safety standards thrown out the back door.
With your permission, Mr Speaker, let me just say something about new clause 2, which is in the final group. The Government must be honest about the impact of any trade deals they sign and Parliament must be able to scrutinise this. The Tory leavers say, “Brexit is the will of the people”, but the Tories are in disarray, trying to work out among themselves what the will of the people actually is. As the chaos and confusion grows, it is time that more Members, on both sides of the House, joined the Liberal Democrats in supporting a people’s vote on the deal. We need to be honest with our constituents about the economic realities of Brexit and then give the people a final say on the deal.
George Hollingbery
I shall try to be brief, Mr Speaker. I thank the Opposition spokesman for his remarks, but I am going to limit my comments in return to saying that I am very disappointed that Labour Front Benchers could not welcome what is undeniably a good and robust scrutiny arrangement. We have hugely improved the position. The House will now have adequate and deep opportunity to challenge the Government’s proposals on any transitioned free trade agreement, and I just think it was a shame they could not say so.
The hon. Member for Brighton, Pavilion (Caroline Lucas) knows very well that this Bill is about the continuity of existing arrangements. The Secretary of State yesterday set out our approach to new trade arrangements in the House, with plans for extensive public consultation, continuous parliamentary engagement and the setting up of the strategic trade advisory group, and clear plans for engagement with the devolved authorities, civil sector and civil society more generally.
My hon. Friend the Member for Huntingdon (Mr Djanogly) asked several questions. I very much welcome his comments on our discussions and the fact that he is prepared to accept our amendments today. I can confirm that not all transitioned agreements will need clause 2 powers to implement changes. I can further confirm that it is not the intention to use powers in clause 2 to implement a transitioned free trade agreement more than once, although of course these will need to remain operable over time. In relation to the clause 2 power, “exceptional” is modelled on the Constitutional Reform and Governance Act 2010 process. The threshold is high and the flexibility provided is simply a matter of prudence. Finally, he asked for reassurance about powers in the European Union (Withdrawal) Act 2018. That Act allows regulations to be made that deal with matters arising from the UK’s exit from the European Union. The implementation of or transition to free trade agreements is not such a matter, so we cannot use that Act for the purpose of implementing a free trade agreement.
The hon. Member for Dundee East (Stewart Hosie) will know only too well that the Bill is about continuity: it is about not our future arrangements but our current arrangements. Yesterday, the Secretary of State comprehensively laid out our plans. We are committed to working with the devolved Administrations on our approach to the implementation of trade agreements that are signed after we have exited the EU, and they will also have a role in shaping the UK’s future trade negotiations. The Department held a successful deep dive on trade with devolved authorities in March 2018. A major outcome of that was the joint agreement on a regularised senior officials meeting, to take place every six weeks between the Department and the devolved authorities. A detailed rolling programme of policy and market-focused roundtables will take place over the rest of 2018. Beyond that, the hon. Gentleman has the reassurances that the Secretary of State gave yesterday on the devolved authorities’ participation. I hope that that at least gives him confidence that the Government are serious about their wish to negotiate with devolved authorities.
George Hollingbery
No, I am afraid I will not.
Finally, I thank my right hon. Friend the Member for Chelsea and Fulham (Greg Hands); my hon. Friends the Members for Chichester (Gillian Keegan) and for Gloucester (Richard Graham); and the hon. Members for Swansea West (Geraint Davies), for Nottingham East (Mr Leslie) and for Bath (Wera Hobhouse) for their contributions to the debate.
Question put and agreed to.
New clause 12 accordingly read a Second time, and added to the Bill.
New Clause 13
Reporting requirement not to apply in exceptional cases
“(1) Section (Report on proposed free trade agreement) does not apply to a free trade agreement if a Minister of the Crown is of the opinion that, exceptionally, the agreement needs to be ratified without laying before Parliament a report which meets the requirements of subsection (3) of that section.
(2) If a Minister determines that a free trade agreement is to be ratified without laying before Parliament a report which meets the requirements of section (Report on proposed free trade agreement)(3), the Minister must, as soon as practicable after the agreement is ratified, lay before Parliament—
(a) a report which meets those requirements, and
(b) a statement indicating that the Minister is of the opinion mentioned in subsection (1) and explaining why.”—(George Hollingbery.)
See Member’s explanatory statement for NC12.
Brought up, read the First and Second time, and added to the Bill.
New Clause 14
Report to be laid with regulations under section 2(1)
“(1) This section applies where a Minister of the Crown proposes to make regulations under section 2(1) for the purpose of implementing a free trade agreement to which the United Kingdom and another signatory (or other signatories) are signatories.
(2) A draft of the statutory instrument containing the regulations may not be laid before Parliament unless, at least 10 Commons sitting days before the draft is laid, a Minister of the Crown has laid before Parliament a report which gives details of, and explains the reasons for, any significant differences between—
(a) the trade-related provisions of the free trade agreement to which the United Kingdom and the other signatory (or other signatories) are signatories, and
(b) the trade-related provisions of the existing free trade agreement.
(3) Subsection (2) does not apply if, at least 10 Commons sitting days before a draft of the statutory instrument containing the regulations is laid, a report in relation to the agreement has been laid before Parliament under section (Report on proposed free trade agreement)(3).
(4) In this section—
‘Commons sitting day’ means a day on which the House of Commons begins to sit;
‘the existing free trade agreement’ means the free trade agreement to which the European Union and the other signatory (or other signatories)—
(a) were signatories immediately before exit day, or
(b) where the report is laid before Parliament before exit day, are signatories on the day the report is laid before Parliament;
the ‘trade-related provisions’ of a free trade agreement are the provisions of the agreement that mainly relate to trade.”—(George Hollingbery.)
This new clause requires a Minister to lay a report before Parliament at least 10 Commons sitting days before regulations implementing a new free trade agreement are laid in draft under clause 2(1). The report is required to explain any significant differences between the new agreement and the existing agreement with the EU. The duty to lay a report does not apply if a report on the agreement has already been laid under NC12.
Brought up, read the First and Second time, and added to the Bill.
New Clause 3
Free trade agreements: Parliamentary scrutiny and consent
“(1) The Secretary of State shall not commence negotiations relating to a free trade agreement unless—
(a) a Minister of the Crown has laid before Parliament a sustainability impact assessment conducted by a credible body independent of government following consultation with—
(i) each devolved authority,
(ii) public bodies, businesses, trade unions and non-governmental organisations which, in the opinion of the Minister, have a relevant interest, and
(iii) the public,
and the assessment shall include both qualitative and quantitative assessments of the potential impacts of the proposed trade agreement, including social, economic, environmental, gender, human rights, labour, development and regional impacts,
(b) a Minister of the Crown has laid before Parliament a draft of a negotiating mandate relating to the proposed trade agreement, setting out—
(i) all fields and sectors to be included in the proposed negotiations,
(ii) the principles to underpin the proposed negotiations,
(iii) any limits on the proposed negotiations, and
(iv) the desired outcomes from the proposed negotiations, and
(c) the House of Commons has approved by resolution a motion, drafted in terms which permit amendment, setting out a proposed negotiating mandate and authorising the Secretary of State to enter negotiations on the proposed trade agreement on the basis of that mandate, and the House of Lords has approved a resolution in the same terms as that approved by the House of Commons.
(2) The United Kingdom may not become a signatory to a free trade agreement unless—
(a) during the course of the negotiations, the text of the trade agreement as so far agreed or consolidated has been made publicly available within ten working days of the close of each negotiating round,
(b) between each round of negotiations, all documents relating to the negotiations have been made available for scrutiny by select committees in both Houses of Parliament,
(c) upon conclusion of the negotiations, the House of Commons has approved by resolution a motion, drafted in terms which permit amendment, setting out the text of the trade agreement as negotiated and authorising the Secretary of State to sign the proposed agreement, and the House of Lords has approved a resolution in the same terms as that approved by the House of Commons, and
(d) the text of the trade agreement includes provision for a review of the operation and impacts of the agreement no later than ten years after the day on which the agreement comes into force.”—(Caroline Lucas.)
This new clause would ensure that all new free trade agreements are subject to parliamentary scrutiny and consent.
Brought up, and read the First time.
Question put, That the clause be read a Second time.
Toby Perkins (Chesterfield) (Lab)
On a point of order, Mr Speaker. There is a great deal of concern across Parliament about the mysterious disappearance of the right hon. Member for Twickenham (Sir Vince Cable). He has been missing since last night. This morning, he was texting about being the only person really fighting Brexit. I just wonder if you and the parliamentary authorities could ascertain his whereabouts and whether he is indeed safe, and report back to me and all those people who are so concerned.
Mr Speaker
I would not want to take upon my shoulders such a major responsibility. I must advise the hon. Gentleman that I wish all the best to the right hon. Member for Twickenham (Sir Vince Cable). I have no reason to be perturbed on his account. I am not aware that he is indisposed, and I very much hope that he is not. The right hon. Member for Carshalton and Wallington (Tom Brake) is beaming in a mildly eccentric manner from a sedentary position.
Tom Brake
Further to that point of order, Mr Speaker. Thank you for letting me raise this. On the same subject, have you had any concerns raised with you about the absence of the Leader of the Opposition in relation to fighting against Brexit for the past two years? Has anyone shared any concerns that they may have on that score?
Mr Speaker
I am not concerned unduly about either matter. They do not fall within the auspices of the Chair, but the point has been made by each right hon. and hon. Member, and I trust that we can leave it there.
Schedule 2
Regulations under Part 1
Amendments made: 4, page 12, line 5, leave out “or 2(1)”.
Amendment 71, page 12, line 7, leave out “or 2(1)”.
This amendment is consequential on Amendment 75.
Amendment 72, page 12, line 11, leave out “or 2(1)”.
This amendment is consequential on Amendment 75.
Amendment 73, page 12, line 13, leave out “or 2(1)”.
This amendment is consequential on Amendment 75.
Amendment 74, page 12, line 20, leave out “or 2(1)”.
This amendment is consequential on Amendment 75.
Amendment 75, page 13, line 30, at end insert—
Part 2A
Scrutiny of regulations under section 2(1)
Scrutiny of regulations made by Minister of the Crown or devolved authority acting alone
“3A (1) A statutory instrument containing regulations of a Minister of the Crown under section 2(1) may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, each House of Parliament.
(2) Regulations of the Scottish Ministers under section 2(1) are subject to the affirmative procedure (see section 29 of the Interpretation and Legislative Reform (Scotland) Act 2010 (asp 10)).
(3) A statutory instrument containing regulations of the Welsh Ministers under section 2(1) may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, the National Assembly for Wales.
(4) Regulations of a Northern Ireland department under section 2(1) may not be made unless a draft of the regulations has been laid before, and approved by a resolution of, the Northern Ireland Assembly.
(5) This paragraph does not apply to regulations to which paragraph 3B applies.
Scrutiny of regulations made by Minister of the Crown and devolved authority acting jointly
3B (1) This paragraph applies to regulations of a Minister of the Crown acting jointly with a devolved authority under section 2(1).
(2) The procedure provided for by sub-paragraph (3) applies in relation to regulations to which this paragraph applies as well as any other procedure provided for by this paragraph which is applicable in relation to the regulations concerned.
(3) A statutory instrument which contains regulations to which this paragraph applies may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, each House of Parliament.
(4) Regulations to which this paragraph applies which are made jointly with the Scottish Ministers are subject to the affirmative procedure.
(5) Section 29 of the Interpretation and Legislative Reform (Scotland) Act 2010 (asp 10) (affirmative procedure) applies in relation to regulations to which sub-paragraph (4) applies as it applies in relation to devolved subordinate legislation (within the meaning of Part 2 of that Act) which is subject to the affirmative procedure (but as if references to a Scottish statutory instrument were references to a statutory instrument).
(6) Section 32 of the Interpretation and Legislative Reform (Scotland) Act 2010 (laying) applies in relation to the laying before the Scottish Parliament of a statutory instrument containing regulations to which sub-paragraph (4) applies as it applies in relation to the laying before the Scottish Parliament of a Scottish statutory instrument (within the meaning of Part 2 of that Act).
(7) A statutory instrument containing regulations to which this paragraph applies which are made jointly with the Welsh Ministers may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, the National Assembly for Wales.
(8) Regulations to which this paragraph applies which are made jointly with a Northern Ireland department may not be made unless a draft of the regulations has been laid before, and approved by a resolution of, the Northern Ireland Assembly.” —(George Hollingbery.)
This amendment provides for regulations under clause 2(1) of the Bill (implementing international trade agreements) to be subject to the affirmative procedure in Parliament when made by a Minister of the Crown, and in the relevant devolved legislature when made by a devolved authority. Where the regulations are made jointly by a Minister and a devolved authority (by virtue of paragraph 5 of Schedule 1) they are required to be approved in draft by both Parliament and the devolved legislature in question.
New Clause 4
Convention about Parliament legislating on devolved matters
“(1) Regulations made under section 1(1) by a Minister of the Crown, may not normally make provision which would be within the devolved competence of a devolved authority unless—
(a) so far as they contain provision which would be within the devolved competence of the Scottish Ministers (within the meaning given in paragraph 7 of Schedule 1), the Scottish Ministers consent, or
(b) so far as they contain provision which would be within the devolved competence of the Welsh Ministers (within the meaning given in paragraph 8 of Schedule 1), the Welsh Ministers consent, or
(c) so far as they contain provision which would be within the devolved competence of a Northern Ireland department (within the meaning of paragraph 9 of Schedule 1), unless the Northern Ireland department has given consent.
(2) Regulations made under section 2(1) by a Minister of the Crown, may not normally make provision which would be within the devolved competence of a devolved authority unless—
(a) so far as they contain provision which would be within the devolved competence of the Scottish Ministers (within the meaning given in paragraph 7 of Schedule 1), the Scottish Ministers consent, or
(b) so far as they contain provision which would be within the devolved competence of the Welsh Ministers (within the meaning given in paragraph 8 of Schedule 1), the Welsh Ministers consent, or
(c) so far as they contain provision which would be within the devolved competence of a Northern Ireland department (within the meaning given in paragraph 9 of Schedule 1), unless the Northern Ireland department has given consent.
(3) This paragraph does not apply to regulations made by the Secretary of State under—
(a) section 35 or 58 of the Scotland Act 1998 (as amended),
(b) section 82 or 114 of the Government of Wales Act 2006 (as amended), or
(c) section 25 or 26 of the Northern Ireland Act 1998 (as amended).”—(Barry Gardiner.)
This new clause would ensure that regulations made by a Minister of the Crown within devolved competence require the consent of Ministers in devolved authorities in accordance with the convention about Parliament legislating on devolved matters while making clear that this does not alter the current powers of Ministers of the Crown in respect of international agreements.
Brought up, and read the First time.
Barry Gardiner (Brent North) (Lab)
I beg to move, That the clause be read a Second time.
Mr Speaker
With this it will be convenient to discuss the following:
New clause 21—Right of devolved authorities to appoint negotiators—
“(1) Each devolved authority shall have the right to appoint one member of any delegation tasked with negotiating an agreement with another state on behalf of the UK if that agreement falls within section 2(2).
(2) A devolved authority shall not make an appointment under subsection (1) unless the person appointed is reasonably competent to carry out the role of a trade negotiator.”
This new clause would permit the devolved authorities to each appoint one member of any negotiating delegation and would ensure that the person appointed is competent to carry out the role.
Amendment 25, in clause 1, page 1, line 15, at end insert—
“(1A) No regulations may be made under this subsection by a Minister of the Crown, so far as they contain provision which would be within the devolved competence of the Scottish Ministers (within the meaning given in paragraph 7 of Schedule 1), unless the Scottish Ministers consent.
(1B) No regulations may be made under this subsection by a Minister of the Crown, so far as they contain provision which would be within the devolved competence of the Welsh Ministers (within the meaning given in paragraph 8 of Schedule 1), unless the Welsh Ministers consent.”
This amendment and Amendment 26 seek to ensure that regulations cannot be made without consent from devolved Ministers.
Amendment 26, in clause 2, page 2, line 40, at end insert—
“(7A) No regulations may be made under subsection (1) by a Minister of the Crown, so far as they contain provision which would be within the devolved competence of the Scottish Ministers (within the meaning given in paragraph 7 of Schedule 1), unless the Scottish Ministers consent.
(7B) No regulations may be made under subsection (1) by a Minister of the Crown, so far as they contain provision which would be within the devolved competence of the Welsh Ministers (within the meaning given in paragraph 8 of Schedule 1), unless the Welsh Ministers consent.”
See explanatory statement for Amendment 25.
Amendment 27, in clause 2, page 3, line 3, at end insert—
“(10) No regulations may be made under subsection (8)(b) unless the Secretary of State has consulted with the Scottish Ministers and the Welsh Ministers.”
This amendment would require the Secretary of State to consult with Scottish Ministers and Welsh Ministers before deciding whether or how to prolong the period during which implementing powers can be used.
Government amendments 49, 50 and 61 to 63.
Amendment 28, in schedule 1, page 7, line 24, at end insert—
“(4) This paragraph does not apply to regulations made under section 1(1) or 2(1) by the Scottish Ministers or the Welsh Ministers.”
This amendment would remove the constraints on Scottish and Welsh Ministers in making regulations under this Act which modify retained EU law.
Government amendments 64 to 67.
Amendment 29, in schedule 1, page 8, line 5, at end insert—
“(4) This paragraph does not apply to regulations made under section 1(1) or 2(1) by the Scottish Ministers or the Welsh Ministers.
Requirement for consultation in certain circumstances
3A (1) No regulations may be made by the Scottish Ministers or the Welsh Ministers acting alone under section 1(1) or 2(1) so far as the regulations are to come into force before exit day unless the regulations are, to that extent, made after consulting with a Minister of the Crown.
(2) No regulations may be made by the Scottish Ministers or the Welsh Ministers acting alone under section 2(1) so far as the regulations make provision about any quota arrangements or are incompatible with any such arrangements unless the regulations are, to that extent, made after consulting with a Minister of the Crown.
(3) In sub-paragraph (2) ‘quota arrangements’ has the same meaning as in paragraph 3.”
This amendment would follow amendments made to the EU (Withdrawal) Bill to replace a requirement to seek the consent of the UK Ministers before making regulations to be commenced before exit day, or regulations making provision about quota arrangements, with a requirement to consult.
Government amendments 68, 69 and 76 to 78.
Barry Gardiner
I rise to speak to new clause 4, which stands in my name and those of my right hon. and hon. Friends.
The extent to which the Bill encroaches on matters of devolved competence and undermines the power of devolved authorities is of particular concern. I am proud that it was a Labour Government who delivered the devolution settlements. They were established with a presumption of full devolution, except in matters considered reserved to the Government of the United Kingdom. Indeed, amendments to devolution legislation contained in the Scotland Act 2016 and the Wales Act 2017 specifically put that presumption on to a legislative footing, stipulating that Ministers would not legislate on matters that fell within devolved competence without “normally” seeking the consent of the appropriate devolved Government. However, the Bill seeks to do exactly that.
The Public Bill Committee heard in great detail the serious consequences the Bill would have for the United Kingdom and each of the devolved nations and their respective Administrations.
Barry Gardiner
A little later.
Certainly, my good friend the shadow Secretary of State for Scotland has impressed on me the deficiencies of the Government’s approach, and it is with her strong advice that I have sought, in consultation with the shadow Secretaries of State for Wales and Northern Ireland, to propose a strong new clause that absolutely and even-handedly respects the devolution settlements and the Sewel convention.
Barry Gardiner
Once I have explained a little bit about what new clause 4 would do, I will happily give way to the hon. Gentleman.
The provisions in clauses 1 and 2, taken with the Government’s latest amendment 34, would allow the Government in Westminster to use Henry VIII powers to modify primary legislation or retain direct EU legislation in areas of devolved competence, such as procurement, agriculture and food standards, without the consent of the relevant devolved authority—even without any consultation. That goes far beyond the convention of not “normally” legislating in matters of devolved competence without such consent.
Just as the Government have erred on one side by proposing in the Bill a disrespectful power grab downwards into areas of devolved competence, so the Scottish National party, in seeking to amend the Bill, have erred in the other direction by failing to respect the boundaries of the devolution settlement and seeking a power of veto and co-decision making in matters that were always reserved to the United Kingdom sovereign Parliament. We must be clear that international trade is a matter of exclusive competence of the UK Government. At no stage has any devolved authority had any competence in respect of matters of international trade, but I will deal with the Government’s amendments first.
Modern trade agreements are so complex and so extensive that there are areas where matters of trade competence do cross over into matters that would otherwise be devolved competence: food standards, animal welfare standards, access to fishing waters, determination of regulatory and oversight bodies, and so on. All these are the substance of international trade agreements, and where such agreements have been negotiated, a devolved authority is entirely right to consider that its consent must be sought prior to regulations to implement the agreement on such matters being made in accordance with the powers in the Bill.
That the Bill allows for Ministers to act in contravention of that convention and without seeking consent from or even consulting the relevant devolved authority is precisely why neither the Welsh nor the Scottish Government have agreed to give the Bill their legislative consent. That is why Labour said in Committee that it would table an amendment to require the convention to be observed, while ensuring that no power of veto was afforded to a devolved Government on matters that were the exclusive competence of Her Majesty’s Government.
Barry Gardiner
I am just about at the point where I will.
Our new clause 4 would achieve this by setting out that normally the Government must seek the consent of the devolved Governments before making such regulations, ensuring that the convention is protected in the Bill, while similarly allowing the Government to use existing powers where a devolved Government act or—importantly—fail to act in such a way that ensures the UK is in compliance with its legally binding obligations arising from an international trade agreement.
Stewart Hosie
The hon. Gentleman is getting this completely wrong. The Scottish Government do not want a veto; the Scottish National party does not want a veto. We recognise that trade is a reserved matter. Our amendments simply say that Scottish Ministers should be consulted, or their consent sought, when UK policy intersects with devolved policy. This is not a veto on a reserved matter. It is common sense. It is equality—it is parity—in respect of implications for devolved matters. Labour Members should go back to the drawing board, because they are simply getting it wrong.
Barry Gardiner
I note the hon. Gentleman’s objections. We clearly have a different view of the nature of the devolution settlement. I will try to take his amendments in turn and explain to him precisely why I believe that he is mistaken.
Let us imagine circumstances in which a devolved Administration simply failed to introduce implementing regulation to an aspect of a trade treaty that that Administration did not like. It would be the UK Government, not the devolved Administration, who were held to be in breach and subject to any penalties that might be imposed. That is why the relevant devolution Acts provide that—not “normally”, but in such exceptional circumstances—the UK could implement such regulations without consent to ensure that the UK complied with its international obligations.
Of course, other amendments have been tabled on these issues. New clause 20, tabled by SNP Members, calls for the devolved authorities to have a right to vote on whether Her Majesty’s Government may exercise what is currently the Government’s exclusive competence to begin trade talks. Our new clause states that negotiating mandates should be formulated transparently and with formal engagement with key stakeholders, including the devolved authorities. However, a right of veto on whether trade talks can begin is a power that no legislature in the country—including the House of Commons—currently has, and it would constitute a substantial new power for the devolved authorities.
Mr Paul Sweeney (Glasgow North East) (Lab/Co-op)
My hon. Friend’s definition of a veto seems to be disputed by the Scottish National party. Does he agree that, in terms of initiating as well as ratifying any trade negotiations, if the Scottish Parliament withholds its consent, that is, in effect, a veto?
Barry Gardiner
My hon. Friend has put it very succinctly, and he is absolutely correct. That is why the SNP’s new clause 20 does not respect the devolution agreements; nor is it about ensuring that devolved authorities have a say. If that were the case, I would have expected SNP Members to support the amendment that we tabled in Committee, which called for the Joint Ministerial Committee to be convened to consult on the implementation of regulations under the Bill and on negotiations on future trade agreements. Indeed, our new amendment 19 would ensure that such consultation frameworks are established.
Similarly, in new clause 21, the SNP has sought to ensure that each devolved authority takes aspects of trade competence from Her Majesty’s Government and to provide for devolved authorities to have their own appointed trade negotiators at trade talks. Our new clause 4 could does not support that, because it could ultimately lead to several trade negotiators’ working against each other to secure the best terms only for their respective territories. Such a bunfight at the negotiating table would allow negotiating partners to play our own negotiators off against each other.
We believe that trade deals must ensure that benefits are delivered across the United Kingdom and that a whole UK approach must be taken to negotiations. That is why we have called for advanced consultation to ensure full and proper representation in those negotiations. It is also why we would have been happy to support new clause 22 had it been put to the vote. It sought to ensure transparency on trade talks, and it would have afforded a right to the devolved Parliaments to scrutinise all aspects of a trade agreement and related correspondence or documents as they so required.
Our new clause 4 would absolutely guarantee the right of consent to devolved Administrations whenever a Government sought to implement regulations to carry out their obligations under international treaties. What it would not do is give the devolved Administrations a power of veto over the ratification of international treaties, the negotiation of which is a matter for the Westminster Government. SNP Members would seek to secure the ultimate power of veto that has thus far eluded them in other amendments and that they have been very clear about seeking.
Barry Gardiner
I am pressed for time. I know that you want me to conclude my remarks very shortly, Madam Deputy Speaker.
While other amendments are about consent before the making of regulations implementing obligations arising under a trade agreement, that clause would prevent the trade agreement from ever having legal effect, as it could not be ratified unless the devolved authorities had consented. It has been carefully worded, but its intent is clear: it is not limited only to matters of devolved competence, but covers all trade agreements in their entirety even if no aspect of that agreement would touch on devolved competence and even if absolutely no regulations were required to implement that agreement. New clause 23(3)(b) would ensure that any trade agreement
“having an impact within the territory over which the devolved authority presides”
was subject to this consent power. Quite clearly, every single trade agreement will be, as there will be exporters across the UK who can trade under the terms of that agreement. It is a thinly veiled attempt at securing the Wallonian veto power that the hon. Member for Kilmarnock and Loudoun (Alan Brown) told us in the Committee was his intention.
The Committee took many more pieces of evidence. I will not detain the House with them today, but simply say that new clause 4 absolutely respects the devolution settlement. It sets out the right relationship so that Government cannot overreach into devolved competence nor the devolved authorities reach up into powers that are reserved for this sovereign Parliament.
I also support new clause 19, but I will not detain the House any longer.
Stewart Hosie
I shall speak to amendment 25 in my name and to amendments 26, 27, 28 and 29. New clause 21 is in this group, but I referred to it earlier so will not do so again now.
First, however, let me make an observation about the Labour party’s position. It seems to rely on the new form of words that the UK Government would not normally legislate or do this or do that in relation to anything that was a devolved competence. If we were talking about normal, reasonable people in normal, sensible times when they did not interfere at all except in extremis, perhaps we could accept that. However, they have taken the Scottish Government to court to undermine a democratic decision of the Parliament, so, of course, we accept the principles of devolution, but to make them work there now must be formal arrangements and consent must be sought. We can no longer rely on the formulation of the UK Government not normally doing x, y or z.
Angus Brendan MacNeil
Does it not also show, sadly, a centrist approach from the Labour party, which cannot adopt the maturity of Trudeau’s Canada and scoffs at the fact that Belgium is not such a control-freak state that it can allow Wallonia some say in the governance of Belgium?
Stewart Hosie
“International” only goes so far—perhaps just to the white cliffs of Dover.
The Trade Bill among other things ensures that the UK can implement any procurement obligations that arise from it being a member of the GPA—agreement on Government procurement—in its own right and ensures that agreements with partner countries corresponding to the EU’s free trade agreements are in place prior to Brexit. If that is all the Bill did, and it maintained all the rights and responsibilities, it might not be great, but it would make sense and probably go through on the nod. The problem is that it goes further than that: it carries on from the provisions in the EU withdrawal Bill limiting the actions of the Scottish Government and other devolved Administrations in areas that are, or ought to be, devolved, and—this goes to the first point about the GPA—that includes procurement.
That is why when the Scottish Government lodged a legislative consent motion in the Scottish Parliament initially, it explained their objections to the Trade Bill with the recommendation that Parliament could not consent to it being introduced. While they welcomed the powers being conferred on Scottish Ministers, the LCM made it clear that they could not accept the constraints placed on the use of those powers, which were analogous to those in the EU withdrawal Bill.
Legislative consent is required for part 1 of the Bill, but is not required for some of the other parts. Specifically, consent is required for the purposes within the devolved competence of the Parliament, which is that the Trade Bill seeks to maintain continuity in the UK’s trade and investment relationships through two implementation powers: implementation of the agreement on Government procurement as an independent member of the WTO; and assisting in the transition of current trade arrangements by enabling, so far as may be required, the implementation in UK domestic law of trade agreements the UK intends to conclude after withdrawal from the EU. These powers may be exercisable within devolved areas, and that is why this is important.
John Redwood (Wokingham) (Con)
I want to be able to understand whether this is a real problem. Can the hon. Gentleman give me a specific example of where he thinks the UK Government might assert a power that they should not assert, and how that might arise?
Stewart Hosie
That is a reasonable question, and I will answer it properly. Clearly we cannot tell precisely where the problems will arise, because we do not yet know precisely what the UK Government might do. Having said that, the Bill gives back to Ministers discretionary powers over procurement. In Scotland, because of the actions taken there, 78% of publicly procured contracts go to small and medium-sized enterprises, 60% to Scottish SMEs. The UK Government figure is 20%. If that power is taken back, and if oversight is retained by Westminster, there would be a real risk that we could lose that economic diversity and that fantastic achievement in a real-life area. That is a real concern that I hope the right hon. Gentleman will share.
I shall turn briefly to the amendments. Amendments 25 and 26 seek to address an issue in the Bill that has a direct read-across to clauses in the European Union (Withdrawal) Act 2018 that confer powers on UK Ministers in devolved areas without any form of devolved consent. No amendments have been made to the Act to alter that approach or to require the consent of Scottish Ministers when UK Ministers make regulations in devolved areas. Amendments 25 and 26 seek to ensure that the UK Government seek consent from devolved Ministers before amending legislation in devolved areas.
Before I move on, I meant to say that I recognise that Government amendments 64 and 66, and consequential amendments 65 and 67, now require Scottish Ministers only to consult and not to seek consent in certain areas. However, the number of areas is limited, and the amendments do not address all the problems.
Amendment 27 requires the Secretary of State to consult Scottish Ministers before deciding whether, or for how long, to prolong the period during which implemented powers can be used. That is important because there is no equivalent provision in the European Union (Withdrawal) Act 2018, and because no amendment has been made to the existing provisions in the Trade Bill that allow the UK Government unilaterally to alter the powers of Scottish Ministers in relation to grandfathering trade arrangements for further periods of up to five years at a time.
At present, it is envisaged that the powers in the Trade Bill relating to the grandfathering of existing free trade arrangements with third countries would have to be used in only a very small number of cases that could not be dealt with under the European Union (Withdrawal) Act—for example, for reasons of timing. However, with so much uncertainty around the ease with which existing agreements will be rolled over, it is possible that this restriction could have a more significant impact, not least because many of the 24 areas likely to be subject to the clause 11 regulations—that is, the power grab—are highly relevant to the world of trading and trade deals. If left unamended, or amended only along similar lines to the amendments in the withdrawal Act, this provision in the Trade Bill would in effect allow the UK Government to change the law in devolved areas to allow for the implementation of these arrangements, which might not necessarily remain exactly as they are at present. In essence, that is close enough to having an ability to implement a new trade Bill with almost no consultation or consent at all. Our amendment 28 deals with that problem.
Amendment 29 is small and seeks a direct read across from the European Union (Withdrawal) Act 2018. It would replace the need for consent from UK Ministers in certain circumstances with the need only to consult. As I said, I note the Government amendments in that regard.
We are not arguing for vetoes for Scotland nor for any sense of Scottish exceptionalism; we are simply looking at the facts, understanding what is going on and what needs to happen. If Scottish Ministers are required to consult or seek consent when Scottish parliamentary responsibilities intersect with UK responsibilities, we are simply arguing that UK Ministers should be under the same obligation to consult or seek consent where UK policy responsibilities intersect with those of the devolved Administrations. It was said in the last debate that that happens with the Parliaments of Belgium, and it also happens with the Canadian provinces. The world does not collapse when proper respect and statutory weight is given to the rights and responsibilities of sub-state administrations. It is common sense. We are trying to improve the situation to make it work and to ensure that our voices and our national interests are protected and that the rights of the devolved Administrations are respected.
Time is short, and we do not want many votes on this group so as to allow time for the last group, particularly new clause 18, which needs to be properly debated, but I hope to press amendment 25 to a vote.
Kirsty Blackman (Aberdeen North) (SNP)
I will not speak for long because our Front-Bench spokesperson, my hon. Friend the Member for Dundee East (Stewart Hosie) has covered the issues well, but I want to talk briefly about why it is important that the Scottish Parliament, Scottish Ministers and the Scottish people in general should have more of a say in deals going forward than is proposed by the UK Government.
In recent times, the UK Government have not had responsibility for signing off and negotiating trade deals. They have not been the key player. Therefore, they have not been able to undertake some of the practices that we think they could undertake, so it is understandable that the Scottish people are worried given that we have been monumentally badly served by the UK Government over decades. Just look at the roll-out of universal credit, the bedroom tax, the rape clause and the passage of the European Union (Withdrawal) Act 2018—legislation that happened despite the Scottish Parliament refusing consent. All those things show the ways in which the UK Government are badly serving Scotland.
Until I was an MP, I genuinely thought that the UK Government were, at times, probably trying their best. When I got elected to this place, I discovered that when the UK Government propose legislation and we say to them, “Have you thought about how this will affect Scotland?” the answer is not that they are trying to do anything bad, it is just that they forget we exist. They just do not even consider the views of Scotland or the differences in Scotland. Look at how the common fisheries policy has been negotiated by the UK Government, for example. The way that the Government negotiated swaps removed quota rights from Scottish fishermen to the benefit of fishermen in the south of England. Such choices made by the UK Government have a direct negative impact on Scottish people. On that basis, it is understandable that we are worried that the UK Government will not take decisions in Scotland’s best interests because they may simply forget that we exist.
John Redwood
Does the hon. Lady understand that the common fisheries policy and international trade deals have been entirely in the power of the European Union? To the extent that they do not suit Scotland, it is the EU’s fault. Can she not see that power is coming back to the benefit of Scotland and the United Kingdom?
Kirsty Blackman
Perhaps the right hon. Gentleman did not hear what I said. The issue is that the UK Government have chosen to negotiate swaps that directly disadvantage Scottish fishermen. The concern is that the weight of the population in the south of England will mean that the UK Government continue to take decisions that improve life for people in the south of England without taking account of the fact that those decisions are detrimental to people in Scotland.
The amendments we have tabled would therefore ensure that, in decisions that are taken in this place—decisions on which the UK Parliament will have more power than it has had in recent decades—the voice of Scotland is heard, because we need decisions that do not disadvantage the people of Scotland.
Angus Brendan MacNeil
You catch me finishing off a Trebor extra-strong mint, Madam Deputy Speaker, and very nice it was, too.
At a time when the House is investigating bilateral trade agreements, my hon. Friend the Member for Aberdeen North (Kirsty Blackman) made the fantastic point that for 40 years the UK Government stipulated in their bilateral trade agreements, “London airports only.” It was only when they demanded that Iceland should fly to London airports and Iceland said, “There is no way we’re flying to a London airport to get the sleeper back to Glasgow,” that some change was brought about—that was relayed to me by the Icelanders themselves.
Trade agreements, by their very nature, require trade-offs, and there should be aggregate gains to the two parties involved. Within those aggregate gains, there will be people in certain sectors who lose. My International Trade Committee heard about that from Kevin Roberts of Meat Promotion Wales. He told us that some 80% of Wales is either upland hills or pasture and is suitable only for livestock farming, which is a fragile sector. About 80% of the net farm incomes of Wales come from EU subsidies, which is another matter.
Let us consider a situation in which the UK Government find themselves in a trade negotiation with somebody who says, “Do you know what? See if you could let us have some access to your market for our lamb and we’ll give you something else.” Wales would lose out. The aggregate gain to UK GDP would be increased—the right hon. Member for Wokingham (John Redwood) spoke on this point—but there would be a loss to Wales and there would be resentment in the UK to fiscal transfers back to Wales, which had sacrificed and given up things for the aggregate gain of the UK as a unit. That is one reason why many countries do not have the control freakery of the Labour and Conservative parties and allow territories, states and subnational Governments to have a voice at the table.
We should remember that Wales is not a member of the UK in the same way as Ireland is a member of the European Union. Ireland, as we have seen week in and week out, day in and day out, month in and month out, and hour in and hour out, has a real voice in Europe. In fact, some Brexiteers complain that Ireland is now the tail that wags the EU dog. If only that were a possibility for Wales, Scotland or Northern Ireland within the UK, there might not then be the concerns that my hon. Friend the Member for Dundee East (Stewart Hosie) raised. That is why there should be some responsibility and some form of acknowledgement from the big beast of the UK—England, or the south-east of England—that it might gain from a free trade agreement at the expense of other places. We need some counterbalancing measures.
In a way, the Brexiteers are constitutional gold dust, because I want to see Scotland catching up with Ireland at the top of the EU growth league, rather than being at the bottom with the UK. This is putting a strain on the United Kingdom. As Laura Dunlop, QC, told the Exiting the European Union Committee:
“At the moment, there is a sense of a double-whammy: that the international arrangements, whatever they are going to be, will be negotiated by the UK Government, and then the UK Government will be telling the devolveds what they have to do to comply with them. The participation is minimal.”
That is an unsustainable way forward. It does not respect the words we heard in 2014, “Scotland, stay in and lead. Do not just be a part; lead the UK.” When push comes to shove, as we have seen all the way through the European Union withdrawal process, Scotland is shoved to one side. It is all rhetoric. If the Government had the grace to put some of their rhetoric into action, they would be accepting some of the amendments here today. This is not big stuff in any other country, so why is it a big deal in the centralised UK, both to the Tory Government and, sadly, to the Labour Opposition, who feel that they must also adopt the centralising approach? It is really disappointing from both of them.
George Hollingbery
It is important to reiterate that the Government are committed to ensuring that withdrawal from the EU is a successful and smooth process for the whole of the UK. As set out in our trade White Paper, our intention, working closely with the devolved Administrations, is to seek to transition all existing EU trade agreements and other EU preferential arrangements.
Hywel Williams (Arfon) (PC)
In a reply to my hon. Friend the Member for Ceredigion (Ben Lake) yesterday, the Secretary of State said the following in respect of having agreements ratified by the devolved legislatures:
“I would imagine that, in line with other agreements, we would seek legislative consent from the devolved Administrations where there were elements in which they were required to apply parts of those negotiations.”—[Official Report, 17 July 2018; Vol. 645, c. 51.]
Is that the Government’s settled view on this matter? Notwithstanding the shortness of time, will the Minister give us a brief example of how that would apply?
George Hollingbery
I thank the hon. Gentleman for his question. What I can say on that is that the Scottish National party has already welcomed a number of measures in the Bill today. The negotiations are ongoing with the Welsh Government and I would hope that in due course we will reach those legislative consent motions.
As I was saying, this will ensure that England, Scotland, Wales and Northern Ireland maintain the greatest amount of certainty, continuity and stability in our trade and investment relationships for our businesses, citizens and trading partners. I am certain that all Members across the House support the importance of maintaining these trading opportunities for business across the UK, such as we see with the 10% of Scotch whisky exports that go to countries with which we wish to transition existing trade agreements. As parts of these agreements will touch on devolved matters, this legislation creates powers for devolved Administrations to implement them. These powers will be held concurrently by the devolved Administrations and the UK Government. That approach will ensure that where it makes practical sense for regulations to be made once for the whole UK, it is possible for this to happen. However, in the trade White Paper, and throughout the Committee stage, the Government have publicly and repeatedly committed to not normally use the powers in the Bill to amend legislation in devolved areas without the consent of the relevant devolved Administrations—and not without first consulting them. I make that commitment again today. As such, new clause 4 is unnecessary.
Barry Gardiner
I take in good faith the assurance the Minister has given across the Dispatch Box that the Government would not normally do that, but surely he cannot equate that with having the security of that commitment in the Bill. He must accept that on this side of the House we have tried to be even-handed in ensuring that the terms of the devolution settlement are respected both by government and by the nationalists in Scotland. If he is simply saying, “Everybody must rely on an assurance across the Dispatch Box”, that is not good enough.
George Hollingbery
I say to the hon. Gentleman that the Sewel convention is well established. It has been in place for many years and it has proved more than adequate up to now. We believe it is the right way forward to handle this particular issue, so we see no need for new clause 4 to be in the Bill.
We will work closely with the devolved Administrations to deliver an approach to the implementation of trade agreements that works for the whole of the UK, reflecting the needs and individual circumstances of England, Scotland, Wales and Northern Ireland. The Government’s approach respects a long-standing and robust convention between the UK Government and the devolved Administrations.
Anna McMorrin (Cardiff North) (Lab)
Will the Minister explain how he is going to work with the devolved Administrations on this? For example, would this involve a UK council of Ministers?
George Hollingbery
Our intention is to carry on negotiating with the devolved authorities to find a way forward to get the signatures on the legislative consent motions that we wish to sign, and that we believe we are in a position to sign with those Administrations if we continue to co-operate with them and to negotiate properly.
Several hon. Members rose—
George Hollingbery
If Members do not mind, I shall make a little more progress.
Concurrent functions have always been a normal part of our devolution arrangements, and the Bill broadly replicates the concurrent approach taken under section 2(2) of the European Communities Act 1972. That has proved an efficient and effective precedent for the devolved Administrations and the UK Government. I thank the hon. Member for Dundee East (Stewart Hosie) for raising the issue of the devolved authorities’ role in the transitional agreements and any extension of the sunset provision. I am happy to confirm that, should they make the decision to use the three-year sunset extension or provision, the Government commit to engaging the devolved Administrations in that decision-making process in advance.
The Government have made a number of their own amendments to reduce restrictions on the powers conferred on devolved Ministers, bringing greater parity between UK Ministers’ powers and devolved Ministers’ powers. I particularly wish to draw the House’s attention to two changes. Government amendments 64 to 67 change the requirement on devolved Ministers from seeking the consent of UK Ministers to consulting UK Ministers before making regulations under the Bill’s powers that relate to quotas or the pre-exit commencement of regulations.
Barry Gardiner
I am concerned about what the Minister said. Does he not accept that if the provisions in clauses 1 and 2 are taken in conjunction with Government amendment 34, they will allow the Westminster Government to use Henry VIII powers to modify primary legislation or retained direct EU legislation in areas that are a matter of devolved competence? That is to go beyond “not normally”, which is why new clause 4 is essential.
Mr Speaker
Order. May I just emphasise that there is no obligation to continue up to the wire? I know that sometimes some people on the Government Bench say “Keep going till the cut-off point,” but it is not necessary to do so. There is a lot of other material to be debated. The Minister, who is a most courteous fellow, was extremely succinct earlier; he should not think that that was unpopular in the House.
George Hollingbery
You will be glad to hear, Mr Speaker, that I do not have a great deal more to say.
Let me engage with the shadow Secretary of State’s point. The powers that the Government are taking relate to where any regulations under section 12 of the European Union (Withdrawal) Act are in force and intersect with devolved Ministers’ rights to modify retained direct EU law. We are carving out an area in which the UK Government believe it is right and proper that the interests of the wider United Kingdom have precedence. I think the shadow Secretary of State understands what I mean; indeed, from the look on his face I believe he probably secretly agrees with what I am saying.
George Hollingbery
The hon. Member for Dundee East will know that work is ongoing around the extent of the areas which I have just outlined to the shadow Secretary of State and which will be covered by section 12. The changes I have outlined recognise the important role that the devolved Administrations will play in implementing trade continuity agreements in devolved areas. I reiterate that, in line with convention, UK Government will not normally implement such measures in devolved areas without the consent of the devolved Administrations.
The amendments demonstrate significant progress in our discussions with the devolved Administrations.
Stephen Kerr (Stirling) (Con)
On a very quick point, is it not true that the working relationship between the UK Government and the Scottish Government is much more positive and much more healthy than we would be led to believe from listening to the rhetoric of the SNP Members in this place?
George Hollingbery
It is not for me to make judgments on how people approach negotiations, save to say that the experience of Government officials is that deep, proper and real conversations have occurred at Scottish Government level between officials and indeed between those in the Executive.
Let me reiterate that, in line with convention, the UK Government will not normally implement in devolved areas without the consent of the devolved Administrations. These amendments demonstrate significant progress in our discussions with the devolved Administrations to whom we have been listening throughout the passage of this Bill, as has been admirably demonstrated. We will continue to engage actively with the devolved Administrations to achieve the agreement of a legislative consent memorandum. As such, I hope that the hon. Member for Dundee East will now feel able not to push amendment 29 to a vote.
Question put, That the clause be read a Second time.
Hilary Benn (Leeds Central) (Lab)
On a point of order, Mr Speaker. What is going on?
Mr Speaker
What is going on is that a Member is being exhorted to remove himself from the Division Lobby, and that will happen. The result of the vote will be declared very soon. I understand the consternation of the right hon. Gentleman, but I have his and all other Members’ interests at heart. We will not long be delayed before proceeding with the next group, for which there is very little time. We must not dilly-dally on this matter any longer.
Mr Speaker
We come now to the third and final group of new clauses and amendments, beginning with Government new schedule 1. In the friendliest and most convivial possible spirit, I remind the Minister on the Treasury Bench that it is not necessary for him to speak at length. It might make him even more popular than he already is if he does not.
New Schedule 1
Transfer Schemes
“1 (1) The Secretary of State may make one or more staff transfer schemes in connection with the establishment of the TRA by this Act.
(2) A ‘staff transfer scheme’ is a scheme providing for the transfer from the Secretary of State to the TRA of any rights or liabilities under or in connection with a contract of employment.
2 (1) A staff transfer scheme may, among other things, make provision—
(a) for the transfer of rights and liabilities that could not otherwise be transferred;
(b) for the transfer of rights and liabilities arising after the making of the scheme;
(c) which is the same as or similar to the Transfer of Undertakings (Protection of Employment) Regulations 2006 (SI 2006/246);
(d) creating rights, or imposing liabilities, in relation to rights or liabilities transferred;
(e) about the continuing effect of things done by the Secretary of State in respect of any rights or liabilities transferred;
(f) about the continuation of things (including legal proceedings) in the process of being done by, or on behalf of, or in relation to, the Secretary of State in respect of any rights or liabilities transferred;
(g) for references to the Secretary of State in an instrument or other document in respect of any rights or liabilities transferred to be treated as references to the TRA;
(h) that is supplementary, incidental, transitional or consequential.
(2) A staff transfer scheme may provide—
(a) for the scheme to be modified by agreement after it comes into effect, and
(b) for any such modifications to have effect from the date when the original scheme comes into effect.
3 For the purposes of this Schedule—
(a) an individual who holds employment in the civil service of the State is to be treated as employed by virtue of a contract of employment, and
(b) the terms of the individual’s employment in the civil service of the State are to be regarded as constituting the terms of the contract of employment.”—(George Hollingbery.)
This amendment inserts a Schedule that sets out powers for the Secretary of State to make a scheme providing for the transfer of staff from the Secretary of State to the Trade Remedies Authority.
Brought up, and read the First time.
Mr Speaker
With this it will be convenient to discuss the following:
Government amendment 58.
Amendment 12, in schedule 4, page 14, line 34, at end insert
“with the consent of the International Trade Committee of the House of Commons,”.
This amendment would give the International Trade Select Committee scrutiny and consent powers for the appointment of Chairs of the Trade Remedies Authority.
Amendment 30, in schedule 4, page 14, line 34, at end insert—
“(aa) a non-executive member appointed by the Secretary of State with the consent of the Scottish Ministers,
(ab) a non-executive member appointed by the Secretary of State with the consent of the Welsh Ministers,”
The Trade Remedies Authority will undertake trade remedies investigations across the UK, which will inevitably touch on devolved areas or areas of significance to Scotland. This amendment would require the consent of Scottish and Welsh Ministers to the appointment of one non-executive board member each.
Amendment 13, in schedule 4, page 14, line 35, at end insert
“with the consent of the International Trade Committee of the House of Commons,”.
This amendment would give the International Trade Select Committee scrutiny and consent powers for the appointment of other non-executive members of the Trade Remedies Authority.
Amendment 22, in schedule 4, page 14, line 35, at end insert
“including representatives of UK manufacturing sectors and trade unions in manufacturing”.
This amendment would ensure that UK producers including manufacturers, and their employees, are included in the corporate governance of the new Trade Remedies Authority.
Amendment 80, in schedule 4, page 14, line 35, at end insert
“including representatives of—
(i) producers,
(ii) trade unions, and
(iii) each one of the devolved administrations.”
This amendment would ensure that the Trade Remedies Authority includes, among its non-executive members, representatives of key stakeholder bodies.
Amendment 14, in schedule 4, page 14, line 37, after “State” insert
“, and with the consent of the International Trade Committee of the House of Commons,”.
This amendment would give the International Trade Select Committee scrutiny and consent powers for the appointment of the chief executive of the Trade Remedies Authority.
Amendment 15, in schedule 4, page 14, line 38, after “State” insert
“with the consent of the International Trade Committee of the House of Commons,”.
This amendment would give the International Trade Select Committee scrutiny and consent powers for the appointment of the inaugural chief executive of the Trade Remedies Authority.
Amendment 23, in schedule 4, page 15, line 2, leave out from “must” to end of line 3 and insert
“, before appointing the other non-executive members, consult
(a) the Chair,
(b) organisations representing UK manufacturing sectors, and
(c) trade unions in manufacturing.”
This amendment would ensure that UK producers including manufacturers, and their employees, are included in the corporate governance of the new Trade Remedies Authority.
Amendment 16, in schedule 4, page 15, line 12, at end insert—
“4A It must be publicly disclosed if any candidate for appointment as a non-executive member of the TRA has, in the last five years, been employed by a political party, held a significant office in a political party, has stood as a candidate for a political party in an election, has publicly spoken on behalf of a political party, or has made significant donations or loans to a political party.”
This amendment would require candidates for appointment as non-executive members of the TRA to disclose political activity, consistent with guidelines set out in the Cabinet Office Governance Code on Public Appointments.
Amendment 17, in schedule 4, page 15, line 16, at end insert—
“5A It must be publicly disclosed if any candidate for appointment as an executive member of the TRA has, in the last five years, been employed by a political party, held a significant office in a political party, has stood as a candidate for a political party in an election, has publicly spoken on behalf of a political party, or has made significant donations or loans to a political party.”
This amendment would require candidates for appointment as executive members of the TRA to disclose political activity, consistent with guidelines set out in the Cabinet Office Governance Code on Public Appointments.
Amendment 18, in schedule 4, page 15, line 31, at end insert—
“10A A member of the TRA, whether executive or non-executive, shall not actively engage in any business, vocation or employment which may give rise to a potential conflict of interest, for the duration of their service on the TRA.”
This amendment would militate against conflicts of interest by precluding TRA members from engaging in any commercial activity for the duration of their time on the TRA.
New clause 1—EU customs union—
“(1) It shall be the objective of an appropriate authority to take all necessary steps to implement an international trade agreement which enables the UK to participate after exit day in a customs union with the EU in the same terms as existed before exit day.
(2) Exit day shall have the meaning set out in section 20 of the European Union (Withdrawal) Act 2018.”
New clause 2—Review of the impact on the UK economy—
“(1) Before the end of the initial five year period, the Secretary of State must publish and lay before both Houses of Parliament an assessment of the impact of all international trade agreements implemented under section 2 of this Act on—
(a) the economy of the United Kingdom,
(b) the economy of the different parts of the United Kingdom and different regions of England, and
(c) individual economic sectors.
(2) The assessment in subsection (1) must so far as practicable analyse the expected difference in outcomes between the international trade agreements implemented under section 2 of this Act and those international trade agreements to which the United Kingdom would have been a signatory had it continued to participate in the EU Customs Union.
(3) In this section—
‘the initial five year period’ has the same meaning as in section 2(8)(a),
‘parts of the United Kingdom’ means—
(a) England,
(b) Scotland,
(c) Wales, and
(d) Northern Ireland
‘regions of England’ has the same meaning as that used by the Office for National Statistics.”
New clause 5—Implementation of a customs union with the EU—
“(1) It shall be the objective of an appropriate authority to take all necessary steps to implement an international trade agreement which enables the UK to participate after exit day in a customs union with the EU.
(2) Exit day shall have the meaning set out in section 20 of the European Union (Withdrawal) Act 2018.”
New clause 8—Internal Market Negotiating Objective—
“It shall be a negotiating objective of Her Majesty’s Government to ensure the United Kingdom has full access to the internal market of the European Union, underpinned by shared institutions and regulations, with no new impediments to trade and common rights, standards and protections as a minimum.”
New clause 9—UK membership of EFTA and the European Economic Area—
“(1) It shall be the objective of an appropriate authority to achieve before exit day the implementation of an international agreement to enable the UK to become a member of the European Free Trade Association and continue as a signatory to the EEA Agreement.
(2) ‘Exit day’ shall have the meaning set out in section 20 of the European Union (Withdrawal) Act 2018.”
New clause 10—UK membership of EFTA—
“(1) It shall be the objective of an appropriate authority to achieve before exit day the implementation of an international agreement to enable the UK to become a member of the European Free Trade Association.
(2) ‘Exit day’ shall have the meaning set out in section 20 of the European Union (Withdrawal) Act 2018.”
New clause 11—Assessment of slavery or servitude—
“The Secretary of State shall, before concluding negotiations relating to an international trade agreement, make an assessment of the steps taken by the other signatory to the agreement (or each other signatory) to prevent and punish activity which, if undertaken in England or Wales, would constitute an offence under section 1 of the Modern Slavery Act 2015 (slavery, servitude and forced or compulsory labour).”
New clause 15—Ratification of international trade agreements—
“An international trade agreement shall not be ratified unless it enables the United Kingdom to require imports to—
(a) comply with any standards laid down by primary or subordinate legislation in the United Kingdom regarding food safety, the environment and animal welfare, or
(b) have been produced to standards that are deemed by the Secretary of State to be comparable in effectiveness to those of the United Kingdom in protecting food safety, the environment and animal welfare.”
This new clause would ensure that UK standards regarding food safety, the environment and animal welfare could not be undermined by imports produced to lower standards.
New clause 17—UK participation in the European medicines regulatory network—
“(1) It shall be the objective of an appropriate authority to take all necessary steps to implement an international trade agreement, which enables the UK to fully participate after exit day in the European medicines regulatory network partnership between the European Union, European Economic Area and the European Medicines Agency.
(2) Exit day shall have the meaning set out in section 20 of the European Union (Withdrawal) Act 2018.”
This new clause would ensure that it is a negotiating objective for the UK Government to secure an international agreement through which the UK may continue to participate in the European medicines regulatory network partnership between the EU, EEA and the European Medicines Agency, ensuring that patients continue to have access to high-quality, effective and safe pharmaceutical and medical products, fully aligned with the member states of the EU and EEA.
New clause 18—Free trade area for goods—
“(1) Before exit day it shall be the objective of Her Majesty’s Government to achieve the implementation of an international agreement to enable the United Kingdom to establish a frictionless free trade area for goods between the UK and the EU.
(2) If an international agreement of the type set out in subsection (1) has not been agreed by 21st January 2019 then it shall be the objective of Her Majesty’s Government to achieve the implementation of an international agreement which enables the United Kingdom to participate after exit day in a customs union with the EU.
(3) ‘Exit day’ shall have the meaning set out in section 20 of the European Union (Withdrawal) Act 2018.”
This new clause would make it a negotiating objective of the UK to establish a free trade area for goods between the UK and the EU and if that cannot be agreed then it should be the objective of the UK to secure an agreement to enable the UK’s participation in a customs union with the EU.
New clause 19—Reporting on trade between the United Kingdom’s devolved nations and regions with the Republic of Ireland—
“(1) The Secretary of State shall, no earlier than 12 months and no later than 18 months after Royal Assent has been given to this Act—
(a) lay before both Houses of Parliament an assessment of the implications of this Act for trade between the constituent parts of the United Kingdom and the Republic of Ireland, and
(b) make arrangements for the assessment to be laid before the Scottish Parliament, the National Assembly for Wales and the Northern Ireland Assembly.
(2) In preparing the assessment under subsection (1), the Secretary of State shall consult with—
(a) the Scottish Ministers, the First Minister or the Lord Advocate,
(b) the Welsh Ministers, and
(c) a Northern Ireland devolved authority.”
This new clause would ensure that the impact of the UK’s exit from the European Union on trade across the border between the Republic of Ireland and Northern Ireland, and between the Republic of Ireland and other parts of the United Kingdom is properly reviewed and reported to Parliament.
New clause 25—Trade agreement with the EU: mobility framework—
“It shall be the objective of the Secretary of State to take all necessary steps to secure an international trade agreement with the European Union which includes a mobility framework that enables all UK and EU citizens to exercise the same reciprocal rights to work, live and study.”
Government amendments 31 to 35.
Amendment 11, in clause 2, page 2, line 12, at end insert—
“or (c) a regulatory cooperation agreement.”
This amendment would ensure that HM Government is able to efficiently replicate existing regulatory cooperation agreements that may be required for continuity of business arrangements if the UK exits the European Union.
Amendment 3, in clause 2, page 2, line 29, at end insert—
“(4A) Regulations under subsection (1) may make provision for the purpose of implementing an international trade agreement only if:
(a) the provisions of that international trade agreement do not conflict with, and are consistent with—
(i) the provisions of the Sustainable Development Goals adopted by the United Nations General Assembly on 25 September 2015,
(ii) international human rights law and international humanitarian law,
(iii) the United Kingdom’s obligations on workers’ rights and labour standards as established by but not limited to the commitments under the International Labour Organisation’s Declaration on Fundamental Rights at Work and its Follow-up Conventions,
(iv) the United Kingdom’s environmental obligations in international law and as established by, but not limited to, the Paris Agreement adopted under the United Nations Framework Convention on Climate Change, the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES), and the Convention on Biological Diversity, including the Cartagena Protocol on Biosafety,
(v) existing standards for food safety and quality as set and administered by the Department of Health, the Food Standards Agency and any other public authority specified in regulations made by the Secretary of State,
(vi) the United Kingdom’s obligations as established by the Convention on the Elimination of All Forms of Discrimination Against Women and by the Convention on the Rights of the Child, and
(vii) the sovereignty of Parliament, the legal authority of UK courts, the rule of law and the principle of equality before the law.
(a) the provisions of that international trade agreement do not in any way restrict the ability to determine whether public services at a national or local level are delivered by public sector employees, and
(b) the Secretary of State has laid before Parliament an assessment that considers the potential economic, social, human rights and environmental impacts of the international trade agreement on the contracting parties.”
Amendment 24, in clause 2, page 2, line 29, at end insert—
“(4A) Regulations under subsection (1) may make provision for the purpose of implementing an international trade agreement only if the Secretary of State has made an assessment under section (Assessment of slavery or servitude) in respect of that agreement.”
Amendment 81, in clause 2, page 2, line 29, at end insert—
“(4A) Regulations under subsection (1) may make provision for the purpose of implementing an international trade agreement only if a principle of non-regression, according to which the protection of the environment, ensured by legislative and regulatory provisions relating to the environment, is incorporated.”
This amendment would ensure that environmental standards are not lowered in a new UK international trade agreement by maintaining and continually updating current standards through an environmental non-regression clause.
Government amendments 40, 41 and 43.
Amendment 20, in clause 2, page 2, line 40, at end insert
“and shall include any agreement to which the UK is party by virtue of membership of a free trade association, including the European Free Trade Association”.
This amendment would make it clear that the implementation powers under the Act would apply equally to implementation of any free trade agreement to which the UK is party through EFTA.
Amendment 5, in clause 2, page 2, line 40, at end insert—
“(7A) No regulations made under subsection (1) shall preclude the United Kingdom from participating in a customs union with the European Union following exit day.”
This amendment allows for the implementation of international trade agreements while leaving open the possibility of negotiating a customs union with the EU.
Government amendments 44 to 48 and 51 to 57.
Amendment 1, in clause 6, page 4, line 10, at end insert—
“(aa) the conduct of trade within a customs union within the meaning of section 31 of the Taxation (Cross-border Trade) Act 2018,”.
Amendment 21, in clause 6, page 4, line 10, at end insert—
“(aa) the consequences for the UK of membership of the European Free Trade Association,”.
This amendment would place a duty on the TRA to give advice to the Secretary of State on the consequences of membership of EFTA.
Government amendments 59 and 60.
George Hollingbery
There is a wide range of issues covered by this final group of amendments we are debating today. I therefore propose to focus on the Government amendments in my opening remarks.
We are committed to creating a world-class Trade Remedies Authority. That is why Government have already begun recruiting TRA staff into the Department for International Trade, so that they can be properly trained before the TRA becomes fully operational. Once the TRA is legally established, staff who have been recruited into the Department will be transferred over to the TRA. Government new schedule 1 and Government amendment 58 are crucial to ensuring that this transfer can take place. This is standard practice when establishing a new arm’s-length body, as set out in the Cabinet Office’s statement of practice on transfers of staff in the public sector.
Trade remedies cases can have material impacts on markets and jobs. We must therefore create an independent investigation process that businesses can trust. That is why we are setting up the TRA as an arm’s-length body, giving it the appropriate degrees of separation from government, and ensuring that people with the right qualities and qualifications are appointed to the board to oversee this new function.
There are other amendments in this group, tabled by other hon. Members, on the TRA. I will wait to hear the points they make before responding to the detail of those amendments. Before I sit down, however, I will underline the point made by my right hon. Friend the Secretary of State for Trade yesterday in his statement to the House. The Bill is about continuity rather than future arrangements. This is why we have now separately set out the role that Parliament, the devolved Administrations, the public, business and civil society will have in our future trade agreements. We believe our approach makes good on our commitment to build an inclusive and transparent future trade policy.
Amendments 44 to 47 reduce the sunset period and renewal periods from five to three years. This has been discussed in previous debates. Amendments 31 and 32 allow Agreement on Government Procurement, or GPA, power to reflect updates to the list of Government entities in the UK’s GPA schedule. Amendments 34, 40, 41 and 48 clarify the scope of the powers in clause 1 and 2. Amendments 59 and 60 update references to data protection legislation, and amendments 31, 35, 43, and 51 to 57 are drafting changes.
Judith Cummins (Bradford South) (Lab)
It is a pleasure to follow the Minister and to contribute to the Report stage of this important Bill.
I rise to propose amendment 80, in my name and that of my hon. Friends, on the Trade Remedies Authority, and to speak to the other clauses and amendments in this group. Labour supports new clause 5 and our own amendment 5 on the implementation of a customs union with the EU. Labour’s policy is for a new customs union with the EU to protect jobs and the economy, and to avoid a hard border in Northern Ireland. We will also be supporting new clause 18, as it keeps open the possibility of a customs union with the EU.
My Labour colleagues and I tabled amendment 5, which requires that any international trade agreement must not stop the UK participating in a customs union with the EU. This is in line with our party’s policy to negotiate a new customs union with the EU. As the Bill deals with international trade agreements, we wish to ensure that no other trade agreements impede on the UK’s capacity to enter into such a new customs union with the EU.
On new clause 18, as I have said, Labour believes that the only way to deliver frictionless trade and to prevent a hard border in Northern Ireland is to negotiate a comprehensive customs union with the EU. The Chequers White Paper published by the Government put forward a different proposal. We think that the so-called “facilitated customs arrangement” is unnegotiable, undeliverable and unworkable, but it at least accepts the need for frictionless trade and to prevent a customs border between the UK and the EU.
Stephen Hammond (Wimbledon) (Con)
It is a great pleasure to speak on Report and I rise to support new clause 9, amendments 20 and 21 and new clause 18. Let me start briefly with new clause 9. We are leaving the European Union and I accept the result of the referendum, but that referendum did not tell this House and this Parliament how we should do so. That is what Parliament is here to decide and what it is going to do.
I think the Common Market principles are the best way to leave the EU. The Common Market principles that I am referring to are the removals of barriers for trade between the United Kingdom and the EU and the protection and development of complex supply chains across the continent, which will protect, as my right hon. Friend the Member for Broxtowe (Anna Soubry) said yesterday, the jobs and livelihoods of our constituents. As we leave the European Union, I believe that should be the key priority of this House.
New clause 9 refers to the European economic area and the European Free Trade Association. EEA and EFTA members incorporate most of the single market regulations. Most goods are not checked for compliance with EU regulations at the border and I think that would go a long way to mitigate complex supply chains and the Irish border issue, as well as the potential congestion at UK ports. That is one reason I support the White Paper; it refers to a common rulebook.
John Redwood
Does my hon. Friend understand that last year 21% of all the components needed for making cars under just-in-time principles came from outside the EU and passed our borders without friction or difficulty?
Stephen Hammond
My right hon. Friend has just made the point that 79% of them do, and in business I was always taught the 80/20 rule, which I would advise him to apprise himself of.
As I was saying, the White Paper is very similar to the common rulebook, and that I think is appropriate. I will not dally too long on clause 9, but I think that the EEA-EFTA, as an institutional structure, is off the shelf, tested and something the EU is familiar with and which we could engage with. I accept, however, that the White Paper sets out a different direction, and I want to make sure we keep the White Paper and the plan negotiated and moving forwards.
What I really want to talk about tonight is new clause 18. I would contend, and I say to my Front Bench, that new clause 18 is exactly in line with their White Paper. It says that,
“it shall be the objective of Her Majesty’s Government to achieve the implementation of an international agreement to enable the United Kingdom to establish a frictionless free trade area for goods between the UK and the EU.”
That is absolutely in line with the White Paper. What causes the Government and others in the House concern is the word “union”.
George Hollingbery
It might help if I could advise the House that, in recognition of contributions from right hon. and hon. Members today, it is my intention to bring forward an amendment in the other place—[Laughter.] If I may. [Interruption.] If I may. Thank you.
George Hollingbery
It is my intention to bring forward an amendment in the other place that takes in the essence of new clause 18 but removes the defective element relating to the customs union. The Government amendment will restate our intention to establish a customs arrangement with the EU. [Interruption.]
Stephen Hammond
Very few people ever say that, Mr Speaker.
It is a generous offer from the Front Bench, and one that I am tempted to accept, but I would say to the Minister: let’s do this the other way around. I will make him a generous offer. Why does he not accept new clause 18 today and then amend it in the Lords? [Hon. Members: “Hear, hear!] I will tell the House why. Subsection (2) of my new clause is entirely in line with the European Union (Withdrawal) Act 2018, which is now part of our law in this country, the House having passed it. All it says is that it should be the objective, after 21 January, which date is in clause 13(10) and (11).
Had I used any other word than “union”, the Front Bench would have accepted it. Frankly, I do not see the problem. Yesterday, we took several amendments that we were told did not undermine the Bill, and this does not undermine the Bill either. It keeps the plan on the road. I say to my Front Bench in all good faith: why not do it this way round? Accept new clause 18 now and I will work with them to find something in the Lords that they find acceptable.
George Hollingbery
It is the policy of the Government not to remain part of a customs union. That is why we cannot accept the amendment today. Clearly, we would not be able to implement any independent free trade deals and would still be a member of the commercial policy. We are absolutely clear that we wish to work with my hon. Friend to reach an agreement that is satisfactory to him. We will do that in the Lords over the next several weeks and come to a conclusion on this matter.
Stephen Hammond
And a good man, as my right hon. Friend says, and I know that he is fulfilling the Government’s wishes. But I remind him that I stood on a Conservative manifesto that said we were leaving “the” customs union. New clause 18 does not commit us to “the” customs union. It commits us to “a customs union”, which is a customs arrangement or a customs partnership. There is a slight deviation in the definition. This absolutely does not affect our ability to engage in international trade, for other customs unions with the EU are already in place. So I ask the Minister to think again during the 25 minutes before we vote on this matter, and to accept new clause 18.
Dr Paul Williams (Stockton South) (Lab)
I do hope that we can vote on new clause 17. NHS patients will not be helped if we leave the European Medicines Agency. Being part of the EMA means that when a new drug is developed, a common set of protocols is followed to get that medicine approved. The UK is a world leader in pharmaceuticals and biomedical sciences. We have been the driving force behind the EMA, which has provided significant employment and revenue here in London, and has helped to raise and maintain standards for patients throughout Europe. We have already lost the EMA to Amsterdam, but although we have lost it geographically, we still have the chance to be part of the European medicines regulatory network partnership, and continue to benefit from the work of the EMA.
There are three big markets for new drugs in the world: the United States, Japan and the EU. Companies already have to follow different processes to get their drugs approved in those countries, but, together with the EU, we are part of a single powerful bloc that represents 22% of the global pharmaceutical market. Companies prioritise getting their drugs to us, because we provide a single European system. If we leave the EMA, we will have only 3% of the global market. Quite simply, we will not be a priority for new drugs. Switzerland and Canada have separate approval systems, and typically get their new drugs six months later than the EU. That is the cost of leaving the EMA: a six-month delay. Try explaining to a patient that a new life-saving cancer drug will not be available to them because we left the EMA!
So why are we leaving? Our life sciences industry is not complaining about EU “red tape”; it likes the common system. According to the Association of the British Pharmaceutical Industry,
“Creating a standalone UK regulator would require significant resource, time and expertise, and...would…still leave the UK behind the US and EU”.
We are leaving the EMA because people voted to leave the EU, but how many people knew that when they voted to leave the EU, they voted to increase the cost of new medicines regulation, a cost that will be passed on to the NHS; to reduce the UK's international influence and excellence in this area of life sciences; and to delay access to new drugs for cancer patients? New clause 17 asks that we “take all necessary steps” to continue to participate in the European medicines regulatory network partnership. We could do that by remaining a member of the EU, by becoming a member of the European Free Trade Association, or by negotiating an associate membership of the EMA.
We are already seeing the high cost of Brexit to the NHS. We are seeing an exodus of EU staff which is making recruitment challenges much harder, we are seeing the threat to the supply chain if we leave the customs union, and now we face delays in the delivery of new drugs to cancer patients. It does not have to be this way. I will be voting for new clause 17 tonight, and I hope that Members in all parts of the House will put the interests of NHS patients above Brexit ideology and join me in voting to remain part of the European medicines regulatory partnership.
Dr Phillip Lee (Bracknell) (Con)
It is a pleasure to follow the hon. Member for Stockton South (Dr Williams), who is a co-signatory to my new clause 17, as are other medically qualified Members: the hon. Member for Central Ayrshire (Dr Whitford) and my hon. Friend the Member for Totnes (Dr Wollaston), the Chairman of the Health Committee.
We all recognise the importance of remaining part of the European medicines regulatory network partnership. New clause 17 would make it a “a negotiating objective” for the Government to secure an agreement that would allow the United Kingdom to continue to participate fully in the partnership. This is vital because it is how we get our people and our NHS the medicines they need. It is also important for our pharmaceutical sector, about which my right hon. Friend the Prime Minister has observed that it is hard to think of an industry of greater strategic importance to Britain and that does so much to improve the lives of patients around the world.
Let me explain further. The European medicines regulatory network partnership makes the process of accessing life-saving new medicines and moving medicines quick and easy. If we leave that partnership, the NHS would get ground-breaking new drugs like those for cancer, dementia and diabetes long after other parts of the world. That is because pharmaceutical companies will apply for licences in the much larger American, European and Asian markets before they come to the UK. It would also be harder to get the medicines we need when we need them. This is particularly worrying for time-critical drugs and equipment. For example, some of the trauma treatments used for victims of last year’s Manchester Arena bombing were stocked in Amsterdam; we got them straightaway because there were no borders or checks. After Brexit we could, in effect, create a hard border so this would not be so easy.
Antoinette Sandbach (Eddisbury) (Con)
AstraZeneca has a supply line of 4,000 people in the north-west. They assist in the manufacturing of a cancer drug that is exported to Europe. Without that export to Europe it would not be viable, because it helps 130,000 people across Europe. Does my hon. Friend agree that remaining in the European Medicines Agency would allow such frictionless trade to carry on?
Dr Sarah Wollaston (Totnes) (Con)
Evidence to the Health and Social Care Committee overwhelmingly showed the importance to patients of our maintaining close regulatory alignment not only here, but across the EU. Does my hon. Friend agree with the Committee that we must do more to publish the contingency planning and the consequences of not maintaining alignment so that the public can see this?
Mr Speaker
Order. We must hear the response to that question, but we must also hear from other Members, including the Father of the House.
Dr Lee
I will be as brief as possible, Mr Speaker.
Yes, I do agree with my hon. Friend’s comments. Every month 45 million patient-packs of medicine go to the EU from the UK and 37 million packs move the other way. It is hard to think of a single other product that illustrates so well the importance of frictionless trade.
This amendment supports the Government’s intentions as explained in the Prime Minister’s Mansion House speech and their White Paper, but we must go further and enshrine them in law because of the very real impact on people’s lives, on the NHS’s ability to operate, on the industry, and on investment in the UK. That is why I will press this new clause to a vote.
I will also support new clause 18 this evening. Yesterday was the worst experience in politics I have had in eight years, and I am sorry that it has changed the dynamic. I started the week intending to support our Prime Minister in her deal and the White Paper. Yesterday changed that, and that is why I will be supporting other colleagues on these Benches when we come to new clause 18 this evening.
Gareth Snell (Stoke-on-Trent Central) (Lab/Co-op)
I shall speak briefly on new clause 11 in my name and the names of 20 of my Co-operative party colleagues—the Co-operative party being the third largest party in this House, despite what some in here say.
New clause 11 simply asks the Secretary of State to make an assessment of slavery and servitude as part of any new trade deals. Modern slavery is a stain on society and we in this country are making great headway in tackling it through the Modern Slavery Act 2015, particularly sections 1 and 54, but, sadly, slavery is all too apparent in some parts of the world. Most people in this room will be wearing an item of clothing that has been made by a slave, and we should be using our international prowess and purchasing power to try to deliver a reduction in slavery and servitude.
Amendment 22, which was very kindly tabled by the hon. Member for Stafford (Jeremy Lefroy), supported by the hon. Member for St Austell and Newquay (Steve Double), relates to trade remedies. The British Ceramic Confederation has worked very hard on this. I shall also be supporting amendment 80, because that will also help to protect our manufacturing base.
Mr Kenneth Clarke (Rushcliffe) (Con)
I shall be voting for new clauses 9, 17 and 18. I will not repeat the very eloquent arguments that have already been put forward by my hon. Friend the Member for Wimbledon (Stephen Hammond), the hon. Member for Stockton South (Dr Williams) and my hon. Friend the Member for Bracknell (Dr Lee), who have put the case perfectly. I do not see any answer to it. The only question I wish to pose relates to my understanding that the Government are resisting these new clauses, which I find completely incomprehensible, particularly since yesterday. I personally cannot see why we are leaving the single market and the customs union, because that does not follow on from the referendum at all. However, I accept that staying in them has been ruled out and, in the spirit of getting a reasonably broad compromise, I am prepared to give the Government a chance to produce some other version that will preserve totally frictionless trade and no barriers to trade and investment with Europe, if they think that there is one. Therefore, I would not press new clauses 1 and 5 to a vote, and I do not think that my right hon. Friend the Member for Broxtowe (Anna Soubry) would do so. Let us give the White Paper a chance, which is what new clause 18 does. What I do not understand, given that the White Paper also supports keeping our present arrangements, if we can, by remaining within the European Medicines Agency, is why on earth these proposals are being resisted.
Yesterday, I was astonished that the Government used a three-line Whip to secure a majority for my hon. Friend the Member for North East Somerset (Mr Rees-Mogg) and his European Research Group faction, which they only just managed to do, by chance. The Government actually whipped my party to defeat their own policy, as set out in the White Paper. Today, we have amendments that are entirely consistent with the White Paper, but the Government are so terrified of the Daily Mail, The Daily Telegraph and the European Research Group that they are now applying the whip to try to defeat these measures. I really hope that they will go away for the summer and have a good rest—perhaps they should lie in a quiet, dark room at some stage—then come back and tell us exactly how they intend to negotiate these serious matters relating to the future of our country.
Several hon. Members rose—
Mr Leslie
Surely new clause 17 is a no-brainer. If we are going to preserve anything, we must surely keep the frictionless flow of medicines and treatments for our national health service going. If ever there were an example of an ideology getting in the way of common sense, it would be that of a hard Brexit attitude physically placing itself at the border in the way of the free flow of those medicines. We know that 45 million packages of medicines cross that border every month. That is how essential this is, so new clause 17 has to be supported.
New clause 18 has been tabled by the hon. Member for Wimbledon (Stephen Hammond). I have to say to him that he is being incredibly generous to the Government in relation to this proposal. He is giving them the benefit of the doubt on the free trade area in goods. It is true that, whatever we get, the lowest common denominator will be a free trade area in goods. We will have to get that. But frankly, I am really quite surprised by the way in which some Conservative Members have been treated by the Government in respect of the ERG amendments—all of which were accepted without any objection—when some of them are trying their best to preserve the Prime Minister’s Chequers plan. Those Conservative Members are being very generous, but I think it is reasonable to put in place a safety net in the form of a customs union in January. I hope that, on this one occasion, we can put party politicking to one side and do the right thing for our country.
John Redwood
Every day, a large number of components come into our country from outside the EU and they meet the deadlines of the just-in-time systems, as do the components from the EU. My hon. Friend the Member for Wimbledon (Stephen Hammond) should understand that you cannot send a car out with only 79% of its components assembled because they are the ones that came from the EU. Manufacturers send their cars out with 100% of their components, including the non-EU ones, which are coming in perfectly well. More than half our trade is done with non-EU countries that are not part of the single market or the customs union. We have already thought about the need to get rid of frictions on the borders for non-EU trade. We have worked internationally through the WTO which, through its trade facilitation agreement, has several instructions for us and for the EU to ensure that there is a minimum of friction at the border for non-EU, non-customs-union trade as well, which is why our manufacturers can work with it.
EU trade is not without administration and bureaucracy. The Intrastat declaration must be made, the commodity code must be identified, the VAT has to be settled and the excise must be settled if necessary. Those things are not done at the border. The lorry drivers do not have to stand in a queue while trying to work things out. When we are outside the EU’s customs union, the situation will be the same for everything else that does not come in within the customs union framework. This is the modern world. It is electronic. There are computers. There is the off-site settlement of taxes and of customs. The WTO knows about that.
The future for us will be great, but we must be free to have our own international trade policy and our own agreements with countries other than those in the EU. We must have the ability to set out our laws and spend our own money. The British public would expect no less of this Parliament, and they will not accept any higgling of their decision to leave the EU.
Emma Reynolds (Wolverhampton North East) (Lab)
If the customs union is not important, why have BMW, Jaguar Land Rover and Airbus suggested that they need to keep the current border arrangements? If we are to preserve just-in-time manufacturing in this country—Jaguar Land Rover is on the outskirts of my constituency—we must either have a customs union or find an equivalent, as suggested by the hon. Member for Wimbledon (Stephen Hammond), who is being patient with the Government. The suggestion from some Members, as we have just heard, that the customs union or an equivalent is not important flies in the face of the evidence and what businesses up and down the country are telling us.
Nicky Morgan (Loughborough) (Con)
I will necessarily keep my remarks extremely brief. I cannot match the magnificence of my right hon. Friend the Member for Broxtowe (Anna Soubry) when she spoke yesterday, but let me say the following to the Chamber. Brexit is a matter of national interest. It is time to put party politics aside, which is why I welcome the fact that Labour Members are open to supporting the Chequers proposals, as captured in new clause 18, which I rise to support. I hear what the hon. Member for Bradford South (Judith Cummins) said about her scepticism regarding whether the proposals could work, but the Prime Minister did the right thing in the national interest by putting on the table a workable, practical proposal, captured at Chequers, that could be negotiated with the EU.
Nicky Morgan
No. Some Government Members chose to try to scupper that agreement and those proposals yesterday. Some of us tried to stop that; but sadly, we failed. What is proposed in new clause 18—I am delighted to join my hon. Friend the Member for Wimbledon (Stephen Hammond) in proposing it—is eminently sensible. We want to give the Prime Minister space for the negotiations, and it is clear that there is a majority in this House for a customs union to safeguard business, jobs and our constituents’ future financial security. I hope that the House will have the opportunity to demonstrate that shortly.
Angus Brendan MacNeil
The majority of the world’s countries are in a customs union. We need to be in a customs union and, I would argue, the single market. The damage that will result from not being in those two things and instead having a free trade, or less trade, agreement with the EU will be 6% of GDP. The panacea often offered is the United States of America, but the US will counter that drop to the tune of 0.2%. To make up for the damage that will be done by not being in the customs union and the single market, we need 30 US-style agreements. The US has a population of about 300 million, and a deal with it will yield a 0.2% gain in GDP. By that arithmetic, we need to make US-style agreements with about 9 billion people, but there is one problem for the Brexiteers: the population of the world is only about 7.4 billion. They should be listening to their friends and colleagues and making absolutely sure that they are not playing fast and loose with jobs, security, employment and with the life chances of people in the UK, young and old. It is a pity for me that Scotland is hitched to this lot at the moment.
Greg Hands
There are three or four very strong arguments not to be in a customs union as outlined in new clause 18. First, being in a customs union puts massive restrictions on having an independent trade policy. Trade agreements are all about WTO schedules, and if we are in a customs union, we cannot have our own WTO schedules. Secondly, who would run trade remedies in such a position? Would trade remedies be run in London or would they be run in Brussels, and in whose interest? With British jobs and British companies on the line, it is incredibly important that we have the ability to run trade remedies.
Thirdly, on the subject of trade preferences, we want to do better for the developing world. Being in a customs union would prevent that. Finally—
Stephen Hammond
With a heavy heart, I beg to move, That new clause 18 be added to the Bill.
Question put.
The Secretary of State for International Trade and President of the Board of Trade (Dr Liam Fox)
I beg to move, That the Bill be now read the Third time.
Let me begin by thanking right hon. and hon. Members from across the House who have shared their time and expertise to help enhance the Bill. We have spent today on Report thoroughly examining the measures in this short but significant proposed legislation. This followed four days of line-by-line scrutiny in Public Bill Committee. I would like to thank those who gave oral evidence to the Committee, and the individuals and organisations who provided written evidence and recommendations. I also extend particular thanks to the members of the Committee, on which the hon. Member for Brent North (Barry Gardiner) led for the Opposition and the hon. Member for Aberdeen North (Kirsty Blackman) led for the Scottish National party, for their detailed examination of the Bill and the positive way in which they contributed to debates on its provisions. I would also like to pay particular thanks to my right hon. Friend the Member for Chelsea and Fulham (Greg Hands), who as Minister of State for Trade Policy played a vital role in developing the Bill and in steering it through the preceding parliamentary stages. I, and all my parliamentary colleagues, owe him a great debt.
This is an important Bill. It provides continuity and stability as the UK leaves the European Union for individuals, businesses and our international trading partners. It will be the confident first step that the UK takes towards establishing itself as an independent trading nation for the first time in over 40 years. As the hon. Member for Brent North concluded on Second Reading:
“The need for a Bill to establish a trade remedies authority, to establish our independent membership of the WTO government procurement agreement, to enable us to maintain strong trading ties with partner countries that have had historical agreements with us through the EU, and to establish the power to collect and share…information—all are uncontroversial requirements.”—[Official Report, 9 January 2018; Vol. 634, c. 221.]
I wholeheartedly concur.
As the UK leaves the EU, the Government are committed to seeking continuity in our current trade relationships. One way we will achieve this is by introducing powers to let us make domestic legislation implementing our independent membership of the Agreement on Government Procurement, or GPA. This continuity is important for both business and the taxpayer. GPA membership will maintain the access of UK businesses to a global public procurement market estimated at £1.3 trillion every year, across major economies such as the United States, Canada and Japan.
Taxpayers and users of public services will also benefit. The GPA has led to increased choice, quality and value for money in the public sector. TheCityUK, which represents financial and related professional services, wrote to the Public Bill Committee to say:
“We fully recognise the need for the UK to become a party to the WTO GPA”.
As it explained:
“The GPA requires that open, fair and transparent conditions of competition be ensured in government procurement…which cover both goods and services”.
The Federation of Small Businesses said:
“it is essential that the UK is able to become an independent member of the GPA, allowing small businesses to have continued access to government contracts and procurement opportunities.”
It is clear that the agreement is of great value to UK businesses and its importance is endorsed by organisations representing their interests.
As an EU member, the UK participates in many trade agreements with partner countries. We want continuity as far as possible in our existing trading relationships with these existing partners. As these agreements account for 12% of the UK’s total international trade, this will be important in preventing disruption to businesses, consumers and workers. The International Trade Committee observed in a recent report that:
“Almost no one who contributed to our inquiry suggested that the Government’s policy objective of seeking continuity was the wrong one.”
Additionally, the Scotch Whisky Association, which I have much pleasure in promoting at home and abroad, has said that
“continuity of current EU trade agreements is vitally important to us”.
British Sugar stated:
“We support the Government’s overriding intention to maintain continuity by replicating existing trade as closely as possible and believe that this is the best means by which to provide certainty to business.”
Continuity for the taxpayer, businesses, consumers and our international partners—that is what this Bill is about. To be absolutely clear, and as I made clear in my statement yesterday, this Bill is not about signing new trade agreements or making substantial changes to existing ones.
Despite many misleading claims to the contrary, the Government will not use measures in the Bill to implement substantially different agreements with existing partner countries. Our policy has always been, and remains, one of securing continuity first and seeking new opportunities second. We have been clear with our trading partners that continuity remains our primary objective, as I made clear earlier this evening. However, as debated on Report, to further reassure the House, the Trade Bill requires the Secretary of State to table a report outlining all the changes made to existing agreements as part of the transition into UK-only agreements. This places in statute the Government’s clear commitment to transparency—to aid appropriate parliamentary involvement, allowing Members of both Houses of Parliament the opportunity to see what changes have been made to secure continuity.
Additionally, the use of the clause 2 power will now be subject to the affirmative resolution procedure, allowing both Houses to debate regulations made under that power. The Government will not use the powers in the Bill to implement the obligations of new free trade agreements—ones with countries with which the EU does not already have a free trade agreement. We consider these to be future trade agreements and we announced this week our proposals for them.
The Bill also provides for the establishment of the Trade Remedies Authority. The World Trade Organisation allows its members to provide a safety net to protect domestic industries against injury caused by unfair trading practices, such as dumping and subsidies, and unforeseen surges in imports. Trade remedies level the playing field and restore the competitive balance. They are key to ensuring an effective rules-based system for international trade. The European Commission is currently responsible for undertaking trade remedies investigations and imposing measures on behalf of the UK. The Government are establishing the TRA to ensure that the UK can continue to provide a safety net for domestic industries after we have left the EU. I am grateful to Members on both sides of the House for the support that they have given on this issue.
Specifically, the TRA will be responsible for making an assessment in a case for a trade remedies measure, based on the evidence available. It will then make impartial recommendations to Ministers. This includes protection from goods that are heavily subsidised or dumped in the UK market at below domestic price. It also includes injury caused by unforeseen surges in imports. The investigative and decision-making framework that the TRA will be responsible for delivering is set out in the Taxation (Cross-border Trade) Bill.
The Government’s commitment to establishing the TRA has been recognised by stakeholders—by both producers and consumers. The Public Bill Committee was told by the British Ceramic Confederation:
“It is clear that we need a TRA, and it is certainly welcome that the Bill establishes one.”––[Official Report, Trade Public Bill Committee, 23 January 2018; c. 64, Q123.]
In its written evidence, consumer organisation Which? stated that it
“recognises the need to develop a trade remedies regime and establish a new TRA which will be able to consider the need for remedies objectively, on a case by case basis”.
As the International Trade Committee also recently acknowledged:
“Establishing a trade defence regime is critical to protect UK domestic industries from injury from adverse trading practices.”
The Committee described the Trade Bill and the Taxation (Cross-border Trade) Bill as “important, necessary steps” and stated that
“we welcome the Government’s attention to this subject.”
The Bill also includes measures that will allow HMRC to collect more detailed information on trade and share it with appropriate bodies, primarily the Department for International Trade. This will allow the Government a sharper picture of how the UK trades and where we can best target support for British businesses. These provisions will also ensure that the UK is able to fulfil its international transparency obligations to share data with organisations such as the WTO. This function is currently undertaken by the European Union and it is vital that the UK can take over this responsibility, if we are to operate an independent trade policy.
Appearing as an expert witness before the Public Bill Committee, Professor Winters of the UK Trade Policy Observatory said:
“Information is very important, not least in my trade, for analysing what goes on. The case for collecting reasonable amounts of information, as long as it is cheap to do so, is very strong indeed”.––[Official Report, Trade Bill Public Bill Committee, 23 January 2018; c. 57, Q108.]
In a similar vein, the British Chambers of Commerce told that Committee:
“If, in the future, there can be a more robust collection of data and stronger assessments of UK-third country trade, that would be helpful.”––[Official Report, Trade Bill Public Bill Committee, 23 January 2018; c. 72, Q136.]
Angus Brendan MacNeil
Given the vote just now and that the UK is turning its back on the customs union, we will most likely have a border in Ireland. In that eventuality, we will not have a transition agreement with the Republic of Ireland. If we have a border but no transition agreement, will the Government be ready in March 2019 with the TRA and will they have in place the 40 trade agreements that are vital for industry?
Dr Fox
I do not accept that the Government’s proposals will require a border in Ireland. In fact, the Cabinet took a specific decision to bring forward a proposal to take to the EU that will prevent us from having that border. Nor will we accept a border down the Irish sea, because all parts of the UK, however much the hon. Gentleman might dislike it, will be treated the same by this Government, who are proud to be a Conservative and Unionist Government.
The Bill also brings forward measures that will ensure a joined-up UK approach to implementing the GPA and continuity trade agreements. However, the Government respect the devolution settlement, as reflected by the amendments tabled by the Government on Report and accepted by the House. We have worked closely with the devolved Administrations to make progress towards legislative consent. Let me reiterate the Government’s commitment to not normally using the powers in the Bill in areas of devolved competence without the consent of the devolved Administrations. These powers are primarily here for administrative efficiency. We will not be taking back any powers currently in the hands of the devolved Administrations, however much the nationalists pretend that we will be. In fact, as powers return from Brussels, more will sit with the Scottish, Welsh and Northern Irish Governments than ever before.
As we leave the European Union, we want to provide continuity for businesses, for consumers and for our trading partners. This Bill sets the scene for the United Kingdom’s independent, sovereign trade policy. We will approach that with optimism and confidence. I commend the Bill to the House.
Barry Gardiner
I thank the Minister for Trade Policy for stepping into the shoes of the right hon. Member for Chelsea and Fulham (Greg Hands) with great aplomb. He has displayed his customary tact in all our engagements and has helped the Government deliver the Bill, despite all the pressures he has faced. I pay tribute to the hon. Member for Huntingdon (Mr Djanogly), who I thought made an exceptionally thoughtful speech on Report and gave the Government a great deal of wise counsel that they might have done better to take even more notice of than they did.
In particular, of course, I want to thank my hon. Friends the Members for Sefton Central (Bill Esterson) and for Bradford South (Judith Cummins) for their exceptional work in preparing for the debates on Report and in Committee. It has been a long process since last October. We were not quite sure whether we would see the Bill this side of the summer recess, or whether it would even resurface before Christmas, but it is a great tribute to them that they were able to scrutinise the Bill with the care it deserved.
I echo the Secretary of State’s remarks about the expert witnesses. It is one of the great features of the innovations over the past 15 to 20 years in this House that expert witnesses now give their testimony to Committees at the beginning and inform our procedures. We certainly benefited hugely from all they said. Of course, I wish that the Secretary of State and the Minister had taken a little more notice of what they said, because they were often extremely critical of the Government, but that was not to be.
Finally, let me apologise to the Government Whips. I am not known in this place for speaking with brevity, and I must apologise to the Whips because when I curtailed my remarks this afternoon, it meant that the session did not go the full length, and I think that they took their wrath out on the Minister for ending it early.
Trade Bill
Wednesday 18th July 2018
(6 years, 4 months ago)
Lords ChamberRead Full debate Trade Bill 2017-19 Read Hansard Text Amendment Paper: Consideration of Bill Amendments as at 17 July 2018 - (17 Jul 2018)
Trade Bill
Tuesday 11th September 2018
(6 years, 2 months ago)
Lords ChamberRead Full debate Trade Bill 2017-19 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Consideration of Bill Amendments as at 17 July 2018 - (17 Jul 2018)
The Minister of State, Department for International Trade (Baroness Fairhead) (Con)
My Lords, I am pleased to open this debate, with so many vastly experienced and distinguished Members on the list of speakers. I particularly look forward to hearing from my noble friend Lady Meyer, who is making her maiden speech today. I warmly welcome her to the House.
Let me start with some background. This Bill is fundamentally a pragmatic and, in most parts, technical Bill. It is about continuity and about certainty—continuity of the existing trade agreements that we already have through the EU, and the certainty that this gives to businesses and our trading partners. It may be a pragmatic Bill, but it is no less important for that. Before we sign any new trade agreement, we need to maintain the effects of our existing ones. Whatever the outcome of our negotiations with the EU, our current trading partners have made clear that they do not wish to lose access to our market—that of the fifth-biggest economy in the world—and nor do we to theirs.
Britain has always been a natural trading nation. We pioneered the global trade in mass manufactures at the start of the nineteenth century and globalised financial services towards the end. It is a deep part of our heritage, leaving its mark everywhere you go. Trade is more central to our economy now than it has ever been. In fact, it represents 60% of GDP, with exports making up 30% of that. It maintains jobs and touches almost every job up and down the country.
Of course, as we look to the future, we can be certain that the shape of the economy will change, just as it has in the past, whether it is from demographic shifts, artificial intelligence or anything else. Government has a duty to prepare the country for those changes. But one thing that we can be sure will not change is that trade will continue to be an important part of our economy and critical to the people of our country, which is why it is right that we now have a department dedicated solely to increasing international trade, and why we are supporting trade through our export strategy and our more than 200 recent ministerial visits from DIT alone overseas.
We can also be sure that the countries with which the EU has existing trade agreements will be a crucial part of that trade. Those agreements—the subject of this Bill—are with more than 40 non-EU countries. They represent 12% of our trade. We must ensure that we can replicate the effect of those agreements in UK law, with a transparent and timely process. Parliament, and especially this House, has a particularly crucial role here, because getting that right—the details, the technicalities, the practicalities—has always been where this House comes into its own. That is something this Government genuinely do value.
I am clear that this Bill has been improved by scrutiny in the other place. As a result of that input, the Government have made amendments to increase scrutiny, so that the Government would have to lay a report in Parliament setting out changes to existing trade agreements when they get transferred and use the affirmative resolution procedure where appropriate, not the negative; and by reducing the sunset period by two years. The amendments also give certainty that the new Trade Remedies Authority can be up and running on day one by letting us set up the TRA in shadow form without risking staff employment rights. They also iron out some technical consequences of machinery of government changes for the agreement on government procurement, so that we do not just have certainty, but are seen by our trading partners to have certainty.
So what, moving to the detail, does the Bill do? In short, the key elements are, first, as I have said, to seek the powers to ensure that we can implement existing continuity agreements with trading partners, both full free trade agreements and other agreements relating to trade. Secondly, it seeks the powers to ensure that we can become an independent member of the WTO’s agreement on government procurement, so that UK businesses do not lose access to a £1.3 trillion market. Thirdly, it seeks powers to establish the Trade Remedies Authority, to protect domestic industries from unfair and damaging trade practices. Fourthly, it lets the Government gather and share information on trade.
On the first of these, the Bill provides for the legal power to continue the trade agreements that the EU currently has with third parties, such as those with South Korea and Canada. Of course, once we have left the EU, the Government will not require additional powers to continue the trade agreements themselves—the power to negotiate and sign treaties is a prerogative power and always has been. Agreements concerning trade are no different. International agreements, once signed, are then ratified subject to the process set out in the Constitutional Reform and Governance Act 2010 and laid in both Houses alongside an Explanatory Memorandum to give Parliament oversight.
This Bill instead concerns the domestic implementation of those continuity agreements, where domestic law is required. Again, in many cases, this will already be preserved through the withdrawal Act, but it is essential that we have the legal power to make such agreements operable under UK law. The Bill will make sure that they can be. We should remember that many of the agreements are ones that the UK itself pushed for as a member of the EU and that all of them are bringing jobs across the country.
From preliminary discussions, the Government are confident that other countries want to be able to continue these existing agreements. Many of these countries have already said as much publicly. We are the world’s fifth-largest economy, its sixth-largest importer and its 10th-largest exporter, so even outside the European Union we will be one of the world’s most significant markets in our own right.
The second function of the Bill is to allow the UK to implement the changes required so that we can remain a party to the Agreement on Government Procurement—known as the GPA. This agreement, covering 19 parties and 47 countries, operates under the structure of the World Trade Organization. Although we are a member of the World Trade Organization in our own right, our GPA membership is through the EU.
The Government already have the power to accede to the GPA, subject to the Constitutional Reform and Governance Act. The power in this Bill will allow the UK to make the necessary changes in domestic legislation to reflect that accession. Being in the GPA means letting businesses from overseas compete in some of our procurement markets on level terms with domestic firms, with guaranteed reciprocated access. Around one-quarter of UK procurement contracts are opened up to foreign providers under both UK and EU rules—that is £68 billion—though in practice the vast majority are still won by British companies. In fact, only around 2.5% of the larger contracts go to foreign suppliers. In return, the Government get better value for money through more competitive tendering and our own businesses can sell into the world’s largest public procurement markets. Last year, British firms won contracts abroad that secured thousands of jobs. As I said, the opportunity is estimated to be worth £1.3 trillion a year.
To be clear, there is no requirement, and it is certainly not the policy of this Government, to open up the NHS or any other public service to international private sector competition. Nor will the Government put our own businesses at a disadvantage. We currently apply GPA rules through our EU membership; this clause simply lets us continue with the status quo. Our market access offer to the GPA remains completely in line with what we currently offer as an EU member state. Our schedule will be replicated. Continuity and reassurance are what this clause of the Bill provides.
The UK will continue to decide, at its sole discretion, which services to open up to competition, not our trading partners. The Bill will allow us to make necessary changes to our domestic legislation to reflect our independent membership of the GPA. In addition, it will allow for further limited changes; for example, to account for other countries joining or leaving the GPA.
The Bill’s third purpose is to let us set up a new public body, the Trade Remedies Authority, or TRA. This will allow the UK to investigate and, where appropriate, take action against unfair trading practices such as dumping and subsidies or unexpected surges in imports where they cause injury to UK industry, in line with WTO rules. This action usually takes the form of an increase in duty on imports of specific products; these are known as trade remedies measures. Such measures are key to ensuring an effective, rules-based system for international trade by levelling the playing field and restoring the competitive balance. They allow us to protect UK businesses and UK jobs.
Currently, the European Commission is responsible for undertaking trade remedies investigations and imposing measures on behalf of the UK. Once we are operating our own independent trade policy, that responsibility will be ours. That is why we have set up our own trade remedies framework, through the Taxation (Cross-border Trade) Bill, which noble Lords debated last week. This will ensure that the UK can continue to provide a safety net to domestic industries after the UK has left the EU. It is vital that this Government can continue to protect our businesses from unfair or injurious trading practices by other states.
Lord Davies of Stamford (Lab)
Have the Government heard from any of the countries currently enjoying free trade agreements with the European Union, or do they know by any other channel that any of those countries are going to propose, or have proposed, any changes in the provisions of those treaties when they apply simply to the United Kingdom and the country concerned as a new, bilateral agreement?
Baroness Fairhead
I can confirm that we have had some positive discussions with each of those third-party trading countries. We will address this in the bulk of the debate and I will also address it in my closing speech. Was that helpful?
This is also why we have engaged extensively with UK industry in developing this function, through multiple round tables, ministerial meetings, technical discussions and site visits. After all, producers play a crucial role in our economy and jobs are at the heart of their communities. This Bill will set up the TRA as a new public body and provides for a governance structure designed to make sure that the TRA is independent and operates an objective investigation process. That is why we are setting it up as a non-departmental public body, to ensure that it has the appropriate degree of separation from government. This will also ensure that businesses have the assurance they need that their complaints will be treated fairly and impartially.
Finally, the Bill lets HMRC collect information about exporters and share export data with certain third-party organisations. We intend to ask companies and partnerships, through the tax returns they already submit, to provide information, on a voluntary basis, about whether they are an exporter of goods or services, or both. Having the correct data will enable government to make better policy and align assistance and resources to help our exporters. HMRC will be able to share information with the Trade Remedies Authority, to give it the evidence it needs for its independent investigations. HMRC will also be able to share information with the Department for International Trade, to support evidence-based policy-making. This data sharing will be subject to strict controls to maintain privacy and commercial confidentiality, including the criminal sanctions in the Commissioners of Revenue and Customs Act 2005. Those four things are what this Bill is about.
I would also like to clarify those areas the Bill does not cover. It is not about new free trade agreements that will come into effect in the future. The Bill does not give the Government powers in this area, nor would it be appropriate to do so. We do not yet know what those agreements will look like; nor can we, because until March next year our duty of sincere co-operation with the EU prevents us negotiating them. The Secretary of State recently set out the process for consultations on new free trade agreements, which I shall explain in further detail in a minute.
The Bill is not directly about Brexit. Of course, we would not have had the Bill if we were not leaving, but the Bill itself is not about whether or how we leave the European Union. Leaving the EU flows from the European Union (Notification of Withdrawal) Act 2017 and the European Union (Withdrawal) Act 2018, both already debated in this House. Whether this Bill passes makes no difference whatever to whether we leave the EU, when we leave the EU, or who gets what votes on the final deal. The nature of our withdrawal and our future relationship with the EU—hard, soft or any other form—will not be changed in any way via the measures in this Bill. Clearly, this Bill is happening because of Brexit—
Lord Liddle (Lab)
Surely one of the main concerns of the manufacturing industry is what will happen to rules of origin in British trade agreements with countries such as South Korea, when the EU rule is that 55% of cars have to be manufactured domestically yet we manufacture only 40% of our content domestically. Surely this is highly relevant to Brexit and the economic damage that Brexit could cause to a sector of our economy on which 1 million jobs depend. Therefore, to say that the Bill has nothing to do with Brexit is very strange.
Baroness Fairhead
I did not say it was not happening because of Brexit. In fact, I was clear that the Bill is happening because of Brexit. But Brexit is not happening because of the Bill. It is a fine point but it is clear. There is the decision on Brexit and then this is about the four areas that I talked about. We will come on to rules of origin in the debate. It is a really complex and important area, and something that we are negotiating with both the EU and the third countries in the continuity agreements. I have little doubt that we will talk about this and I expect to cover it in my closing speech. If the noble Lord is happy with that, I will proceed.
Lastly, the Bill is not an attempt by the UK Executive to take power from Parliament, the devolved Administrations or anyone else—in fact, the opposite. On devolution, the Bill grants devolved Ministers the powers they need to implement existing trade agreements and procurement legislation, respecting their competence in these areas. It retains for the UK Government the powers they need—nothing more. We have also agreed changes to the Bill with the devolved Administrations, in the other place. We look forward to continued engagement with the devolved Administrations throughout the passage of the Bill and hope to work together to secure legislative consent Motions.
On wider public engagement, the Government have no desire to push through trade agreements without public support. Frankly, that is not in our interests. When Governments try to push through trade agreements, not only is it the wrong thing to do but it almost always backfires, as we saw with the Transatlantic Trade and Investment Partnership—TTIP. In any new free trade agreements, the Government will engage with the public right from the start. In June we published our engagement strategy for the pre-negotiation stage of future trade agreements. The comprehensive four-point plan includes open public consultations. We launched four online consultations on 20 July, open for 14 weeks. These ask for public feedback on potential free trade agreement negotiations with the United States, Australia and New Zealand. They also ask for views on the UK potentially seeking accession to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership —CPTPP.
We also set out detail on UK-wide outreach events; detail on thematic and sectoral groups of stakeholder experts; and information on our intention to convene a strategic trade advisory group, consisting of experts from across the country from academia, trade unions, consumer groups and businesses from different sectors and of different sizes. That is just for the pre-negotiation stage. There will be more targeted engagement as we move forward. As I said, the Bill is about existing trade agreements. These agreements are already in place. Maintaining their effects in UK law merely preserves the status quo and will not involve changes on the ground for businesses or consumers.
Finally, on the role of Parliament, as noble Lords will know, these trade agreements have already gone through the normal parliamentary scrutiny processes for EU legislation and have already been scrutinised by both Houses of Parliament. In any case, the power to implement continuity trade agreements under Clause 2(1) is exercisable only for three years from exit day—unless both Houses agree extensions. This is one of only seven delegated powers in the Bill and one of only two Henry VIII powers. The other Henry VIII power relates to HMRC data collection. This is also subject to the affirmative resolution procedure and is very narrowly defined, as requested by HMRC itself. All these delegated powers are necessary. It would be simply impossible to implement our continuity trade agreements or the GPA membership in the time available without them. We would also miss the opportunity to understand how best to help UK businesses by collecting export data. That is why the Government have requested them, and for that reason alone.
In conclusion, we are forging a new trade policy to make the most of the opportunities of Brexit but we need to get the practicalities right first. I look forward to hearing the views of all noble Lords today as we enter the detail of the Bill. I will listen carefully and seek to engage as fully as I possibly can, whether with groups, by party or with individuals, to ensure that proper scrutiny is given to the content and intent of the Bill. It is a necessary and pragmatic Bill. It is one that respects Parliament, respects the devolution settlement and puts in place a firm foundation for our future trade policy for the years to come. It is with that in mind that I commend this Bill to the House. I beg to move.
Lord Grantchester (Lab)
My Lords, I welcome the Minister to her first Bill in your Lordships’ House and I look forward to the maiden speech of the noble Baroness, Lady Meyer. This Second Reading debate offers us an all-too-rare opportunity to consider in detail what should constitute the UK’s future trade policy and what changes to our legislative structures, now and into the future, are required. At the moment there is still huge uncertainty about what relationship the UK will have with the European Union, or about how the Government think that our national trade policy will be built around that relationship. Certainty is what our business community needs.
As the Minister has just explained, the Government believe that all that is needed at this time is a technical Bill, aimed at facilitating our engagement with the government procurement agreement, establishing the Trade Remedies Authority and making sure that the UK can roll over the existing free-trade agreements negotiated by the EU with some 80 third-party countries. On the latter point, Japan and Chile have both indicated that they are not happy to simply roll over their agreements and George Hollingbery, a Minister at the Department for International Trade, said in evidence last week that,
“it is not an absolute given that we can get them all transitioned”.
Is a technical Bill sufficient? What is our trade policy, and who operates and agrees it? What powers lie with the devolved Administrations and how are disputes to be resolved? What impact will these agreements have on ordinary people, on consumers, on companies and businesses up and down the country? How will our trading activities as a nation impact on third countries, particularly developing ones? These issues are still to be determined.
One of the most disappointing shortcomings in the Bill is that it proposes to restrict trade policy almost entirely to the UK Government. In doing so, it ignores the devolved authorities and largely bypasses Parliament. It has no engagement with civic society and, ultimately, fails to offer accountability or to offer opportunities to nations, regions or cities. Even if the right thing to do at this stage, given the massive uncertainties around Brexit, is nothing more than rolling over the trade deals that we currently enjoy as part of the EU, what happens if these trading partners ask to renegotiate? Is it possible that countries such as China and South Korea may wish to change the terms of the agreement when dealing with a market of 65 million people, when the original deal was premised on access to a much more diverse and remunerative market of over 500 million? We must make plans for how the UK will approach such challenges and take into account all the diverse viewpoints and outcomes.
On transparency, the Bill fails to guarantee the disclosure of any information relating to negotiations or to mandate consultation on continuity agreements, while essential scrutiny of secondary legislation is compromised in some of the most crucial areas. It offers few checks and balances—fewer, indeed than those the EU currently routinely guarantees for its trade deals to the European Union Parliament and civic society. It tries to set up the UK’s trade policy as a simple continuation of where the EU has got to, but it ignores the growth in public interest in trade agreements.
The Bill also misses an opportunity to act as a framework for our future trade policy and set out the UK’s pitch as an ethical trading nation right from the beginning. Trade policy should not be pursued only for self-interest but should also be used to shape a world that better reflects our ideals. I refer to advancing human rights, eliminating poverty, promoting sustainable development and reflecting the UK’s concern for high environmental and welfare standards in production methods.
This gives me the opportunity to touch briefly on the issue of tariff rate quotas, which deal with the split quantity of certain goods within the overall EU allocation, which can be traded at reduced tariffs following our departure. A large share of such goods is related to agriculture, so the issue is central, not only to our economic prosperity but to the food we all eat. I am sure many will be aware of the disputes that have arisen as a result of nations such as Canada and the US claiming that plans to divide these quotas will disadvantage them. This is an issue that must be resolved, and it can be examined at later stages to allow the Government to best do so.
The Trade Bill should guarantee that even our continuity agreements promote these principles, and that our trade policy has its sights on goals beyond benefiting our own economy. I am sure the Minister will offer assurances that our trade policy will be principled, but if her Government are serious about this commitment then they should enshrine these ideals in the statute book. The Bill also paves the way for the UK to participate in the government procurement agreement, and we welcome that. However, there is no detail in the Bill about what constraints, if any, will be placed by the UK on third-country companies bidding for UK public bodies contracts. We will be putting down amendments to scrutinise that and making suggestions for how procurement can be used to advance social objectives.
As the Minister said, the key proposal in the Bill is the establishment of the Trade Remedies Authority. Labour recognises that, provided it is set up properly, it is guaranteed independence from the Government and has the right powers to protect UK industries from unfair trading practices. I am sure the House is well aware of the dumping of Chinese steel, where the market has been flooded with goods being sold below the cost of production without profit, leading to dreadful consequences for the UK steel industry. Unfortunately China’s dumping of steel is not an isolated case. Trade dumping has become a major feature of the international trading market. The House also needs only to look towards the aggressive and protectionist trade policies of President Trump to demonstrate the need for strong defences. This is a serious issue with serious ramifications for jobs and the economy. The TRA will need substantial resources if it is going to do the job required. We will be looking carefully at the structure proposed for it and how best to guarantee its independence.
Lastly, I come to the greatest missed opportunity: the chance to settle the question of whether the UK will negotiate a new customs union. One of the many myths peddled by this Government is that the UK is better off outside the customs union with the EU. Surely we can trust businesses to know what is best for them, and the clear majority of them say they are best off in a customs union with the EU. The reason is simple: a customs union could allow for frictionless trade with the EU and offers the best possible basis for dealing successfully with the Irish border issue. It could also pave the way for access to over 50 trade agreements with third countries. Together, these markets accounted for 62% of UK goods and services exports in 2016.
The country was encouraged by the Prime Minister’s recent trip to Africa. We were all pleased to see efforts to expand into these markets. However, it is worth reminding the House that South Africa, the focus of the trip, already has an agreement with the EU, from which both South Africa and the UK greatly benefit. In addition, 34 of the least developed African countries already benefit from tariff- and quota-free access to the EU through the Everything But Arms policy. Nearly all African countries receive preferential access to EU markets. The Prime Minister is right to look to Africa and elsewhere for future trade, but a customs union with the EU is the best way to do so.
With Britain outside a customs union, there seems no remotely realistic scenario in which British businesses would find it easier to sell their goods and services abroad. This is for the simple reason that the UK alone is unlikely to secure trade deals more effectively than it does in the EU. First, there is the question of capacity and experience. While the EU has more than 40 years’ experience negotiating trade deals, the UK would be starting from scratch. Secondly, it is a question of negotiating power. While the EU can offer access to a huge market of more than 500 million people and extract large concessions in exchange, the UK can offer access to a market of merely 65 million people and will have to accept fewer concessions in return. A customs union with the UK at the front and centre is a solution for our future trading policy. This would allow us to broker new trade deals and expand markets through the joint bargaining power of the UK and the EU, while solving the Irish border question. A trading bloc is inherently more powerful than an isolated nation state.
It should be noted that services—on which the customs union has limited impact—must also be protected. We hope to provide for this issue during the later stages of this Bill. The enhanced equivalence provisions on services, set out in the Chequers proposals, are inadequate and erect significant barriers to trade.
Ultimately, this Bill is a missed opportunity to prepare the UK for a new chapter in our trading history. It betrays the principle of accountability and devolution which are so vital for any future trade policy. It creates a Trade Remedies Authority which will be woefully unprepared to fulfil its responsibilities. It misses the opportunity of mandating the Government to remain in a customs union with our major trading partner. The UK’s trade policy should have both our nation’s self-interest and the advancement of our ideals globally at its heart. Unfortunately, this Bill fails to prepare our nation to build a trading policy which can achieve any of this.
Lord Fox (LD)
My Lords, here we are again. Last term, playing to packed houses, we had the long-running debate on the EU (Withdrawal) Bill. Last week, for one night only, we had the Taxation (Cross-border Trade) Bill. Today, we start the third act in this tragedy.
Just now, the Minister set out the latest instalment in a programme of national self-harm. This Bill sits alongside the Government’s plan to take a smooth-running customs system and swap it for the facilitated customs arrangement—an unworkable technological fudge of Heath Robinson complexity. As the Minister has already admitted, leaving the European Union puts at risk 40 trade agreements, accounting for around 12% of our exports. It is, in effect, throwing them into the air without any idea as to how they are going to come down. In around 200 days, at the end of March, something will emerge, but it will not be what we have today. Nobody in this House knows what it will be.
I welcome the Minister to her first Bill. I am optimistic that she understands the challenges that are presented to business. She knows that this badly thought-through legislation will seriously affect the country’s economy. It will grow more slowly. Exports will be tied up much more and investment will slow. She understands the effect this will have on productivity. My hope is that she, alongside other sensible Members on the Benches opposite, will eventually realise that this is a path we should not be going down.
It will not surprise your Lordships when I say that the Liberal Democrats regard the Bill as unnecessary because we should not be leaving the customs union in the first place. By leaving the customs union, the UK is abandoning not only the world’s largest trading bloc but every free trade deal that the EU has negotiated with third countries.
The Liberal Democrats are champions of open markets and free trade, but we believe that the UK can negotiate better deals as a member of the huge EU bloc than it can as an individual country. That is why, all over the world, countries form blocs to negotiate trade agreements: they find it easier than doing it on their own. Being in the EU has not harmed other countries by preventing them from being acquisitive and getting their own deals. Germany has done very well, thank you, in international trade, despite the “huge impediment”, as some people would have it, of being in the European Union.
As we have heard, Clause 2 is premised on the assumption that the UK can effectively copy and paste the terms of the trade deals that the EU has signed with those 40 other countries or groups of countries, so that they can fly, as are, at the end of March. This is just one of the many acts of faith that we have to put up with every day in this place. It just is not going to happen. Although some countries may be prepared to roll the deals over, many others will demand renegotiation and changes because the power arrangement has changed—it has shifted; they are in the driving seat.
Many countries are already stepping forward. Seven, including the USA, have already written to the UK to complain about how it proposes to divide agricultural quotas after Brexit. It is inevitable that they will seek to change the terms. The Government may try to believe that they can roll these deals over, and I look forward to the Minister’s closing speech and her answer to the question of the noble Lord, Lord Davies of Stamford: what do you have in writing, what do you have that is real, other than a nod and a wink that this might be doable?
The Government are also trying to implement these deals by the back door. I know that the Minister talked about transparency, but the use of secondary legislation to implement these negotiated deals is not right. We need to involve Parliament more. The Government plan to comply with a trade deal by changing the law using statutory instruments. This has been improved thanks to the adoption of the Lib Dem amendment to switch to the affirmative procedure, and that is welcome, but it does not go far enough.
Although Parliament will get to ratify deals, it will not be involved or consulted in the process of delivering them—quite unlike what goes on in many other democracies, and certainly different from how things are handled in the European Union today. So much for taking back control: Parliament is ceding control over trade deals.
Future deals will have a significant impact on consumers and businesses. Although the Minister talked about them being rollover, temporary deals, we should remember that they can be extended, so they could carry on for some time. They should not be used by the Government to participate in a race to the bottom in ethics and standards. I want to hear what the Government have to say about that.
Clause 2 must ensure that trade deals cannot be signed and endorsed unless they are consistent with all the UK’s commitments to combat climate change, uphold food standards, promote sustainable development, defend labour laws, create a more equitable international order and defend human rights. These are all important parts of what make us the United Kingdom. To support that, an impact assessment is very important.
I turn briefly to plans for the facilitated customs agreement—I know that the Minister probably does not want to talk about it. It is important because it will be the mechanism by which trade will be delivered with our most important trade partners. This is the third attempt by the Government to come up with a frictionless replacement for a customs union, but that is an impossible dream. I do not think anybody really believes that the FCA will work, or that it is acceptable to the EU 27. However, just in case, and to understand how the Government are thinking on this, can the Minister explain how the following few issues will be dealt with: mutual recognition of standards; licensing arrangements; procurement rules; labelling; origin; IP law; environmental standards and employment legislation? All of these reflect on goods that are moving around in the European Union, some of which will have been facilitated to come into this country through the trade agreements being discussed today. How will goods be traced? How will standards be maintained? Referring back to last week’s debate, how will the tariffs and duties be totted up and shared out across the European Union? This is just the tip of an incredibly complex iceberg which indicates how unworkable this solution is.
Because the Minister knows that the FCA is a non-starter, I am sure that she understands why your Lordships’ House is so worried about the Northern Ireland issue, which was again revealed through Questions today. Brexiteers huff and puff and say that this is an exaggerated issue, but of course it is not. Nothing in this Bill, or its sister Bill debated last week, facilitates a border solution to maintain the Good Friday agreement. As I said last week, this Bill, and last week’s, are the enemies of that agreement.
In winding up, I cannot help but remind the Minister that 29 March is around the corner, yet it is hard to detect a sense of urgency. Indeed I still see tendencies to obfuscate. For example, after this debate there is absolutely no sign of a committee stage. I had expected to return in October and find committees ready and waiting, but no. It is not on the programme so far; is it happening in mid-October, late October, or November? Perhaps the Minister or someone in government can help. Either way, if this Bill is so important, why are we not getting on with it? It seems to me, and others, that the Government are sitting in their own version of David Copperfield and waiting for something to turn up.
The Government cannot, at the moment, help business with what is going to happen and that is the central issue which concerns me as business spokesman for the Liberal Democrats. Decisions and investment have to be made, products developed, and marketing plans put in place. What can you tell those businesses, big and small, north, south, east and west across the United Kingdom? You cannot tell them anything. The people working for those businesses deserve answers. For their sake, if no one else’s, please get on with this. Address the issues, step back, think again and hold on to what we have, because it is more valuable than what is on offer.
Lord Kakkar (CB)
My Lords, I thank the Minister for the thoughtful way in which she introduced her first Bill in this House. I remind noble Lords of my entry in the register of interests as chairman of University College London Partners and Business Ambassador for Healthcare and Life Sciences. I will confine my remarks to Clause 6 of the Bill, dealing with the question of the European medicines regulatory network.
The life sciences sector is hugely important to our country in terms of both the economy and the broader health of the nation. We are fortunate to be home to two of the world’s top 10 pharmaceutical companies. There are some 5,000 businesses in the life sciences sector, employing some 235,000 people between them. The sector is worth some £68.5 billion a year to the economy. Over the last 20 years, the pharma industry has been a positive net contributor to our nation’s trade surpluses.
As a result of the expertise in this country, the United Kingdom is the number one destination in the European Union for inward investment in the life sciences sector. Small and medium-sized enterprises—some 3,500 companies—have grown consistently since 2009 at a faster rate than the rest of the economy, and more than 500 of those small and medium-sized enterprises now actively export.
However, beyond the businesses involved in life sciences, the expertise in our country has resulted in both the development and sustaining of a broader ecosystem. That ecosystem includes four of the top 10 biomedical universities in the world and a series of other university departments, charities, and of course the National Health Service, which are seen as fundamental not only to this sector in our country but fundamental more broadly because of their global contribution.
In that context your Lordships’ House, on Report of the EU withdrawal Bill on 18 April of this year, heard from my noble friend Lord Patel on an amendment that dealt with the question of clinical trials regulation. Inevitably, in such an important sector that so directly affects the lives of citizens across every European country, there is a degree of important regulation that attends the question of how the database—the research that justifies the introduction of new medicinal products—is conducted. In 2004, the European Union introduced the clinical trials directive. Regrettably, over time that was shown not to be achieving what was intended, and Her Majesty’s Government, among others, led the way in ensuring a revision of that directive, which resulted in the clinical trials regulation of 2014.
When considering the withdrawal Bill, Her Majesty’s Government rightly identified that, although the clinical trials regulation had indeed been passed by the European Union, it was yet to be fully adopted because there was a need to establish a central portal for the accumulation of data associated with clinical trials that would be made available across all member states. As a result, the 2014 regulation could not be considered—certainly at the moment we were considering the withdrawal Bill—as retained EU law that would therefore be directly transposed into domestic legislation at the time we left the European Union. That is a very important point because the clinical trials directive has hindered clinical research, particularly in the United Kingdom. The new trials regulation overcomes those problems, and it could have left us in the situation where our country was left with the old directive on statute, governing the way that trials are conducted in the United Kingdom, while the new regulation providing a much better framework would not be, and therefore we would be left in a disadvantaged position.
The noble Baroness, Lady Goldie, when answering that amendment, which was ultimately withdrawn, gave the assurance that the elements of the clinical trials regulation that could be incorporated by Her Majesty’s Government in domestic legislation would be incorporated to ensure that many of the disadvantages of the directive would be overcome, irrespective of what status the regulation had by way of retained legislation. However, there are two elements that the Government were not able to give an assurance about. The first was the participation of the United Kingdom in the clinical trial portal, which is vital if we are going to participate across the European Union in clinical research in future and vital for ensuring the competitiveness of the life sciences sector in terms of developments and innovations in our own country that could ultimately undergo rigorous clinical trial testing and then be adopted across a substantial market which has very high global standing. Clearly, Her Majesty’s Government were keen for the United Kingdom to participate in that portal but were unable to give the assurance.
The second element was participation in the single assessment procedure that would result from the new clinical trials regulation, streamlining the way that applications for new medicinal and device products were considered by the European Union—which, again, is vital for market access. When the Trade Bill was considered by the other place, a contested amendment was introduced that resulted in Clause 6, which commits now for every effort to be made to ensure that the United Kingdom participates in the European medicines regulatory network. This is a network comprising the European Commission, each member state’s own regulatory authority for medicinal products and the European Medicines Agency.
The Minister has said that this is principally a technical and pragmatic Bill, and therefore I have a couple of technical points to put to her. The first is this: does Her Majesty’s Government believe that this clause and, therefore, the European medicines regulatory network, provide the vehicle by which they will be able to pursue the big questions they were unable to deal with in terms of considering the clinical trials regulation—that is, participation in the research portal and the question of participation in the single assessment procedure? Secondly, if this is to be the vehicle, can we be clear that the Government feel it is the mechanism by which they will now deliver on the commitment they made on Report in the withdrawal Bill, which resulted in that particular amendment not being voted on?
Finally, I would like to understand a little more about how the Government propose to use this commitment to participation in the European medicines regulatory network to take forward broader opportunities for securing the life sciences base in our country.
Lord Lilley (Con)
My Lords, it is a great privilege to follow the noble Lord, Lord Kakkar, who has delivered the kind of well-informed speech that I, as a new boy, have looked forward to hearing in this House, and which is such an important feature of its contribution to the working of Parliament.
The Trade Bill is useful, workmanlike and necessary. I was tempted to add that it is crucially important, because I have a vested interest in emphasising the importance of trade Bills and trade deals. I am probably the only person in the Chamber—or rather, one of the few—who participated in negotiating a trade deal in the Uruguay round, which culminated in the creation of the World Trade Organization. I was also the Secretary of State for Trade and Industry who had to introduce the whole single market programme into our country, by introducing the legislation that made us part of the single market. At the time, I made speeches emphasising how immensely important these developments were and how dramatically they would change everything.
I am a scientist by training so, when I make a prediction, I subsequently look back to see whether it has come true. I have to say that it was hard to see a seismic change following either the Uruguay round or the single market. Since the single market was implemented, our exports to the European Union have grown at 1% per annum compound, which is not a huge deal though better than no growth at all. It is hard to see a dramatic change in our trade, or in the trade of the whole world, following the Uruguay round. I believe that both were important and valuable, but we should not exaggerate their importance. What drives trade is producing goods and services of a quality, and at a price, that other people want to buy. One can have the best trade deals in the world but, without that, one will not prosper. It depends far more on your domestic competiveness, productivity, investment, training and skills, rather than the trade deals we negotiate. Yes, let us have good trade deals, but let us not imagine that they are the solution to our problems or will create a sudden, dramatic change—or that the loss of trade deals, though regrettable, would be the end of the world.
The Uruguay round halved the tariffs between developed countries on trade in goods. This means that future free trade agreements based on goods between developed countries are of limited value. The average tariff on trade in manufactured goods between developed countries is in low single figures, smaller than fluctuations in the exchange rate in a week or a month. Indeed, the tariffs are quite small compared with other factors too. There is merit in removing those tariffs but we should not think it is the be-all and end-all. Therefore, as far as goods are concerned, the most valuable free trade agreements are with countries with highly protected markets—typically the fast-growing countries of Asia, Africa and Latin America. It would be wonderful if we could indeed join the CPTPP agreement, as the Government have indicated they want to do, as the first non-Asian member of that trade group.
More than 50% of the value added that Britain exports is in services, so trade deals that emphasise services are particularly important to us. Unfortunately, they are less important to the EU and, as a result, 90% of the trade deals that the EU has agreed have no significant benefits for services. Switzerland, for example, has its own trade deals, a third of which have a significant component of service-enhancing trade. We will be able to do the same if we are outside the EU, but as a member of the EU we have to go along with the lowest common denominator, which is not necessarily in accordance with our interests.
The Bill will enable us to novate the existing EU deals—covering some 70 countries, we are told—into UK law and take over our share of those agreements. That sounds a daunting task, and of course it is significant, but I understand that no country has said that it is unwilling to renegotiate or reapply deals with us. Even those who have said that they wish to exploit the opportunity to change the terms, as the noble Lord, Lord Fox, has suggested, will, I understand, in the interim continue on existing terms, as is allowed under WTO rules, while any revised agreement is being finalised.
It is not the case that trade will suddenly stop. In fact, most of the countries that I have visited—I have been to Australia and New Zealand and have talked to a number of other countries nearer to home—want, subsequent to rolling over those deals and once we have some spare negotiating capacity, to negotiate better, more comprehensive deals. There is the scope for that because the deals that we have at present are those negotiated by the EU, which had to get the unanimous agreement of all 28 countries, not all of which were in favour of free trade and all of which have the exceptions that they wanted to make. Therefore, those deals are less comprehensive and we will be able to say, “Those exceptions don’t matter to us because we don’t manufacture that sort of thing. We can make you a concession on that in return for concessions on other things”. Therefore, there is scope for improvement even there.
I understand that the bulk of these different agreements is carried out with very few countries. Seventy countries sounds daunting but half of all our trade with those 70 countries is with one of them—Switzerland—and 80% is with three or four of them: Switzerland, Korea and Norway; I forget the fourth. Therefore, as long as we prioritise those, we can deal with most of our trade very well. However, I do not think that we should neglect the smaller countries. I am the former chairman of the All-Party Parliamentary Group on Trade out of Poverty. It happened to be a personal interest of mine that we should open our markets—and keep our markets open—to the developing countries of Africa and elsewhere. All my talks with those countries indicate that they want that too and that they will not put obstacles in the way of novating the trade deals that they have with the EU into trade deals with us.
This debate, like many others, has given people the opportunity to spread what I call plausible myths: things that sound plausible but unfortunately are not true. The noble Lords, Lord Grantchester and Lord Fox, said that, as a member of a big unit like the EU, we will be able to negotiate better, faster and more-extensive agreements than we would as a country in our own right. That sounds very plausible but it is simply not true. A study of all the trade agreements negotiated in the last 20 years shows that the average speed at which they were negotiated was 28 months. If, however, you exclude multilateral deals—essentially those involving the EU—the remaining bilateral deals were negotiated in much less than two years. Australia found that, when it told its negotiators not to go for the perfect agreement, but for the best agreement that they could reach in 12 months, it got three agreements within 12 months—with, I think, Taiwan, South Korea and Japan. It is possible, therefore, to do it more speedily when you are not part of a big group.
It is possible to do it more comprehensively, too, because if the EU is negotiating as 28 countries, each country has things it wants reserved, and the country it is negotiating with says, “Well, if you do not include this, and that, we will not include everything either”. So the EU’s group agreements tend to be less comprehensive than bilateral agreements that would be possible with us. There could also be more such agreements. Switzerland—which does not seem to think it necessary for its just-in-time trade to be a member of a customs union—is able to negotiate its own trade agreements, and has one with China. Even Iceland has an agreement with China. The EU does not. Switzerland has agreements with countries with a collective GDP that is far greater than those of the countries with which the EU has negotiated agreements. The same is true of Chile.
I do not think we should allow ourselves to be misled by things which sound plausible but which, when we confront them with the facts, turn out not to be true.
Lord Hain (Lab)
My Lords, I, too, welcome the noble Baroness, Lady Meyer, who, I am sure, will recharge the flailing Brexiteer case in this House with her great eloquence.
This Bill could have huge significance for people’s jobs, people’s rights and the economy, because it illustrates how Brexit puts at risk not only our trade agreements with the other 27 member states of the EU, but agreements with around 70 so-called third countries around the world that collectively account for around two-thirds of the UK’s trade. In a no-deal scenario on exit day—which is enthusiastically advocated by many Brexiteers—we risk losing not only tariff-free access to the biggest single market in the world but the benefits of our participation in the EU agreements with these third countries.
It is also important that we debunk the Brexiteer myth that Britain will be freed to conquer new global trade markets if, and only if, we leave the single market and the customs union. Germany is in both, and its biggest trading partner is China. There are absolutely no barriers within the EU preventing us getting a greater share of global trade.
A further problem, once the UK ceases to be regarded as EU territory, is that for the purposes of complex rules of origin which define when a product benefits from tariff-free quotas, UK component parts and products will no longer qualify. This could have a huge impact on UK trade, especially in sectors such as the automotive industry and aerospace, where complex supply chains currently operate freely within the EU.
All these difficulties are exemplified—noble Lords will not be surprised to hear me mention it again and again—in the case of the Irish border. InterTradeIreland’s report last March, Cross Border Trade and Linkages, found that the vast bulk of cross-border trade is accounted for by firms that trade simultaneously in both directions. Although these two-way traders amount to just 18% of firms, they account for over 60% of imports and 70% of exports. The data also shows that most cross-border trade occurs in intermediate inputs—components of final products—and highlights the considerable interconnectedness of cross-border supply chains on the island of Ireland.
In addition to being exposed to costs from customs duties and increased administration, two-way trade also risks disruption from delays, particularly where supply-chain links are concentrated in perishable food products such as milk. Milk tankers cross the Irish border about 33,000 times a year. Northern Ireland produces around 2.2 billion litres of milk a year, of which some 30% is processed in the Republic. Milk and dairy products move in both directions, sometimes several times. For example, cream from Northern Ireland milk is removed in Virginia, County Cavan, in Ireland and sent back to the Baileys Irish Cream plant in Mallusk, County Antrim, in Northern Ireland. We should not think of trade across the Irish border as being confined to the island; much of it is connected to global trade as well. For example, this complex cross-border supply chain underpins global exports in powdered milk products from the island of Ireland, north and south. It is exposed on two fronts by Brexit. First, in the event of a hard Brexit, the north-south milk trade would become unprofitable due to tariffs ranging from 40% to as much as 64% depending on fat content. The second concern is that when the UK exits the EU, it will no longer be included in EU export agreements. It could take a period of years to put new export agreements into place for key milk powder markets. What is supposed to happen in the meantime to those dairy farmers and the thousands of other jobs dependent on these supply chains? The Brexiteers have absolutely no idea.
And for those no-deal zealots, in July, Pascal Lamy, the former director-general of the World Trade Organization, described as “pie in the sky” the idea that there would be no border on the island of Ireland if there was no deal. Therefore, as Labour has rightly argued, a new comprehensive customs union with the European Union after Brexit is the best way to protect jobs and the economy, as well as avoiding a potentially disastrous hard border on the island of Ireland. That is what the TUC, the CBI and major businesses such as Jaguar Land Rover and National Grid want.
For the last 40 years, when trade deals have been negotiated by the EU on behalf of its members, scrutiny has been delivered through the European Parliament’s Committee on International Trade and in the UK by the European Scrutiny Committee of the House of Commons. These mechanisms will no longer apply after Brexit. But surely trade negotiations must be transparent and open to scrutiny by stakeholders and the public. As things stand, these new arrangements with third countries which the Government call “continuity agreements” would be excluded from the Government’s new arrangements, admittedly still lacking in detail, for structured engagement with stakeholders in relation to the new trade agreements announced by the Secretary of State for International Trade on 16 July.
My Labour colleagues in the Commons successfully argued that the Government’s Bill as introduced was woefully deficient in that it accorded yet again a number of Henry VIII powers to Ministers but made no provision for parliamentary scrutiny, as takes place in other countries including Germany, New Zealand and Australia. Following an unprecedented campaign by trade unions, the trade justice movement and industry and consumer representatives, the Government, in fear of their own Back-Benchers, tabled amendments very late in the day addressing at least some of the issues. However, the Government simultaneously tabled an amendment that would allow Ministers to ignore these scrutiny provisions should they so choose. So much for taking back control. Furthermore, those provisions for enhanced parliamentary scrutiny did not extend to the clauses relating to the UK’s future membership of the WTO’s Government Procurement Agreement covered by the Bill. This is very worrying, as protections relating to public procurement need to be in place for public services such as the NHS and the public sector more generally in the UK. The Bill remains seriously deficient and still needs significant amendment to be made fit for purpose on these scrutiny issues.
I find it mind-boggling that, with the clock fast running right down, we still have absolutely no idea how, after Brexit, we will be trading with our biggest partner, Europe, or any other country outside. No wonder that investors and traders are giving up on the British economy and that Jacob Rees-Mogg has had to volunteer that we will be poorer for decades. He asserts that it is worth it because we will be free of Brussels: free, free, free at last, but poorer, poorer, poorer as well.
As they confirmed recently, Boris Johnson, David Davis, Liam Fox, Jacob Rees-Mogg, Iain Duncan Smith and the rest—and quite possibly the noble Lord, Lord Lilley—have no plan for their cherished Brexit. Meanwhile, government Ministers admit that we have no idea where we are going but we are going there anyway. What a way to run a country—no wonder the rest of the world thinks that reliable old Britain has gone barmy, with this Parliament a willing accomplice to what is rapidly becoming a national tragedy. The trade unions and others are providing a lead to rescue the country from this madness by demanding a people’s vote on the final deal. I hope that we will all support that.
Baroness Meyer (Con) (Maiden Speech)
My Lords, it is a great honour and privilege to introduce myself to you today. I would like to thank noble Lords from all sides of the House, officials, staff members and the wonderful doorkeepers, all of whom have welcomed me into this House so warmly. I am particularly grateful to my sponsors, my noble friends Lady Jenkin of Kennington and Lord Black of Brentwood.
Even as I stand before you, I have to pinch myself that I am here. You see, my long journey to the Palace of Westminster began in Petrograd in 1917, 100 years ago, where my mother was born on the eve of the revolution. It was a long and winding road that brought my family and me, against all odds, from revolution-torn Russia to Brexit-torn Westminster. My mother’s family came from the old Russian aristocracy. They fled the Bolsheviks. My grandfather, a tsarist officer, fought in the White army. In the end, destitute, they found refuge in Manchuria. After all kinds of trials and tribulations, my mother found herself a young woman in Hanoi. There, she married a French army officer but a year later, in 1945, he was killed fighting the Japanese. She was left alone, homeless and eight months pregnant with my half-sister, hiding from the Japanese in Saigon. The wheel of fate turned again. She was rescued by a French naval officer after he had survived a Japanese prisoner-of-war camp. They married and I am the result. When I think of my parents, I think of fortitude, suffering and survival. They were together for 60 years and set me a fine example. My mother died last year at the age of 100. My only regret is that neither of my parents is here to listen to me today.
My parents sent me to the French Lycée in South Kensington. I took my degree at the School of Slavonic and East European Studies and began my career in the City. I was one of the first women to be licensed as a commodity broker. Working in a hard-driving male environment in the 1980s certainly had its challenges but I survived and, though I do say so myself, I ended up becoming one of my firm’s top producers. However, just like my parents and grandparents, I have lived a life full of peaks and troughs. Speaking before your Lordships today for the very first time is one of the highest peaks. It ranks with arriving in Washington in 1997 with my husband, Christopher, as he took up his post as ambassador only 24 hours after we married. What a honeymoon those five and a half years proved to be: we arrived with Monica Lewinsky and left with Saddam Hussein. In between, we also experienced the horrors of 9/11, which are to be remembered today.
No trough could have been deeper than when, in 1994, my children were illegally retained by their German father in Germany. During the next 10 years, despite the supposed international conventions, I saw my sons for a total of only 24 hours. To be separated from your children in this way is beyond a nightmare. I could not reach them, I constantly worried about them and, even today, I find it difficult to talk about. I was confronted by a merciless German legal system. I was buried under huge legal bills, and I ended up having to sell everything I had. I lost my job. I queued for unemployment benefits in Fulham Road, still unable to see my sons. I know how it feels to be a victim of an injustice—I will never forget it. This is why the protection of children is a subject on which I will always want to speak.
Even in this nightmare, there have been some points of light. It drove me to set up a charity against child abduction, as I soon discovered that many other parents were in a similar predicament. I ran it for 19 years; we achieved quite a lot, not least thanks to the help of the police and the Home Office under Theresa May. It introduced me to politics, as I pressed my case and that of other parents with the White House, the US Congress, the Élysée, the French Senate, the Belgium Senate, and, of course, noble Lords and Members of the other place. On points of light, in the photographs of my introduction to this House, you will see my sons—now grown men—standing by me, smiling proudly, having come from Germany to see their mother’s ceremony. My charitable work also took me to the European Commission and the Parliament in Brussels, where my experiences shaped my opinion of the European Union, just as my experiences in the Soviet Union in the early 1960s, when I went to visit my aunt in Moscow, made me realise the folly of the socialist dream and how lucky I was to be living in the United Kingdom.
I arrived in London as a French citizen of Franco-Russian blood. I quickly fell in love with this country—with its customs and respect for individual freedom and democracy. This is why I chose to become a British citizen. It was not forced upon me; it was not a requirement of my job, or of marriage. Though views may differ about France, I was not even fleeing a totalitarian regime. I felt I belonged here: British is what I wanted to be.
This background has given me a very particular view on the matters before us this afternoon in the Trade Bill, which I support because it lays the foundation of an independent trade policy. We should not let our divisions and differences of opinion over Europe get us down. This is democracy at work—a sign of self-confidence, and strength. We should face our future with the fortitude and optimism of our ancestors who, time without number, overcame the challenges that confront this nation. I say this to your Lordships as someone who is both a true Brit and a true European. Thank you.
Baroness Neville-Rolfe (Con)
My Lords, it is a great privilege to follow my noble friend, who has been a friend for nearly 20 years. We worked together on the charity she founded, now called Action Against Abduction. I know that all noble Lords will join me in extending to my noble friend Lady Meyer a very warm welcome, and thank her for her fascinating and emotional personal story.
The great strength of her contribution today has been to show her achievements nationally and internationally, especially in the area of children and families, for which she was duly honoured by Her Majesty the Queen. She brings experience, knowledge and good sense to your Lordships’ House, and we very much look forward to her next contribution. She has an energy, vibrancy and charm that will warm the whole House.
I start my contribution to today’s debate by referring to my interests in the register and by congratulating my noble friend Lady Fairhead on her opening speech. I liked her clear summary of the powers in the Bill and of the work already in hand. I will add a historical perspective. Trade is the linchpin of prosperity. It is a fascinating subject, from the trading of obsidian and flint during the stone age to the Hanseatic League, an alliance of trading cities in northern Europe—a precursor of the EU—running a trade monopoly between the 13th and 17th centuries.
Trade is disproportionately important economically, as we have heard. For example, there was a great trade collapse after the last financial crisis between the third quarter of 2008 and the second quarter of 2009. World GDP dropped by 1% and world trade by an amazing 10%. So, in view of the enduring importance of trade to the UK, the Government are right to want to prepare for a vibrant international trading future in the post-Brexit world.
I support the Bill and its speedy passage. It rightly seeks to provide continuity in our trade and investment relationships with third countries. It replicates the effect of existing EU preferential trade agreements and makes us a member of the government procurement agreement on our own account. The Bill passed by this House last week will deal with tariffs and customs matters, but this Bill will allow us to implement our non-tariff obligations. It does not look forward to new free trade agreements since, as the Secretary of State for International Trade helpfully made clear in his Statement on 16 July in another place, these will now be the subject of new primary legislation. This Bill is concerned with existing agreements, making it less contentious and very urgent as we need these to continue on Brexit day, transition or no transition.
I will touch on a few issues. I am known for my interest in impact assessments and I studied the one issued on this Bill as long ago as 11 September last year. The bad thing about it is that, understandably, it gives no figures on the impact on business, either static or dynamic, of future continued FTAs or procurement arrangements. The good thing about it is that it sets out a list of the existing third-country agreements that the UK will seek to continue. My noble friend Lord Lilley touched on these in his very perceptive speech.
What I found most interesting was that from this group, in 2015 Switzerland, the Iceland, Lichtenstein and Norway group, Canada, Turkey and Korea were our top five trading partners among those with FTAs. When I worked at Tesco I had something to do with the agreement with Korea. When it was being negotiated, the Korean Government were very helpful with my company’s problems as an overseas investor. Keen to conclude the FTA, they shied away from discrimination against our business and that of others in a similar position. But, once the EU-Korea agreement was signed, our problems returned in spades. Indeed, Tesco has since sold the business to help restore its balance sheet. But, given the vibrancy of that business—called Homeplus in Korea—its contribution to the whole group on innovation and digital, and, looking at it the other way, the substantial amount of capital it received from us to build a leading Korean retailer, this seems very sad. The lesson for today is the importance of looking beyond the here and now of a trade agreement to what happens afterwards and the need for good remedies and dispute resolution.
That brings me on to an area of the Trade Bill that I am interested in exploring—the Trade Remedies Authority. As my little example shows, the quality of this aspect of trade arrangements is very important. The EU’s comparable body has some of the very best career officials, as I saw when I was a Business Minister in the EU Council. So we need a highly professional team looking after the UK’s trade interests in the new world. I have to admit that I am somewhat doubtful about having a new authority separate from the trade department, partly because of the stringent financial controls on pay imposed on such bodies. However, that has been decided and we cannot delay the Bill.
The proposed body is of a very special type. Different considerations apply to it than apply to most, superficially comparable, bodies. In this case, having everyone inside the tent would not be a good idea. In particular, I would be very much against including stakeholders, whether from producing industries, trade unions or devolved Administrations, as members or non-executives of the new authority.
I was glad that the Commons voted against this concept. The investigation process should be run by people who are independent-minded and able to stand up to the various interests who will want to influence the outcome of something as a delicate as a trade dispute. I am also pleased that the Government are planning to move some of the experienced staff that they have developed or recruited for the Department of Trade into the new authority.
Another area that is very important and on which I have had representations from the retail sector is how VAT will operate post Brexit and the sums involved. While it is strictly a tax issue and not for this House, I hope that the Minister will agree to find time to answer questions on this.
Finally, in response to the noble Lords, Lord Grantchester, Lord Fox and Lord Hain, perhaps I may offer a wider, fundamental observation. I voted remain in the referendum, because, on balance, I thought then that continued membership of the EU was the better option. However, it does not follow that, when we leave, people of my persuasion should consider the best outcome to be to remain as close as possible to the EU, via membership of the single market, customs union or whatever. Past support for remain implies no such conclusion.
We need to review the matter from first principles, covering such considerations as why the UK would profit from membership of an organisation whose rules are set by others. My point is simple: remainers who now advocate the closest possible ties with the EU need to argue their case and not assume that all who once agreed with them must accept the truth of their current proposition. Of course, if we stay in the customs union or the EEA, the powers in this Bill and the new authority will go largely unused, bringing home the extent to which that outcome would limit our influence on trade.
Baroness Kramer (LD)
My Lords, let me from these Benches join in the welcome extended to the noble Baroness, Lady Meyer. Sometimes in this House we have a Member who gets to their feet and speaks deeply from the heart; she did that today, and I hope that she will continue that passion into her future speeches.
I have the great advantage of speaking in the middle of the batting order, so I can now select just a few topics on which to focus. I think that it will not surprise the Minister that I want to talk about rules of origin. She said that that she would address that issue in her summation. Unfortunately, it will be difficult to challenge her at that point in the discussion, so I hope that she will be comprehensive.
In the continuity FTAs that are to novate—as the noble Lord, Lord Lilley, phrased it—the 40 to 43 existing deals that the EU has with 70 countries, rules of origin become critical. As this House will know, the right to reduce a tariff to zero is in many cases dependent on the content of the good being exported. Local content has to reach a pre-agreed threshold. In the example often used, of the sale of automobiles to South Korea, the required local content threshold under the EU agreement with South Korea is 55%.
The UK is a major exporter of cars to South Korea. It has no difficulty using that definition of EU content in reaching the 55% threshold. However, the UK alone has content that is far lower. From reading speeches of Mike Hawes of the SMMT, which is basically the automobile trade association group, I understand that the core UK content is on average about 20%. Through various other mechanisms, that number can for some vehicles be raised to about 40%. To get to 55% or 60% is generally acknowledged to be impossible. The rationale for that is simple: it is economies of scale. Major manufacturers are not going to want to have multiple ball-bearing parts in every country from which they export; they are not going to want to replicate the construction of tyre wheels, or whatever else. It is the supply chain, collectively, that delivers that final product to the UK for onward export to Korea.
My understanding is that it would be very difficult to get a variance from that 55% to 60%, for the simplest of reasons: the benchmark is used in trade deal after trade deal across the globe, and many of those trade deals include a clause that says that if more favourable terms are offered to another country, then automatically that more favourable benchmark is included for each country that is engaged. You know that if the UK were able to get a benchmark reduced to 20%, for example, the EU would enjoy that, as would many other countries that have free trade deals with South Korea, so we create a problem. The answer that the Minister often gives is that we will have a triangulation system that allows the UK to treat EU content for these purposes as if it were UK content and vice versa. However, my understanding is that that would last only to the end of the transition period even under the Chequers agreement, and if there is no deal then there is no possibility that that arrangement will even be in place late on 29 March next year. Perhaps the Minister will take us through those various issues.
I took a look at a very handy chart derived from world import-export tables—these are 2016 numbers—produced by a company called Absolute Strategy Research. That 55% to 60% benchmark is quite common for a wide variety of goods: we are not talking just about automobiles. It may be lower for some: there is an agreement in aerospace, for example, that there will be no benchmark. I looked at this and at UK content of its exports. In electrical equipment we just about get to 20%, in food products we are below 10%, in rubber and plastic products we are at just about 20% again, and in chemicals at just over 20%, so there is a very wide range of our exports in which we could not meet the local content benchmark in these free trade deals that we intend to novate. We could if we included other EU products, but that requires agreement with the EU and requires the EU to renegotiate every one of its existing free trade deals, because of course it has to make that adjustment as well.
I would really like some realistic comment from the Government, because I have a sense from my discussions that they think it will be an absolute no-brainer to get an agreement to bring the thresholds down to something like 20% or 30%, because Britain is Britain—that seems to be the logic, as far as I can see. For the reasons I have described, including the impact on trade deals all over the globe, I cannot see that that is likely. I certainly cannot see that it would ever happen without reciprocal giveaways. I shall give this House the example of Korea. The South Koreans basically said that if they were to change the threshold and allow EU content to be considered as local UK content, they would wish to do the same for Chinese products. As I understand it, the automotive industry in the UK has now said that if that door were opened, essentially it is the end of automobile production in the UK, because it would allow such a flow of cheap Chinese automobiles into the UK and it would be so damaging to our manufacturing that every investor would have to fundamentally reconsider. Spread this across industry sector after industry sector and we deserve a better answer.
I want to pick up one other issue around rules of origin. It is a point that I made in debate on the customs Bill, but that was such a truncated debate that it would be wrong not to make the point in this context as well. The noble Lord, Lord Lilley, said that tariffs are not really such a problem—they have been coming down all over the world, so it really does not matter if we do not have a zero-tariff regime: our competitors might have it but we can still do fine. But rules of origin have a huge non-tariff cost. The estimate given by the Government—perhaps the Minister will confirm it—is that a single certificate for rules of origin will cost £30 to produce. I have previously used the example of a small stationery supplier in Northern Ireland, who imports his goods from the Republic of Ireland—he has no choice; there is a wholesaler only in southern Ireland—and the shipment comes every week. The cost to him for that shipment would be £30 for the pencils, £30 for the white paper, £30 for the blue paper, £30 for the filing cabinet, £30 for the pens, and so on. The slightest difference creates the requirement for a new certificate of origin.
Lord Lilley
The Swiss have to fill in rules of origin on their trade with Europe, which constitutes 80% of their exports. They say that the overall cost of dealing with borders is about 0.1% of the value of trade. How does the noble Baroness make that tie in with the scare story she is currently retelling?
Baroness Kramer
This is not a scare story. I think the Government will be able to confirm the description that I have just given. I will make one, more general comment but I do not want to go on because of time. Different countries have different patterns of production and trade. Over the past 40 years the UK has integrated into a supply chain, just as the Northern Ireland economy has integrated across those borders. I cannot speak about the Swiss because I do not know that economy in detail. It requires detailed knowledge of the specific economies. We are part of a crochet, deeply embedded into it, just as many of the supply-chain countries are, with constant trading across borders within the EU.
Even under the Chequers proposal, rules of origin certificates are required on every good. I have talked before about the small company that sells party supplies across Europe. It would be £30 every time they sent out a shipment of cups, £30 for the plates, £30 for the paper napkins, £30 for the tablecloths—you can go on with those kinds of numbers and you quickly realise why for many companies this is a totally destructive additional cost, which changes the game completely. I ask the Minister: can we please have some comprehensive answers? Can we have the impact assessment of what this will do to our businesses as they are today—not the fictitious new businesses that may develop in the next 20 years which will abandon the kind of trade that I have described and specialise in something different, perhaps more along a Swiss pattern, but the real businesses that exist today, in which people have invested and by which people are employed?
Lord Purvis of Tweed (LD)
My noble friend may be interested to learn, on the Swiss example, that the regulations associated with all agricultural, tradeable and industrial goods are fully aligned with the European Union, and Switzerland is part of the Schengen agreement, so for the movement of people and those agricultural and trade goods there are no necessary checks.
Lord Butler of Brockwell (CB)
My Lords, I am delighted to be the first Cross-Bencher to congratulate the noble Baroness, Lady Meyer, on her very moving and powerful maiden speech. I have previously known her as the wife of her husband. I knew some of the story she told us today, but not all of it. None of us can be in any doubt that the range and depth of the experiences that she described will enable her to contribute very powerfully to the business of this House.
I support the Second Reading of the Bill. Like the earlier withdrawal Bill, it is clearly necessary if the UK is to leave the European Union. As has been said, it will be an important first step if the UK, as a third country, is able to novate trading agreements that we already have as members of the EU. Of course, it will be for the EU’s trading partners individually to decide whether or not they want to make such arrangements with the UK. As the noble Lord, Lord Grantchester, said, that will not in every case be straightforward. The Secretary of State assures us that the auspices are good; we must hope that he is right.
However, there is the much larger question of trade with the EU countries themselves. I accept what the Minister said—that this Bill is not directly about trade with the EU—but the EU is such an essential part of UK trade that it is bound to be relevant to a Trade Bill. I hope that we can reach an agreement with the EU and believe that we must not be excessively dismayed by the reports of negative reactions from the EU negotiators to the Chequers proposals. As we all know, the EU has a habit of cobbling together an agreement at the 59th minute of the 11th hour. Nevertheless, we must be realistic about the consequences of failing to reach a deal.
In a recent article, Professor Ngaire Woods, the director of the Blavatnik School of Government at Oxford, pointed out that because world markets are becoming increasingly interdependent, other countries are consolidating their supply chains, not breaking them up. She made the point that three-quarters of world trade in goods consists of inputs to items finished elsewhere. For all countries, there is a premium on the ease of transmission of goods across borders. Half of current British exports are to the EU. I know that I do not have to give a lecture on these matters to the Minister, with whom I had the great pleasure of working during my brief foray into commercial life.
There is also the fundamental importance to the UK of exports of services. Here, I draw attention to my interests in the register. The Chequers proposals do not cover such exports but here again, mutual recognition of standards is as important as it is for goods. Of course, an agreement on these matters is important also for the EU, which is a reason for hoping that a deal will ultimately be done. But it is more important for us because trade with the EU is a more important part of our economy than trade with the UK is for its members, so we cannot afford to be light-hearted about the consequences of no deal or an inadequate deal. I know that the Government are not light-hearted about that but we have to ask ourselves whether, in the event of no deal or an inadequate deal, the advantages of leaving the EU still outweigh the disadvantages. Can we assert that a majority of the British people, in voting for Brexit, were in a position to take an informed view on this question? Of course, they could not have been because the terms of our future relationship were not known when the referendum took place—indeed, they are not known today.
I do not believe that it be would be right or responsible for the British people to go over the cliff without being asked to make an informed choice when the terms of our future relationship with the EU are available. If an amendment to this Bill is tabled to provide for such a choice, I will again support it. I cannot accept the Prime Minister’s response that providing the British people with an opportunity for an informed choice would be “a negation of democracy”. On a matter of such importance, precisely the reverse is the case.
Lord Hamilton of Epsom (Con)
My Lords, I congratulate my noble friend Lady Meyer on her maiden speech, which was distinctly moving. I knew about the story, which I had read in the press, of the problems that she had in being reunited with her children as a result of German divorce laws—but I must say that to hear it again strikes dismay, and many other emotions, in the heart of any mother or indeed father in this country today. I wish I could say that it was only the German divorce laws that were depriving mothers of their children; I am afraid the state in this country as well has a role to play in that.
She described her White Russian grandparents, a persecuted minority who had to flee. She also said that she was standing up for Brexit in this House. She will not be persecuted but she will certainly be in a minority—a very small minority, I have to tell her, because for some reason there are serried ranks in your Lordships’ House who think that the country made a very great mistake in voting to leave the EU and are not really reconciled, as we have heard from the noble Lord, Lord Butler, to the vote, which was a quite clear decision that made it absolutely clear to the country that we wanted to leave. This is strange, because I always think of the noble Lord as coming from what I call the mandarin class—people who have made the decision to dedicate their lives to politics but not to stand for election. Then someone makes a democratic vote—the country votes—and they say, “No, no, they’ve got it wrong”. Suppose that we ignore the vote of the country. Where does that leave the people of this country?
Lord Butler of Brockwell
I am very grateful to the noble Lord for giving way—I intervene because he referred to me. I do not assert that the British people got it wrong. I assert that they were not in a position to make an informed choice—and that is what I now want to see happen.
Lord Hamilton of Epsom
I would point out to the noble Lord that you could make exactly the same point about the verdict of a general election. You could say that the people who won the election did not give the right information, ignored many vital issues and produced inaccuracies in their election addresses. Do you, on that basis, reverse the general election? If you do, you will find that people will be given no option but to take to the streets.
Actually I am rather heartened by the people contributing to this debate. Many of my noble friends who have arraigned us with their views do not seem to be speaking here today. Perhaps they have been somewhat discouraged by the lack of enthusiasm for the rebels in my party in the other place, who failed to uphold any of the amendments to what was then the European Union (Withdrawal) Bill—perhaps the stuffing has been knocked out of them.
This seems to be a very sensible Bill because it paves the way for transferring many of our trading arrangements. As my noble friend Lord Lilley pointed out, this is not a very complicated exercise because, of the countries that have free trade agreements with the EU, only about four, accounting for 80% of our exports, really matter in terms of the negotiations.
The point was made by the Opposition Front Bench that some of these countries might want to alter the agreements. I have to say that I sincerely hope they do—but that does not mean that we do not transfer the agreements as they stand today on a cut-and-paste basis and then go back at a later date and negotiate a more wholehearted deal that will incorporate a lot more trade.
Baroness Kramer
I have a question for the noble Lord, which I hope might help. How does he propose we cut and paste rules of origin and local content? I find it a really interesting concept that we could do that.
Lord Hamilton of Epsom
The noble Baroness mentioned the question of origin, and I thought my noble friend Lord Lilley dealt with that. I do not think it is quite the problem that the noble Baroness seems to make it out to be. I do not see that there is going to be any great problem in transferring over the existing agreements. Indeed, there is tremendous good will from the countries involved that want to do this.
Lord Hamilton of Epsom
I am not going to give way again. The noble Baroness cannot go on getting up; I have only a limited amount of time. It must be right that we sign up to the government procurement agreements as well, because they involve a lot more countries. This will make it easier for us to leave the EU without an agreement and resort to the WTO.
It is interesting that, during the progress of these negotiations, the whole idea of going to the WTO and having no deal on trade has been taken off the table. Let us face it: the Government had a very weak hand, and no deal was the only ace in that hand. It almost defies credibility that, at one point during the negotiations, it was taken off the table. Now there is a lot of preparation being done for no deal and for the WTO. This Bill will form part of the preparation.
The whole attitude of the EU has completely changed. There are a large number of manufacturers in the EU saying, “What does the WTO mean for us?”. What it means for German car manufacturers is a 10% tariff on all assembled cars they send to this country. Everybody says, “Oh, it’s a much smaller amount of trade for the EU than it is for us”—as the noble Lord, Lord Butler, did a moment ago. The eurozone sells us one and a half times as much as we sell to it, and the Germans sell twice as much in manufactured goods to us as we do to them. So it does impact on them. There was a moment when we were told that we were being the laggards of Europe and that our growth rates were falling. I agree that you cannot believe quarterly figures, but now our growth rates are up by a margin over those of the EU. So the EU is not in such a strong economic position that it can say, “For political reasons, to punish the British, we are going to have a really hard deal which means that we sell less to them than they do to us”.
Let us look at what has actually happened. It was not that long ago—before the election, I must admit—that the Prime Minister said that no deal was better than a bad deal. That was in the days when Nick Timothy was her special adviser. As a result of the general election, he has gone. Now we have Olly Robbins instead, and we seem to be in the position where any deal is better than no deal. The result has been the Chequers agreement. In my opinion, this is a complete dog’s breakfast that could have been dreamed up only by a civil servant. Why have we moved away from the simplicity of a Canada free trade deal with serious additions? I do not understand why that was ever taken off the table and why we are in the nonsensical position that we are today. If this country is going to have a future, we want a clearly understood deal, based on Canada. That will get us out of the EU and trading as the Canadians intend to do in the future.
Lord Browne of Ladyton (Lab)
My Lords, since my introduction into your Lordships’ House, on each occasion when I have risen to speak from these Benches, I have endeavoured to find some point of common cause with the previous speaker—some point on which we can agree, or some way in which I can seamlessly weave myself into the debate. The noble Lord, Lord Hamilton, will appreciate that, on this occasion, I choose to divert myself from that and to take this opportunity to welcome the noble Baroness, Lady Meyer, to your Lordships’ House. I particularly congratulate her on her maiden speech. I was privileged to be here in person to listen to it. She has a compelling personal story. I have not practised law for some time but, when I did, I spent a lot of time trying to persuade judges of what was in the best interests of children. If she intends to use her opportunity as a Member of this House to do this, she can guarantee that I shall be behind her. I honestly think that people are much more likely to listen to her because she can translate her personal circumstances into a compelling argument, and I thank her for that.
In the third or fourth sentence of the Minister’s opening remarks, she said that the principle that guided the Bill—I think this is the phrase used by Liam Fox in the other place—was that of continuity. She suggested in her peroration that the purpose of the Bill is substantially to preserve the status quo. During the passage of the Bill through your Lordships’ House, to the extent that I can engage with it, I intend to test whether it in fact gives any bankable guarantee of continuity or whether it creates a series of opportunities, which I suspect that the Government will not resist, to do the opposite in some specific cases. I intend to use my time to identify some of them and ask some specific questions of the Government about their intentions.
I begin by going back to a point made by several speakers, including my noble friend Lord Grantchester and the noble Lord, Lord Fox. Indeed, before we even started on Second Reading, the noble Lord, Lord Purvis, asked the noble Lord, Lord Callanan, about this. My noble friend Lord Davies of Stamford also asked about this in his intervention. We are promised that, in summing up the debate, the noble Baroness will come back to address the issue of whether the Government can achieve what they set out to do, which is to roll over these trade deals in the time available in a way that generates continuity.
Whether the noble Lord, Lord Hamilton, likes it or not, third parties are involved, and that guarantees that we cannot just cut and paste these trade deals. First, the European Union has to take action and then the third-party countries have to agree. Some of these countries are required by their constitutions to ask their Parliaments whether they can agree to the novation of these trade deals; in some, the head of state has the equivalent of our prerogative power to do so; in others, it is relatively simple, and departments can do it.
This point was brought to my attention by press reporting over the weekend. I am thinking specifically of the report in the Independent—it may have been only online—on 8 September of an answer given to an FoI which revealed that, beyond trade, there are more than 750 such deals with at least 168 non-EU countries. They cover a wide variety of issues: airline services, nuclear safety, fisheries, agriculture and data sharing, over and above those that relate to trade, which we are specifically dealing with here.
I ask the Minister to address the specific question asked in the FoI: whether the Government have central information on the number of those agreements and whether information is held about their individual status—in other words, the degree to which a likely positive response from a third-party country had been gained by discussion and negotiation, principally by her department. I understand that, in answer to that question, Charles Marquand was told that the Government do not hold the information relevant to the request.
It was reported that none of these 168-odd countries have given clear agreement to roll over any deals, yet there is no date for asking them to do so. Given what the noble Lord, Lord Purvis, was told by the noble Lord, Lord Callanan, in Oral Questions—that these all have to be rolled over by 29 March—perhaps the Minister can confirm in her promised response to this debate that the Government do know how many third-party countries have promised or agreed to roll over agreements. Perhaps she can persuade your Lordships’ House that the Government are confident that this information actually exists somewhere. Can she quantify the risk of loss of trade after Brexit if any of these countries refuse to roll over agreements or require significant changes to them?
I have a few minutes left in which to make a second point, which relates to geographic indications. No one who knows my history of representing a Scotch whisky constituency for 13 years will be surprised at this. In case I run out of time, I repeat to the Minister what the Scottish Whisky Association, which has briefed me on this issue, has asked me to put to her:
“If the UK does not agree to reciprocal protection, it risks the status of the UK’s GIs”—
there are 86 of them and a lot of rural economies utterly depend on them—
“in the EU and globally with those countries that have trade agreements with the EU”.
I make this point because the Minister of State for Trade Policy went to the Scottish Parliament on 5 September to give evidence to its Finance and Constitution Committee. He told it specifically—it is in the Official Report—that the Government do not agree with the European Union’s position on geographic indicators because they consider it to be a barrier to free trade. That suggests to me that the Government intend to undermine many of these geographic indicators. That would be a very significant detriment to many rural communities, particularly in Scotland.
I have taken up too much of my time in making these two points. At later stages of the passage of the Bill, I also want to engage the Government about devolution issues. Again, Ministers went to the Scottish Parliament and said some really interesting things about that.
Baroness Jones of Moulsecoomb (GP)
My Lords, it is a pleasure to follow the reasonable and well-reasoned comments from the noble Lord, Lord Browne. I am not sure if it is the convention, but I welcome the noble Baroness, Lady Meyer, who has left the Chamber, as the first Green to do so. I am of course the only Green, which is a source of great sadness to me and, I am sure, to many Members of your Lordships’ House. I take issue with the rather rude and disagreeable comments about Brexiters from the noble Lord, Lord Hamilton. I voted leave, but I had no idea that this Government would make such a hash of it, so I will be voting against almost everything that the Government bring forward unless they listen carefully to the debates and arguments in this House.
I used to be an archaeologist so I have a little experience of trade 5,000 to 10,000 years ago. My knowledge is not that much more outdated than that of the Government. The Trade Bill sounds rather like an attempt to continue with 20th-century arrangements, which are based on ideas from the 18th and 19th centuries. Of course, if that is not going far back enough in history, some of the measures here are more 16th-century—the Henry VIII powers that Ministers are trying to grab for themselves yet again.
The Government try to tell us that this is simply business as usual, but we all know that that just is not true, and that this legislation will have far-reaching impacts in economic, democratic and constitutional areas. It is therefore for us to talk sense to the Government and hope that they will listen. Trade deals are no longer just about removing tariff barriers between countries. Modern trade deals can change vast areas of public policy, such as food standards, environmental protections, working conditions and the privatisation of public services. A trade deal can make huge changes to our hard-won rights and protections, yet the Government want a blank cheque to trade away those rights if they feel it is appropriate, without parliamentary scrutiny or approval. Obviously I am going over some areas that have been mentioned already, but I will say it differently—and, quite honestly, these things need repeating. The Government frame this Bill as simply the rolling over of existing deals, but there is nothing on the face of the Bill to stop their powers applying to renegotiated or even entirely new trade deals.
We have been told, time and again, that Brexit is about taking back control, that Parliament will once again be sovereign, and that the UK Supreme Court will be the ultimate arbiter of legal disputes. But the provisions in the Bill will undermine that. Any control taken back from the EU will be jealously guarded by Ministers and shielded from scrutiny by this Parliament. This arrangement will hold the powers outside of the supervision of the Supreme Court, too, which is already limited in its capacity to question the exercise of royal prerogative. If things were not bad enough, many modern trade deals create supranational legal bodies—so-called investor-state dispute mechanisms—whereby corporations and lobbyists can take national Governments to secretive courts for the crime of hurting their profits. The idea that we are taking back control is clearly laughable. The Government appear to be seizing power on behalf of international capitalism at the expense of workers and the environment. The simple truth is that we are losing control with the Bill, and I fear for our democracy if it goes through. Ministers will have the power to change primary legislation to meet the demands of any dictator who chooses to intervene. Whether it is Putin, Xi Jinping or Donald Trump, anyone could negotiate with Liam Fox, who is desperate for some high-value deals, and I do not trust him not to sell us out while he tries to outfox Mr Art of the Deal.
To put all this in perspective, let us compare the scrutiny arrangements in the Bill with those of some of our trading partners. The United States, the European Union, New Zealand and Canada all have some degree of public and parliamentary scrutiny which exceeds the proposals in front of us. In the United States, negotiating texts are reviewed by a body of representatives, and Congress has both a power of amendment and a binding vote on the final agreement. In the EU, the European Parliament is consulted throughout, and MEPs get a binding ratification vote on the final agreement. In contrast, our Parliament will have little say and zero power; even the so-called undemocratic EU will be more democratic than us, which is very embarrassing. Parliament will be on its knees, begging for scraps from the Government, while our counterparts in other countries can be said to be running the show. Trade justice campaigners have told me that they always thought the EU system was flawed and undemocratic, but the proposals in the Bill have managed to concoct something even worse. This is not what anyone meant by “taking back control”.
My big worry is not just the procedural and democratic argument; I am extremely worried about the massive changes that could be made to some important laws. We already know, for example, that the US is pushing for us to reduce our food standards to allow it to import food that would currently be deemed unsafe and probably plain yucky by British consumers. We hear a lot about chlorinated chickens, but in fact the unsanitary, diseased conditions of American mass farming are the scary part rather than the chlorine, which is designed to make the meat safe to eat, so we should be glad that American chickens are chlorinated. Just one statistic: someone eating food in the United States is 10 times more likely to contract food poisoning and other food-borne illnesses than if they were eating in the UK. We can be sure that people like Donald Trump will insist that we lower our standards and flood the market with American goods, if we want a trade deal. It cannot be left to Ministers alone to wave goodbye to our food standards and safety; it is Parliament that passed these laws, and Parliament should take them away.
Of course, different departments could pursue completely different objectives: the Department for Environment, Food and Rural Affairs might have one idea about trade while the department for trade is negotiating the complete opposite. We must make sure that protections are in this Bill to ensure that our standards and rights are protected, and that all departments negotiating trade deals are clear that these protections are not up for grabs.
We have an opportunity here to rethink what trade means and what trade deals are. Trade does not have to be a race to the bottom; it can be used as a way to work with other countries to create good jobs and improve living standards. Instead of working together to bargain away workers’ rights and environmental protections, we could make deals in which we agree collectively to strengthen our standards and take them to new heights. It is possible to be ethical about these things and to shape policy for good; we should be setting our sights rather higher. Much of Britain’s wealth was created by plundering and exploitation of the global south; we have to move away from that mindset with our modern approach to trade. We can demonstrate global leadership by championing fairer trade and rising standards, not just free trade.
From a green point of view, there is absolutely no point in continuing with trade for trade’s sake. Global thinking is that trade is incredibly important but, where something can be produced and consumed locally, we should aim for that; it will have less environmental impact both globally and locally. Food is also much healthier when we get it locally rather than have it shipped in. A noble Lord mentioned earlier how there is lots of exchange—milk, for example, goes backwards and forwards across borders. Why on earth does that happen? We should think more locally. I would like to see the Government do more to encourage local and regional trade and I hope to hear from the Minister about any ideas that the Government have.
The proceedings around the EU withdrawal Bill proved that there is a lot of concern with the way things are going. I look forward to working with other noble Lords to help make this legislation fit for purpose but, unless significant changes are made, I will vote against the Bill.
Baroness McIntosh of Pickering (Con)
My Lords, I am delighted to follow the noble Baroness. I refer to my interests in the register, particularly the work I do with the Dispensing Doctors’ Association. I welcome the Minister to her ministerial position. I also add my congratulations to my noble friend Lady Meyer on her excellent speech and welcome her to the House. Like her, I have a mother born outside of the United Kingdom—my mother came from Denmark. I warn my noble friend the Minister that I will be focusing on a number of issues where I think Denmark is doing particularly well.
The Trade Bill is appropriate, as Britain is a trading nation. We are liberal and outward-looking and the UK has benefited from our membership of the European Union since 1973. Through our membership of the EU, as the Minister said earlier, we benefit from wider trade agreements and, most recently, from economic partnership agreements with third countries. The Trade Bill is to be welcomed as putting arrangements in place for our leaving the EU and becoming, effectively, a third country. However, the provisions of the Bill before us today relate to internal aspects only, rolling over the provisions of existing free trade agreements into our law. As the noble Lord, Lord Browne of Ladyton, mentioned, there is an external aspect where the agreement of a third country needs to be sought on the subject of a free trade agreement—or possibly of the EU if it is a mixed agreement. I urge the Minister to continue to keep the House informed in regard to these matters.
We must also have regard to the sheer timescale of negotiating and concluding even the simplest of free trade agreements. As we leave, we are giving up access to 440 million remaining consumers in the EU, as well as access to an additional 47 countries through the EU free trade agreements, so there are dangers in over-emphasising the opportunities of these new trading relationships.
I welcome the commitment in Clause 6 to continuing to participate in the European medicines regulatory network, but questions remain over the free movement of medicines, medical devices and UK participation in European clinical trials, as referred to by the noble Lord, Lord Kakkar. The EU has been our most important trading partner and clearly has other benefits, such as close cultural ties and geographic proximity, so the costs of trading with our EU partners are clearly substantially lower than if we were to trade with, say, the US, Japan, Korea, Australia and New Zealand, as well as such trade being more sustainable and less damaging to the environment.
The challenges of seeking new trading arrangements must be clearly understood. There is the possibility of protectionism and, as the noble Baroness, Lady Jones, referred to, hormone-produced beef and chlorine-rinsed chicken, as well as food insecurity and potential disruptions in the event of a trade dispute. The size of these new markets and their distance from us means that they will not easily fill the void left by our previous trade with our existing EU partners.
Under World Trade Organization terms, the most challenging aspect is the rules of origin, as a number of noble Lords have mentioned. I take the example of the humble sausage. The contents of each sausage will, more likely than not, emanate from more than one country, with a multiplicity of ingredients in each. Every individual product would have to be identified and its source confirmed before a nomenclature and potential tariff could be agreed. However, as with all aspects of trade, it is often the potential non-tariff barriers that cause the greatest threats.
There are concerns over the regulatory powers set out in the Bill. I would prefer that as a general rule no power to make policy decisions should be vested in the Government without proper parliamentary scrutiny being in place. I would go further and propose that Parliament be given the formal power to approve trade agreements, as well as the power to approve the UK’s negotiating position and the final text of each agreement.
Farmers have had to meet the highest possible standards of food safety, animal health and hygiene in producing our food, and they have been proud to do so. It would be singularly inappropriate for deals to be sought with countries such as the US, Argentina and Brazil that do not meet the criteria that our farmers currently have to meet. Most producers, whether of food, farming or manufactured goods, welcome the broad thrust of the Chequers plan and, in particular, the fact that there will be an acceptance of a common rulebook to ensure a smooth transition as we exit on 29 March next year so that our goods will still be accepted into the EU. Anything less would be a travesty. Producers and consumers alike need to know that there will be continuity of supply, as well as high standards of production, in what has become a very sophisticated integrated supply chain between us and our existing EU partners.
I should like to take Denmark as an example. With a population of only 6 million, it punches way above its weight in exporting its foodstuffs. Largely through the work of industry and a particularly strong co-operative movement, with some limited government support, Denmark has a strong export showing to China and other far-flung places of meat, dairy and other food products, even while remaining a full member of the EU. I am mindful of the fact that our main export, above all—this will delight the noble Lord, Lord Browne of Ladyton—is whisky. Britain recently appointed an agricultural attaché to China, since when our agricultural exports have been boosted to the benefit of companies such as Karro, whose food plant was formerly the Malton bacon factory in North Yorkshire, which now proudly exports to China pigs’ trotters and other pig parts for which there is no home market.
Our agricultural attaché is financed mostly by industry, with only a modest contribution from the Government. This is a model shown to have brought results and should be rolled out in other countries too. The Food and Drink Federation calls for in-market specialists in priority markets, identified—in addition to China—as the USA, India, Japan and the UAE. Figures provided by the Food and Drink Federation show how UK food and drink exports have played catch-up with our EU partners, with our exports to China increasing by 94% between 2015 and 2017, due no doubt to the work of the agricultural attaché as well as the strong growth of the Chinese consumer market.
Danish exports of food and drink to China in 2017 were still substantially greater than ours, as were their exports to Japan. Growth of UK food and drink sales to Japan, at 10%, lags behind growth of food and drink exports from Ireland, Spain and Germany, as well as from Denmark. So there is clearly great potential for future growth in exports for the food, drink and farming sectors. We did not, however, have to leave the European Union to achieve it.
The Agriculture and Horticulture Development Board levies a statutory fund of about £60 million each year from farmers, growers and others. It is currently under review and needs to build on its role in promoting exports. I hope that this will be cautiously considered, so as not to damage our growing export market. The Minister may not be aware that there is growing concern over the position of organic farmers post Brexit, when their niche market may be lost because they will have to renegotiate recognition and certification from scratch.
The trade remedies and dispute resolution mechanisms raise questions about problems arising from the relationship between this Bill and the customs Bill. One issue of which the Minister may be aware relates to bricks and ceramics, which face potentially unfair competition from unsustainable sources in developing countries, and reduced exports—with an effect on domestic production—arising from the recent Trump tariffs and the retaliatory measures from China.
In conclusion, whatever happens with the process of this Bill we must beware of cutting our producers off from their main existing export markets in the EU. The potential impact of no deal could be catastrophic for farming and the food and drink industry. I am firmly of the view that the Chequers paper sets us on a direction of travel that could take us to a safe haven, such as the EEA or EFTA, by forging a bespoke customs union with them, while carrying on with negotiations and keeping our longer-term trading options open. I hope the House will give the Bill a fair wind.
Lord Adonis (Lab)
My Lords, the noble Baroness, Lady McIntosh, has just spoken powerfully about the benefits of expert sectoral attachés at our embassies, and I am sure that the Minister will be taking her suggestions seriously.
I make no apology for returning to the critical issue of Northern Ireland, following on from my speech on the Taxation (Cross-border Trade) Bill last week. Ireland is the Achilles heel of Brexit, because it cannot be squared with the prosperity and flourishing of Ireland, because of the impediments it will impose on trade within Ireland and between Ireland and Great Britain. The crucial thing to understand about this, as I now appreciate only too well from successive visits to Belfast and Dublin in recent months, is that as an island off an island, Ireland’s trade is overwhelmingly centred on, or routed through, Great Britain. Some 14% of Ireland’s trade is directly with Great Britain, while 85% of Ireland’s EU freight trade is routed through British ports.
The issue we and Ireland face, therefore, has two critical dimensions. The first is the extent of the trade between us and the damage we will inflict on Ireland if we unilaterally erect barriers to that trade. The second is the impact on the fragile peace and stability of Northern Ireland, which, even 20 years after the Good Friday agreement, is in a state of crisis, with no Assembly or Executive for 600 days and the constant threat of re-entering a spiral of civil disturbance or worse. These two issues are interrelated, since nothing contributes to peace more than prosperity, and nothing undermines prosperity more than civil unrest, uncertainty and an absence of democratic institutions able to deliver for the people.
Since I spoke last week the position has worsened, because of the incredibly inflammatory remarks by Boris Johnson, Mrs May’s Foreign Secretary until two months ago, about her Brexit policy being a “suicide vest”. Leaving aside the nauseating attention-seeking tone of that metaphor, it is important to understand that Mr Johnson was referring to the backstop provision for Northern Ireland. As an irresponsible hard Brexiter, Mr Johnson has long been opposed to the backstop by which EU law and the EU’s trade regime will continue in Northern Ireland if there is any question of a hard Brexit requiring border infrastructure after the implementation period in 2020.
Mr Johnson’s reason is simple: the backstop imperils Brexit itself. This is in fact true. The problem is that anything else imperils the Good Friday agreement and threatens to provoke paramilitary activity in Northern Ireland—which is precisely why the Prime Minister agreed to the backstop last December, as a key element of any withdrawal agreement between the United Kingdom and the European Union this autumn.
I know that the Minister will totally dissociate herself from the “suicide vest” remark—but will she say what the Government’s current position on the backstop is, given that the Prime Minister herself said in Belfast, shortly after Mr Johnson’s destabilising resignation, that she no longer favoured a backstop that had force in European law or was not time-limited?
I have two other vital questions for the Minister about the Government’s post-Brexit trade and customs policy on Ireland. First, can she say how Section 10 of the European Union (Withdrawal) Act relates to the Irish backstop? My specific point is that if there is no deal, there is no backstop—so, by definition, on 29 March 2019 there will be a hard border and customs tariff arrangements between Ireland and Northern Ireland. I do not see how this, or any weakening of the backstop, is compatible with Section 10 of the European Union (Withdrawal) Act, which noble Lords will recall—because we inserted it into the Act—provides that a Minister of the Crown must act,
“in a way that is compatible with the terms of the Northern Ireland Act 1998”.
The same provision—Section 10 of the European Union (Withdrawal) Act—also specifically prohibits the Government from agreeing to,
“create or facilitate border arrangements between Northern Ireland and the Republic of Ireland after exit day which feature physical infrastructure, including border posts, or checks and controls, that did not exist before exit day and are not in accordance with an agreement between the United Kingdom and the EU”.
I ask the Minister, therefore, whether Section 10 prohibits no deal, or a weakening of the previously agreed backstop in relation to Northern Ireland?
As a further consequence of the crisis in the Conservative Party this summer, following the Chequers declaration on Brexit policy in July, the Government have gone significantly further than Section 10 is respect of provisions relating to Ireland. We now also have Section 55 of the Taxation (Cross-border Trade) Act that we enacted only last week, which was inserted as an amendment in the House of Commons by Mr Jacob Rees-Mogg. Section 55 of the latest Act states:
“It shall be unlawful for Her Majesty’s Government to enter into arrangements under which Northern Ireland forms part of a separate customs territory to Great Britain”.
This gives rise to an obvious and huge question that I will now also put to the Minister. If under Section 10 of the European Union (Withdrawal) Act a no-deal Brexit or any Brexit without a backstop is illegal in respect of Northern Ireland, and given that Section 55 of the Taxation (Cross-border) Trade Act states that it is not legally permissible to have different customs arrangements between Northern Ireland and Great Britain, does it not logically and necessarily follow that a no-deal Brexit, or any hard Brexit that is inconsistent with the Northern Ireland backstop and the Good Friday agreement, is illegal not only in Northern Ireland but across the whole of the United Kingdom?
I would be grateful if the Minister would respond to these two questions, either verbally at the end of the debate or in writing as soon as possible. Given the gravity of the issues at stake, it may be that she will want to give me a full response in writing. I should also say that I am taking other eminent legal advice on these vital questions. In conclusion, it looks to me as if the Irish Achilles heel of Brexit might be about to go gangrenous—and the force of the Brexit laws already enacted by Parliament might well be the cause.
Viscount Waverley (CB)
My Lords, the breaking news today is that Monsieur Barnier, the EU negotiator, may have blinked. Also, the Governor of the Bank of England, Mark Carney, has agreed to stay on. Being reluctant but optimistic on Brexit, this portends well. In the circumstances, this Trade Bill is a necessary piece in the Brexit jigsaw.
A question to start, however, is this: will this Trade Bill survive the environment in which it must serve or will it require amending once the conditions under which we are leaving the European Union are known? It would appear that the architects of the Brexit vision did not anticipate the complexity of the negotiations in addition to the unfolding contagion in important emerging markets together with trade tariffs distorting globalisation, all of which could become centre-stage challenges. Those are insecure foundations on which to build a secure future.
The noble Lord, Lord Lilley, who is not in his place, did make some substantive points about renegotiating trade agreements; nevertheless, the Government have to shoulder the consequences of their policies and actions. History will judge whether the architects of Brexit made a fundamental error of judgment by looking to the future through blinkered vision, along with a negotiating flaw of not being sensitive to the unsurprising strength of opinion across the Channel that could possibly haunt us further. Time will tell, and shortly at that. At this late stage we must be flexible, opportunistic and respectfully Machiavellian. All that said, we are where we are—but where are we? We must either wrap up what was started or change tack, decisively searching for an assured future. As Cicero said, “Where there’s life, there’s hope”, so in that we may take some comfort.
There are many aspects to this Bill, but I will focus my central remarks on a cornerstone of our economy: financial services. The Bill represents a building block, and it needs to do so. It is inconceivable that the EU 27 would allow as important a sector as financial services to remain fully offshore. Brexit may indeed mean Brexit, but Brexit also means consequences. Post-Brexit pressure will undoubtedly grow on the City of London and other centres around the United Kingdom. The European Central Bank is already implementing its location to the continent in mandatory stages. The combination of principle and the possibility of rich pickings will place further sustained pressure on the financial services sector. The list of annual rankings of international financial centres is published today or tomorrow. Let us keep an eye on how London fares both now and in subsequent years, having mostly maintained its position at number one up to now.
The financial services sector is on the move and we must be diligent and keep abreast of that. The likes of Frankfurt, Paris, Toronto, Tokyo, Seoul, Astana and Moscow along with others are the founding members of the newly established World Alliance of International Financial Centres, to be headquartered in Frankfurt and incorporated under Belgian law. Currently, London has observer status only. The Minister may wish to become acquainted with this alliance.
Then there is China’s increasing influence in Europe and the world at large. As in times past when the pound was superseded by the dollar, so a potential parallel yuan could become a base currency for the changing face of global geo-economics, which the likes of Ankara, Tehran and others might find increasingly appealing. China’s impact is growing. It is delivering west-bound the infrastructure that supports economic growth and the development of the old Silk Road. The UK has experience of and proven ability in supporting and promoting infrastructure development. Together we can advance east-bound, thus increasing trade and connectivity, improving quality of life and reducing the cost of living. In the first five years since the belt and road initiative was announced, 103 countries worldwide have signed 118 agreements with China. China is delivering west-bound the infrastructure that supports economic growth and development along the old Silk Road route and far beyond. The UK’s expertise is considered to be well placed, with useful experience in supporting and promoting that infrastructure development.
But corporate partnership in the spirit of local content is fundamental and I would urge UK players to seek out co-operation agreements with local players of merit, wherever the trillions of dollars are going to be unfolded. Many countries and regions along the belt and road have considered integrating the initiative with their own development programmes—including Mongolia’s Prairie Road, Kazakhstan’s Nurly Zhol, and the Eurasian Economic Union—with Pakistan having high expectations, together with the EU’s Juncker investment plan. The belt and road initiative has been incorporated into the documents of many international mechanisms including the UN, the G20 and the Asia-Pacific Economic Cooperation.
The US-China trade war is not close to being resolved and its impact is already being experienced in Asia, particularly in those countries that have existing good trade relations with China such as South Korea and Singapore. UK trade with these countries has had an upward trend during the last years and is likely to be impacted as these countries get caught in the crossfire. China warned yesterday that it will take countermeasures if the United States escalates the trade war. The United Kingdom needs to take a holistic approach. Technological advancement makes access to any financial centre easy. This is a good time to look to the future and fully understand and respect the importance of partnerships. As Amina Turgulova, head of global markets at the Astana International Financial Centre in Kazakhstan reminded me just this morning, while London will always be an attractive destination with many opportunities, there must be a clear and innovative development plan based on partnership. It follows that it is imperative that we build strategic links with other capital markets. Linkages and partnerships are paramount. The London Stock Exchange Group is working on links with the Shanghai Stock Exchange, and the London Metal Exchange belongs to the Hong Kong exchange.
There is a real necessity for a regulatory framework to adjust to changes; this will distinguish the leading financial centres from the rest. No less a body than TheCityUK is calling for the UK to make the most of the once-in-a-generation opportunity to recalibrate and repurpose its trade and investment policy to benefit the wider economy once it leaves the EU. I commend its thinking to the Government and refer the Minister and her team to its report of January 2017, entitled Future UK Trade and Investment Policy. TheCityUK’s latest report of 30 August 2018, entitled A UK-EU association agreement and future UK free trade agreements, in effect builds on last year’s report by going further into the detail of the issues that will concern financial and related professional services. I share many of its conclusions.
The potential presented by deals that focus on regulatory coherence and co-operation, as well as next-generation international trade and investment agreements, would not only strengthen London’s position as the leading global financial centre but bring new growth opportunities to key financial centres across the country. Trade policy is useful ammunition in the tool box; equally, it serves as a carrot. I absolutely recognise the importance of trade, which is vital to allowing people to work their way out of poverty, supporting job creation, value addition and clean industrialisation. A message to the world at large is that trade is as critical to us as it is to others. The Government should ensure, however, that equivalent levels of market access are accorded. The Minister referred to reciprocal access.
Agreements with implications such as these for consumers, businesses, development and human rights, to which should be added the scourge of corruption, should have maximum scrutiny. As I understand it, it is suggested that the replication of some FTAs and EPAs is the way forward. I can see the benefits, but does this approach merely store up problems for the future and need to be challenged? Scrutiny and approval of all agreements on the overseas front should become mandatory. I anticipated a shake of the Minister’s head. Her opening remarks served as a comfort to a degree. However, although I am broadly supportive of much that is before us, I request that the Government reflect on the benefits of scrutiny and participation by allowing a framework that covers consultation with stakeholders. I was enthused by the reference to public support.
We need a more formal system of accountability, definition of the devolved Administrations’ role, full debate, approval by both Houses—including a dedicated committee—and parliamentary scrutiny in the process proposed. I recognise that this requires a seismic change but our country’s future should centre on change to prepare for tomorrow’s world. The role of Parliament in approval and ratification processes for international trade agreements—enshrining the Ponsonby rule, whereby international treaties have to be laid before Parliament 21 days before ratification—should be embraced unequivocally. The Government’s performance in ratification timelines is, if I may choose my word carefully, precarious. This needs attention.
Lord Risby (Con)
My Lords, it is a great pleasure to follow the noble Viscount, who always speaks clearly and directly. It also gives me great pleasure to add my congratulations to my noble friend Lady Meyer, whom I have known for many years. She brings efficiency, competence and great humanity, as shown in her speech, and I know that all those characteristics will be well represented in her contributions to your Lordships’ House.
It is a personal pleasure to add some comments on the Trade Bill. For some years, I have been one of the Prime Minister’s trade envoys, trying to help British businesses with commercial opportunities abroad. I pay tribute to my fellow trade envoys in both Houses of Parliament, across all parties, who do this voluntarily but with much enthusiasm and, in many instances, considerable success.
I also applaud the Secretary of State for International Trade for his incredible energy and dedication to the task at hand. I can only hope that whatever vitamin pill he takes is made in Britain. He has a strong ministerial team, not least in my noble friend, who brings such immense experience to her role. Her department offers such help and professionalism to me and my fellow trade envoys.
We should remind ourselves of the Bill’s objectives, which are not complicated: to keep important trading partners that currently have relationships with us via the European Union; to collect and share information, where there is certainly much more work to be done because it is imperfect at the moment; to enable us to defend our commercial and industrial sector from inappropriate trading practices; and, most importantly, to establish powers to move from having current trade agreements via the EU to dealing with them ourselves, given that trade policy has been an exclusive EU competence.
Sitting, as I do, on two of your Lordships’ EU committees, we have heard repeatedly, and passionately at times, about the need for British business and our business partners abroad to have a sense of continuity and order during and after the Brexit process. This is all inextricably intertwined. In addition to these key elements of our economic life and prosperity post Brexit, it is crucial that we stand out as a beacon of free, unimpeded trade, upon which historically we have thrived and in which we have been a role model. Although President Trump may have highlighted perceived unfairness and lack of balance in bilateral or multilateral trade architecture, there is a great danger of a destructive, tit-for-tat approach developing. That could seriously undermine the world economy, which has in some measure been sustained by much more open markets over the years as well as low interest rates and generous liquidity.
One of our greatest challenges in this age is the problem of migratory flows from poorer countries. It is so obvious that any attempts further to restrain free international trade would most seriously affect the poorest people on our planet. In this context, I welcome the strong links developing between us and the WTO.
This country has an enviable reputation for transparency and has led the charge against bribery and corruption, whether direct or indirect, which regrettably influences commercial decisions in some countries. However, I should add that, in my role in trade promotion, our firm commitments and tough laws to preclude this are much appreciated and commented on by Governments seeking to tackle this corrosive activity.
One element of our departure from the EU is our participation at present in the Agreement on Government Procurement. It is crucial that we maintain access to global public procurement markets, so I welcome our involvement in and intention to join the GPA after we leave the EU. As many of your Lordships will know, government procurement is a substantial part of the business profile of many of our actual and potential markets.
For some years, I have been the deputy chairman of the Small Business Bureau, trying to encourage a suitable tax and regulatory framework for the sector. However, it is a fair generalisation to say that our economy has been very consumer driven. I express my admiration for and appreciation of the Government’s real attempts to stimulate the small and medium-sized businesses in our country into getting involved in overseas trade activity. Many of our European neighbours have moved on much more successfully than we have in changing the culture of export promotion, particularly with respect to the SME group.
In this context, I want to touch on my personal experience as a trade envoy. In the past few months, we have signed contracts in Algeria, the country of my particular responsibility, to the tune of about $1 billion, mostly in the energy sector but also in the defence sector. This followed a trade show held last year in Algiers, organised largely by our embassy there, where numerous small, superb, defence-related British companies showed their brilliant range of activity.
My final observation is on the role of securing business in situ. Last month, in Cape Town, the Prime Minister announced the most welcome new partnership for Africa, an additional £4 billion programme for UK investment in African countries that will pave the way for £4 billion of private sector financing. That includes £3.5 billion through the Government’s development finance institution, the CDC, and an African investment summit, set to take place next year. This is very important in the context of what we are trying to do to explore new markets.
The House should be very grateful to my noble friend Lady McIntosh for pointing out the importance and efficacy of having specialists—in agricultural products in this case—attached to our embassies. However, I wish to be blunt: the trade promotion grind is often done at a local level. The Prime Minister talked about our national interest. In my view, it is patently absurd that the Foreign Office budget is less than 1/10th of our overseas aid budget. Indeed, the Department for International Trade’s budget is a quarter of that of the Foreign Office. It is totally disproportionate.
Particularly in countries which are quite statist, a number of our fiercely competitive European neighbours have established chambers of commerce or invested in a whole range of skilled, local employees, often fanning out and securing business in their particular countries by talking to governors or key business people. The digging out of investment opportunities by people in situ will be a critical part of the architecture of our winning export business in the future, particularly in the new regime which we will have.
I conclude by saying that there are huge challenges which face us post Brexit and I want to acknowledge the key role, which I greatly admire, of those who are involved in this activity, particularly in our posts abroad. It has to be recognised, as part of the topography of trade promotion abroad, that they are appropriately resourced to enable us to compete effectively, which is in all our interests whatever our attitude is to Brexit, and to ensure our capacity to trade successfully in the future.
Lord Taverne (LD)
My Lords, I intend to speak about Clause 15 of the Bill, which says that, “This part”—that is, the provisions on interpretation and extent—
“comes into force on the day on which this Act is passed. … The remaining provisions of this Act”—
which is the bulk of this Bill—
“come into force on such day as a Minister of the Crown may by regulations made by statutory instrument appoint”.
But if there is no Brexit, no Minister will appoint a day and the Bill will never take effect.
I believe that no Brexit is a very real possibility. Why? First, the odds are that there will be no deal. Despite the recent conciliatory words of Monsieur Barnier, none of the proposals that the Government have put forward for avoiding a hard Irish border is credible. This has been convincingly demonstrated in speech after speech in our recent debates, and again today by the speeches made by the noble Lords, Lord Hain and Lord Adonis.
The Government will therefore be forced to fall back on the backstop agreement, which they solemnly pledged last December to put into statutory form as an essential step to move to the next stage of the negotiations. The backstop agreement, as the noble Lord, Lord Adonis, has stated, means that Northern Ireland will continue to remain in the EU’s single market and customs union without a hard border, but it means that the border will be in the Irish Sea. Thus, one part of the United Kingdom will be in the customs union and single market while the rest is not. Mrs May, despite her solemn pledge, says this will never be acceptable—one can see why not—but no backstop means, in effect, no deal.
There are other potential deal breakers. The same problem arises in the negotiations about a free trade deal between Britain and the EU. Again, there is a need for a frictionless border, but trade negotiations between the UK and the European Union at present have not offered any viable solution that is acceptable to the EU 27 or that has proved workable anywhere.
So what sort of trade deal will prove negotiable? No deal, it is generally agreed—except by the denizens of another world who belong to the ERG—would be a disaster. But there is no reason why no deal is inevitable if negotiations break down, because Parliament has been promised a meaningful vote and can, and almost certainly will, reject no deal.
What then? What will be the alternative? To tell the Government to negotiate a better deal is mission impossible, especially after their chaotic record of incompetent negotiation. A general election, leaving aside the complications of overcoming the rule of five-year Parliaments, will hardly be seen by the Government as an attractive option after the last one.
At the same time, there has been a surge of support for letting the people have the final say. Early this year, only 10% favoured a new referendum; now, it has overwhelming support among the trade unions and, as polls show, among Labour voters. In my view, it is likely to become official Labour policy at some stage. Polls also show that it has majority support among the public generally, not least because the politicians cannot agree among themselves. There has also been a major shift in public opinion about Brexit. The last poll showed as much as 59% for remain against 41% for leave, and there is a lot more bad news about Brexit in the pipeline, which is bound to have an influence on MPs’ votes. A new people’s vote is the obvious and likely solution.
The only meaningful choice in a new referendum would be between no deal and remain. It would not be a re-run of the last and would not show a disrespect for the people’s verdict, because the facts have changed. This time, we would know, or certainly have a much clearer idea, of what Brexit means. In a democracy, people must be allowed to change their minds, if it is clear they want to. I believe that the result of a new referendum will be to stop Brexit, but the remain campaign will have to be a very different one and show that it understands the reason why so many voted leave.
Nowhere has the effect of Brexit and the positive case for our membership of the European Union been put more eloquently and persuasively than in a recent booklet by Will Hutton and the noble Lord, Lord Adonis. It is a small booklet called Saving Britain. It gives good reasons why, despite all the sorts of eloquence and insights we have had displayed in this debate, today’s debate will prove irrelevant because Clause 15 will never take effect.
It is very important that industry recognises that there is a real possibility of no Brexit, both here and abroad, and that they think again before they take too many irreversible decisions which are so damaging to the European Union as well as Britain.
Lord Tugendhat (Con)
My Lords, I will begin with three preliminary remarks. First, like others, I congratulate my noble friend Lady Meyer on her maiden speech. All of us bring the experience of our previous lives to our role in this House and her experience has been particularly unusual and hard. All of us will benefit from the insights she will bring to our debates.
Secondly, I support my noble friend Lord Risby in what he said about the Foreign Office. The corollary of leaving the European Union must certainly be to reverse the squeeze that has been so consistently put on the Foreign Office’s finances and manpower over the years. We will have a much greater need for embassies and for trade missions in the future as we will not be able to rely on the European Union’s support.
Thirdly, I congratulate the Minister on her introduction to this debate. Having listened to the very authoritative way in which she introduced the Bill, I think we can look forward to a much greater degree of engagement between the Front Bench and the House on this Bill than was the case on what was then the European Union (Withdrawal) Bill. That is very important because the nature of some of the amendments that will no doubt be moved on this Bill is that they may appear technical and arcane but they have very far-reaching consequences. It requires the Minister to have a real command of the subject and an ability to think on her feet to be able to handle these in a constructive way, and to carry the House with her.
I have one further point to make about amendments. It would be wrong to refight the battles decided during the passage of the withdrawal Bill. I voted for most of the amendments carried against the will of the Government and I wish that the House of Commons had supported them. But it did not and, once we have asked the House of Commons to think a second time and it has, one has to accept the result, and it would be wrong to bring those issues back on this Bill.
As I listened to the Minister’s confident exposition and her expectation that the Government will have everything in place for continuation of the existing FTAs and EPAs for Brexit day, I could not help thinking of what her Secretary of State, Liam Fox, said in July 2017 about doing a deal with the EU. As many Members will remember, he said:
“The free trade agreement that we will have to do”,
with the EU,
“should be one of the easiest in human history”.
He then admitted that it might not be so easy in practice because politics gets in the way. He was right about the politics but, even so, he was devastatingly underestimating the problems of doing a deal with the EU.
While I certainly support the Government’s aim of seeking to achieve the greatest amount of certainty, continuity and stability in our trade and investment relationships for our businesses, citizens and trading partners, I cannot help feeling that it will be miraculous if, by the time we are due to leave the EU, all those matters have been wrapped up. It would be very surprising indeed if difficulties did not arise. Both the noble Lord, Lord Grantchester, from the Labour Front Bench and the noble Lord, Lord Fox, put very relevant questions to the Minister on this matter. I hope that she will be able to deal satisfactorily with what they said.
Then there is the question raised by the noble Lord, Lord Butler of Brockwell, about what will happen if there is no deal. What will happen then? Is not the subject that we are talking about now, the FTAs and EPAs, yet another instance of where the country is unprepared for such an outcome? The result, if that does happen, will be considerable uncertainty for the businesses and citizens it is the Government’s objective to protect. In saying this I am not criticising the Government. I recognise that they are doing all they can to bring about a deal that will preserve jobs and employment. It is a very difficult task and I fully support the Prime Minister’s approach. But it is a criticism of those—largely, I am sorry to say, in my own party—who are putting up barriers to compromise and trying to thwart negotiations for ideological reasons in the belief that failure will promote their personal ambitions. This is a very real danger. I did not agree with my very good friend, the noble Lord, Lord Taverne, when he said that he did not think there would be a Brexit. Sadly, there most likely will be one, but it is important that the terms should be as good as we can get, and I fear that those who are trying to sabotage what the Prime Minister is doing are doing a great disservice to the country.
On the whole, those people, and indeed some others, say that we should not fear a no deal and a crash-out because we will be able to rely on WTO rules. I will put two points to the Minister on this subject. First, what assessment has the Department of Trade made of the effect of the United States’ unwillingness to make an appointment to the WTO disputes arbitration body? Am I not right in thinking that there is a considerable danger that by the end of this year that body will not be quorate? If we are relying on WTO rules, which some people seem to think is such a good idea, what is the Department of Trade’s assessment of the nature of the problems that will arise if the disputes arbitration body is unable to function?
Secondly, what assessment has the Minister’s department made of the suggestion recently put forward by President Trump that the United States might withdraw from the WTO? I know that President Trump makes many suggestions and does not fulfil all the things he says—but, none the less, if we are to put our trust in the WTO, it is slightly concerning that the President of the United States, the largest trading country in the world, is contemplating the possibility of withdrawing from that organisation. I wonder what discussions Her Majesty’s Government have had with the United States Government on this subject. I should be very grateful if my noble friend could tell us what has been happening on that front as well.
Lord Monks (Lab)
My Lords, 2018 is the 150th anniversary of the TUC. In a debate yesterday the congress came close to expressing no confidence in the Government’s conduct of the negotiations with the EU so far and edged rather reluctantly towards supporting a popular vote on the outcome of the talks. Why did it do that? It is because the trade unions are worried: worried about the impact on jobs and rights after Brexit, the byzantine complications of the Chequers proposals, and our country crashing out of the EU with no deal and becoming distanced from our biggest trading partners, with no customs union and no single market.
To hear some Brexiters talk, British business can survive cut off from obligations to the EU. But pause for a moment: what is British business nowadays? The UK has been unique among the world’s largest economies in having permitted extensive foreign ownership of what might be termed the commanding heights of the economy, with many companies in sectors such as cars, energy, utilities, aerospace, transport, investment banking and many others under ultimate foreign control. All this risks our open economy, which is particularly vulnerable to disruptive actions by companies rethinking their locations for research and production. I have never understood why the nationalists among the Brexiters have paid so little attention to the extent of foreign ownership of UK businesses.
Of course, in the past we have certainly welcomed inward investment. We would not have a large car industry without it. Much of it resulted from our membership of the EU single market as companies rushed to get in. But take that away—I hope everyone will recognise that there is a huge risk involved, unless the future trade issues are agreed amicably and quickly. While we wait for the Brexiters’ plan, their alternative, we know that it is likely to focus on tax cuts, deregulation, competing in the bargain basement and not raising our sights to compete on investment, innovation and productivity with the best. It is a sorry prospectus and I am glad that the Prime Minister has resisted it to date.
In my time in Brussels as secretary of the European Trade Union Confederation, I was involved in the EU trade negotiations on the South Korea free trade agreement, TTIP and the Canada deal. In each of these negotiations, we managed to insert a trade union role and voice into the processes. Our aim always was to replicate features of the EU single market in those deals, so that there was a measure of social and environmental protection in them. We succeeded in the South Korea agreement. Having listened to the noble Baroness, Lady Neville-Rolfe, speak about her experience with Tesco, it may be that we should revisit that, but, at the time, we thought that we had succeeded. We thought that we had succeeded, too, in the Canada case. We did not succeed with the Americans in relation to TTIP, which is one reason why it ran into such heavy bombardment on both sides of the Atlantic. I note what the Minister said earlier, but we are concerned that this trade union influence and role might not be continued or replicated in the new UK arrangements. I am interested in her response to the following question: will the Bill include measures which can reassure stakeholders that they will be engaged and involved as fully as possible in future trade negotiations? What is the Government’s reaction to the call from the TUC, the CBI and the International Chamber of Commerce for such engagement of trade unions, employers, civil society and the devolved authorities in trade policy?
I am suspicious that some of the countries with which the EU has negotiated trade deals that we would hope to roll over would welcome this opportunity to jettison measures concerned with social and perhaps environmental regulation. The Conservative Party has had a long aversion to the social dimension of the EU single market—remember the opt-out in the Maastricht treaty? Can the Minister assure us that, as the Government seek to roll over existing trade deals and conclude new arrangements with the countries concerned, they will not jettison the social and environmental features? One way of helping with this would be to include trade union and other stakeholder representation among the non-executive members of the Trade Remedies Authority. I ask the Government for an assurance on this point, too.
Similarly, the Bill needs to make provision in trade deals for the protection of fundamental worker rights as enshrined not just in ILO core conventions but in its decent work agenda, which is rather more ambitious. I hope, too, that proper respect is shown for public services such as the NHS. We cannot allow them to be swamped by private companies pleading that a free trade arrangement permits them to challenge the continued existence of public services, with allegations that their monopoly is not subject to market pressures and so on. That was a certainly a huge problem with TTIP.
In the recently published document, Framework for the UK-EU Partnership: Open and Fair Competition, the Government state that the UK proposes committing to high levels of social and employment protections through a non-regression commitment, which is welcome, but they go on to use the phrase, “on domestic labour standards”. What does “domestic” mean? Does it mean the EU social acquis—the 60 or so EU directives on employment which the UK has absorbed? Does it mean that the working time directive and its provision for four weeks’ paid holiday a year are to be protected? Or does it mean just that employment laws generated domestically will not be interfered with? Can we have the Government’s assurance that it means the former and that we will continue to mirror the measures in the EU’s social and employment programmes? I hope that the Minister can clear that up during the passage of the Bill through this House and look forward to her responses.
Lord Dykes (CB)
My Lords, it is a great pleasure to follow the noble Lord, Lord Monks, and once again to acknowledge the value of someone coming to this House with such experience of a particular sector, representing as he does modern enlightenment in trade unionism and its respectable and necessary role in modern economic society. One recalls all the work that he did along with famous people such as Jacques Delors, Michel Rocard and others in Britain gradually to change the minds of trade union members and officials in this country about our membership of the EU, which was a fantastic achievement.
Although she is not here at the moment, I want to add my congratulations to those offered to the noble Baroness, Lady Meyer, for her riveting and devastatingly moving maiden speech. I have not met her before nor heard her speak, but I was so struck by it that I think that she will be an immensely valuable Member of this House. I happen to have the pleasure of knowing her husband, with whom I had a few words beyond the Bar of the House earlier. I am glad to see that he has at long last begun to recover from that most awful attack that he suffered in Victoria station. I am sure that we wish both of them well.
Debates such as this always please me in the sense that, as usual, in the civilised House of Lords, the significant pro-European majority comes out, with speeches that imply that they would much prefer to stay in the EU. I entirely agree. Why leave? There is no reason to leave at all. That is not to disrespect the result of the referendum of 23 June 2016. However, others have taken a different view, and the contributions have been many and varied. Although he is not here now, I want to praise in particular the noble Lord, Lord Adonis, for his unstinting work on behalf of the good cause of Europe.
We have all been aided and abetted by the excellent documents on this Bill provided by House of Lords officials. While it is a necessary, technical Bill in the sense of our having to be ready if there were to be a Brexit—I understand the Minister’s utterances in that regard—none the less I always feel in these debates like Ian McEwan apparently still does, who said at the beginning of the whole ghastly process, “No, this can’t be happening. It’s just a dream. I’m only dreaming it. When I wake up in the morning, everything will be all right”. I think that, quite rightly, he still says exactly the same thing.
I was particularly pleased to receive the excellent NFU briefing on these complicated matters. It is anxious to make sure that UK food production standards, which have been maintained under the EU membership system, will continue if the worst were to happen—which I hope it will not.
I declare a personal interest as an officer of the Food and Drink Manufacturing All-Party Group. Submissions from Food and Drink Federation officials remind us that this is the largest single manufacturing sector, with many and variegated items in it. We have huge food and drink exports to all over the world. There has been a big increase in exports to the EU and the rest of the world in the last period. Those are important sectoral interests that have to be maintained.
It was interesting to hear it implied by some in the debate that it may be okay to go to WTO rules. I was grateful for some remarks about that made recently in the press by a leading expert on how the WTO works. He wrote:
“However, since representing ourselves as a single country against 163 others wields less influence than being represented by the largest single market on the planet, the UK parliament nominated the EU to represent us at the WTO. As the UK is the third largest member of the EU28—after Germany and France—the country punches above its weight inside the Union and therefore is also over-represented at the WTO—as things stand”.
Giving that up and going into all the expense, tariffs, rules and regulations of the WTO would be a nightmare for this country after that experience led by the combined EU effort. One can understand why the Prime Minister really does not want to leave all aspects of our EU membership and has now reached an extraordinary state of acceptance of things, which of course causes huge headaches for the strong and often hysterical Brexiteers, particularly in the other House—we know some of the famous names.
The noble Baroness, Lady McIntosh, who is not here now, referred to what Denmark was doing. The Danish newspaper, Jyllands-Posten, wrote recently that, while the UK is not shy about proclaiming its soon-to-be-regained “freedom”—by which, I mean this Government—it is simultaneously begging the EU to continue co-operation on 60 different policy areas. The article points out that the UK wants to maintain a semi-strong relationship with the EU rather than completely burning all its bridges; this is particularly clear when one looks at the UK Government’s White Paper. Apart from some exceptions, the UK Government wish to maintain the close relationship as well as the benefits that EU co-operation provides.
Jyllands-Posten points out that the term “common rulebook” is mentioned 44 times where the UK is proposing a set of common rules covering the EU and the UK. In contrast, the word “sovereignty”—what an old-fashioned word nowadays, in an interdependent world where we all work together—is mentioned only 11 times. This is surprising considering that Prime Minister May emphasises that Brexit is about regaining control and sovereignty. On the home front, Brexit is spoken of as an event that will allow the UK to determine its own destiny. It is thought-provoking that the UK has concluded that there is much more in the EU it wishes to embrace than to get rid of.
The fact remains that this is the continuing nightmare—the tragedy—that this Government have inflicted upon the country, without any authority from Parliament in terms of numerical support and other background factors. The 8 June election came two years after the previous one. It is interesting that people say we cannot have another vote of the people so soon after the previous one—although it would not be connected with the previous one, the result of which we still respect. The public were so disgruntled with their own socioeconomic weaknesses, as a result of government austerity, that that is the way they voted, for all sorts of reasons, in an advisory-only referendum, giving an opinion. Now we see that Mrs May lost her mandate completely in the 8 June election—she had only a shaky one before. She thought she was going to triumph; it did not happen: Parliament refused to give that mandate. That is the reality that I hope the Labour Party will at long last build on, and come out strongly in favour of what is needed to save this country from total perdition.
Lord Cooper of Windrush (Con)
My Lords, I start by echoing and warmly endorsing the many words of praise for the maiden speech of my noble friend Lady Meyer. I do not think I was the only person in the House with tears in my eyes hearing her extraordinary story: she will make a tremendous contribution to the House, I am sure.
Since 24 June 2016 dawned, the fundamental question hanging over the Brexit debate has been, to paraphrase Metternich’s comment on the death of Talleyrand, “What did they mean by that?” On what terms did the narrow majority in favour of the UK leaving the European Union want us to deliver that? What were, if you like, the people’s red lines? Issues within this Bill go to the heart of that question. Many of those who support Brexit have changed their answer to that question considerably over the last two years; attitudes have hardened as the confident pre-referendum assertions have collapsed; things that many of them were in favour of, or at least open to, in June 2016 are now seen as red lines by many of the same people. It is obvious that not all the 17 million people who voted to leave the EU did so for identical reasons, or with the same aspirations in mind, but some hopes and some assumptions were shared by most, so what can we discern about the key outcomes that people were hoping for?
An opinion poll earlier this year asked people to think back to the EU referendum campaign and to list, without prompting, all the arguments they remember being made in favour of Brexit by the leave campaign and its supporters. The argument for Brexit that is by far the most strongly recalled is £350 million a week extra for the NHS. The second is cutting EU immigration. The third is stopping sending billions of pounds a year to Brussels. Those three, which we may or may not think are likely to appear as a product of Brexit, are far ahead of anything else. Far behind—recalled by just 12%, fewer than one in eight people—is new trade deals with other countries. Most people do not even remember that having been made as an argument in favour. Other polling reveals that in as much as trade was a factor at all in voters’ minds, their dominant focus was, rightly, on ensuring that we sustain our EU trade, not the pursuit, which so enchants Brexit dreamers now, of theoretical future trading opportunities with mostly much smaller and much more distant economies.
During the campaign itself, the remain campaign’s private polling tracked the public’s view on what the most likely end state would be if the country did indeed vote to leave the EU. Consistently, about one person in four thought that if the UK voted to leave the EU we would in fact end up not leaving. They thought the EU would panic and come back and offer us a much better deal, and that we would end up accepting it and staying in. Another group had a completely contrary perception, which was that if the majority did vote for Brexit we would leave the EU, the single market and the customs union, and lose the benefits of being in the EU, such as they were. That was the expectation of less than 20% of the electorate. Four voters out of five did not think that voting for Brexit and getting Brexit would result in us leaving the single market and the customs union and risking or forfeiting the trading terms that we have with the EU now. Most voters had come to a completely different expectation. They concluded from the referendum campaign and the arguments that they heard playing out that if Vote Leave were to win, the UK would leave the EU, but it would agree and keep access to the single market and the customs union, and keep many of the benefits of membership. More than half the country believed that that would be the outcome, and nearly two-thirds of the key swing voters whose final decision on that question determined the result.
There has been a lot of polling on what the UK’s priorities and red lines should be in negotiations, and the extent to which trade with the EU should or should not be a priority over other things. The point is that most people voting in that referendum in June 2016 had been persuaded that we would never have to face these trade-offs at all. In focus group discussions, of which we did dozens, where people discuss these issues in greater depth, trade with the EU was virtually the only benefit that most people could think of from being in the EU, but they were keen to retain it and they were clear about its significance for our economy.
More than 60% of the electorate, and about 70% of the key swing-voter group, thought that even if the UK did leave the single market we would still get some kind of different free trade agreement with very similar benefits that would be essentially almost the same as being in the single market and the customs union, and that we would be able to do so without having to accept free movement of people and without having to pay into the EU budget. Most people thought that because they had been told it repeatedly. They believed it because they had also been told repeatedly that the EU needed us more than we needed it. That was the basic false logic from which flowed the conclusion that we could somehow have our cake and eat it.
It was, of course, a fantasy all along. Liam Fox’s confident prediction of historically easy trade deals, which my noble friend Lord Tugendhat referred to, was wrong. Michael Gove’s reassurance that,
“we hold all the cards and we can choose the path we want”,
was completely wrong. Boris Johnson’s promise that,
“there will continue to be free trade, and access to the single market”,
after Brexit was quickly withdrawn as a view which he now defines as treason. The Brexit Secretary tells us that in a no-deal scenario, for which the Government are preparing, there will be adequate food. If they had put that on the side of the bus we would not be in this situation now.
The leave campaign had the option, of course, of making the case to the British people for leaving the single market and the customs union, sacrificing free and open trade with the EU in pursuit of their vision of vague new trading deals on the other side of the world, but they did not make that case. A few individuals might have alluded to it but others said precisely the opposite. It was not the message of the leave campaign. It is not what most people heard. It is not the Brexit that most people voted for. Most people certainly hoped that Brexit would bring real change in some respects in this country but they assumed that in terms of trade we would stay in the single market and the customs union, or something very close to it. That is the outcome that I still strongly support and I urge other noble Lords to do the same.
Baroness Falkner of Margravine (LD)
My Lords, I welcome the noble Baroness, Lady Meyer, to the House. As she knows from our personal interactions, and after her fabulous contribution today, she will find friends right across the Chamber. I have had chats with her since she arrived here but it was good to hear from her formally in the Chamber.
Turning to the forceful arguments advanced by the noble Lords, Lord Risby and Lord Tugendhat, regarding resources for the Foreign and Commonwealth Office as we go forward, I would go further and suggest to the Minister—whom I welcome to her first Bill—that she tells her colleagues that the logic of the UK’s future trade relations requires that we amalgamate the Foreign Office and the Department for International Trade, as the Australians and, indeed, the Canadians do. They have been doing this on their own for a very long time and they know how to do it.
The Minister will be pleased to hear that I broadly support the Bill and, given the generalities that she has heard around the Chamber today, that I will confine my remarks to the detail of the Bill itself. It is a wholly necessary piece of legislation to keep the show on the road as we prepare to leave the EU. Continuity will be fundamental to ensuring that we get the best for the British economy.
It is good that the Government improved the Bill in the Commons; for example, the change in the duration of sunset clauses, which the Minister mentioned in her opening remarks, and the reassurances of parliamentary scrutiny. I find the Bill in rather better shape than some others that have made their way to the Lords in recent times. However, the argument in the Commons that the Government should emulate the European Parliament’s powers in the provisions of the Bill is flawed, and they should resist those sorts of moves here if it comes to it. Although there are elements of the scrutiny of trade negotiations where the European Parliament does a very good job, there are others where it is effectively a sui generis institution: it reflects the weight and strength of national groups. For those of us observing TTIP, when we hoped that it would go through, it was evident that the trade preferences and political priorities of certain countries prevailed, while those of others did not. It was not a level playing field and some countries were disadvantaged by that. It was hardly a negotiation that delivered for all 28. Although the EP attempted to improve it, it seems just as well that it did not go forward in the way it was likely to.
Clause 3 concerns parliamentary scrutiny. I note the debates in the other place on enhancing scrutiny. I have similar aspirations for what we do with the Bill in this Chamber. I have no doubt that we will see debates along those lines and amendments of those sorts moved here and I look forward to debating them. But when it comes to parliamentary approval of the negotiating mandate, as well as the requirement for the Government to publish their negotiating text at the end of each round of negotiations, I urge against this level of micromanagement. In trade negotiations, both sides have red lines but these are not necessarily disclosed as they form part of the give and take of the negotiation itself. I cannot see how giving Parliament, in effect, control of the negotiation would lead to a more optimal result in that regard.
I welcome the improvements to parliamentary scrutiny in Clause 4 but it is not entirely clear to me why the clause was deemed necessary given the concessions made in Clauses 2 and 3. I know that the Minister is required to lay a report as soon as possible after the trade agreement is ratified to explain why it was not possible to do so before ratification but perhaps we might be given an indication of the cases that are so exceptional that ex post facto reports would be deemed necessary. This exceptional cases clause seems to slightly contradict the powers that the Minister has.
Turning to the Trade Remedies Authority, paragraph 2(2) of Schedule 4 restricts the total number of members of the authority to nine. This appears unduly restrictive. Perhaps the Minister will tell us why the Government have settled on a firm figure rather than having a range, such as nine to 12. One can foresee situations where, over time, in a complex, multisectoral, comprehensive future agreement taking several years, it might be helpful to expand the membership of the TRA to bring on board those with specific and particular skills, to build flexibility into the body’s governance. In paragraph 2(4) the Government are rather more flexible about how they define good governance. It states:
“The Secretary of State and the Chair must ensure, so far as practicable, that the number of non-executive members is at all times greater than the number of executive members”.
That seems rather too tentative. If the Trade Remedies Authority is to be accountable, as it should be, the number of non-executives should always exceed the number of executive members. I hope the Government will look again at that in Committee. If the restriction in paragraph 2(2) was resolved, it is likely that the issue in paragraph 2(4) of the balance between executive and non-executive members would conflict. I look forward to the Government’s response in that regard.
I will conclude on a general point. I see this as a necessary Bill to prepare the ground for Britain’s withdrawal from the EU. Here in the Lords we have a duty to improve it and I have no doubt that we will. The European Union (Withdrawal) Act is now behind us and we need to move forward to put in place machinery in government and Parliament to ensure continuity and build on the UK’s interests as an open, globally significant trading nation, building on a philosophy articulated by Adam Smith and David Ricardo more than 250 years ago. We know how to trade, we know how to make things that other people want, and we know how to work with others to make multilateral institutions fairer and more effective. I have no doubt that we will face significant challenges in the period immediately following our exit from EU arrangements, but I also remain open to new opportunities for trade with new partners—and, more importantly, in new sectors—as the global economy changes and evolves, as it is doing, with phenomenal speed. The challenge still awaits us but for now we need to get on with the Bill.
Baroness Hooper (Con)
My Lords, this has been a most illuminating debate. As most speakers have said, clarity and certainty are what is most needed for business, investment and the future prosperity of this country. My noble friend the Minister gave us an outline of what is intended with great clarity. Indeed, I do not envy the task facing my noble friend of winding up a debate which has been very wide-ranging, has included a remarkable maiden speech, and has attempted in some cases to make what she described in her introduction as a “technical Bill” to give the UK Government “the powers they need—nothing more” into something far more comprehensive and complicated.
I am not going to follow the example of the noble Baroness, Lady Falkner, in going through the clauses of the Bill, because I wish to focus on aspects of the trade opportunities. I shall use as an example Latin America, a region with which I am familiar and which, incidentally, has a combined population of well over 500 million—rather comparable to that of the European Union itself. Latin America comprises 20 republics and has huge and important natural resources and tremendous good will towards the United Kingdom because of the historic support we gave to their independence movements over 200 years ago. Many of them also have enviable GDP growth, although I recognise that, at the moment, some have rather acute political and economic problems.
The European Union already has trade agreements with Mexico, central America, Colombia and Chile, all of which will be candidates for the rollover procedure that my noble friend the Minister explained at the outset. I think it was the noble Lord, Lord Grantchester, who suggested that Chile has already expressed the wish to do more than just roll over, and that may well be the case for other countries in Latin America as well. There is also the possibility that the long-awaited European Union-Mercosur agreement will be concluded before March next year. Indeed, it is hoped that it will be concluded before the elections in Brazil in October. The Mercosur countries are, of course, Brazil, Argentina, Uruguay and Paraguay—in all of which the United Kingdom already has a presence, but where there is plenty of scope for improvement. In addition, there is the potential for a future agreement with the Alianza del Pacifico countries: Mexico, Colombia, Peru and Chile.
It must be remembered that in these cases we will have to negotiate with the trade blocs as a whole and not with the individual countries, as we might prefer to do. We may prefer to choose or cherry pick—however noble Lords wish to describe it—but that may come as a surprise to some people. These countries are committed to trading as a bloc, in much the same way as we have been within the European Union. I am happy to say that a good start has been made with the appointment of a trade commissioner to Latin America, Jo Crellin, who is currently based in São Paulo and working on a trade plan for the region. In addition, the Prime Minister has appointed special trade envoys to Mexico, Brazil and Panama, along with one to Colombia, Peru and Chile combined. My noble friend Lord Risby gave us a very good account of the value of such voluntary appointments. There has also been an increase in ministerial visits to the region, and many countries in Latin America see Brexit as an opportunity to increase their trade with the United Kingdom as it looks beyond its traditional partners. All that sounds very hopeful.
Can my noble friend reassure me, however, that when the time comes to get up and go, her department will have adequate qualified staff, with adequate language skills, to enter into negotiations once this framework Bill is in place and, indeed, once we know whether we will have a transitional period during which to sort ourselves out? Much as we all appreciate the efforts of our ambassadors and diplomats, which have already been referred to, a lot more will be needed. As a matter of interest, is it intended to redeploy the Brits currently working in the trade team in Brussels for this purpose?
When the time comes to enter into these bilateral trade deals, on which the Government are placing so many hopes for a post-Brexit Britain, I trust there will be a strong focus on some areas that have already been mentioned, including health and medicine and agriculture. But there is also the education sector and the energy sector, especially renewables. Indeed, the Prime Minister announced a strategy today for more clean energy, with electric cars, increased battery storage facilities and all the research that is involved in that. These will be important areas to move forward in and, as focus areas, would provide opportunities for reciprocal trade and investment with Latin American countries.
Like others who have spoken in this debate, I wish to make it clear that I voted to remain in the European Union in the referendum. I would very much prefer to feel that we had the clout of a group of like-minded countries with which to negotiate, and with which to insist on the ethical, environmental and other social policy standards that we have developed within the European Union, but I hope and trust that those will continue to be applied by our negotiators in the future. In spite of that, I believe now that we must all make every effort to make the best of going it alone. It is in that spirit that I wish the Bill a fair wind.
Baroness Henig (Lab)
My Lords, first, I add my congratulations to our new colleague the noble Baroness, Lady Meyer, on her riveting maiden speech. I look forward to hearing her future contributions in this House.
I wish to speak to Part 1 of the Bill. We are repeatedly told by those keenest to pursue our departure from the EU that our ability to make our own future trade deals is one of the most significant opportunities that Brexit will bring us. Given the importance of the issue, it must therefore follow that they and the Government will welcome keen and effective scrutiny, and recognise that the collective experience of this House will be extremely useful in helping to illuminate and improve not just this Bill but, I hope, also our future trade policy. Unfortunately, I have to tell the House that in the two years since the formation of the Department for International Trade, we have heard virtually nothing about its priorities or policies. Recently, there has been a consultation on new bilateral trade negotiations with the United States, New Zealand and Australia, but we have not been told what the Government hope to achieve by prioritising these countries. We have seen Answers to Parliamentary Questions that provide little detail on either our proposed trade policy or on the progress of the talks that we are having to replicate the existing trade agreements covered by this Bill.
The avoidance of any real scrutiny of the UK’s trade negotiations reached new heights when Cabinet Minister Liam Fox appeared before the International Trade Select Committee in the other place on 11 July. In relation to ongoing UK negotiations at Geneva to re-establish independent WTO schedules, he told the committee that,
“negotiations are going quite well ... people do understand our position … Of course, the problem is not with the United Kingdom”,
by which he presumably meant to imply that the problem was with the EU. Two weeks later, when the UK’s schedules were formally submitted, correspondents in Geneva cited a number of countries which were in fact going to lodge objections to the existing treaties because, in the process of transfer, they wanted to change one or more provisions. That must surely have been known at the start of July but Parliament was not told. On this evidence, can we trust the Government to provide honest information to Parliament?
If we in Parliament cannot trust the Government, imagine what business and civil society will think. In the case of businesses, we are talking about changes to their access to other markets in potentially as little as six months’ time. All we have heard from Ministers is that discussions are progressing well and that no countries have raised objections. On the evidence of the information provided regarding WTO negotiations, there is no way that businesses can rely on such assurances. Surely we want our businesses to be as well briefed and prepared for the future as possible.
The Government should be equally concerned about the impact of secrecy on civil society. Four years ago I was a member of the EU sub-committee examining the EU-US trade agreement, TTIP. It caused considerable controversy, not least because people objected to its being negotiated in secret. In our final report we judged that,
“insofar as a public debate on the TTIP exists, EU member states are losing it”.
What lessons have the Government learned from that? Few in this House would wish to repeat the experience—say, for example, with a US-UK trade deal being negotiated behind closed doors, which potentially, through some of its food provisions or trade dispute resolution clauses, could render any other trade agreement toxic. This is indeed what nearly happened in the EU when TTIP nearly endangered the EU’s trade deal with Canada.
The Secretary of State has been making speeches about the need to support trade agreements, calling in aid on occasion the work of David Ricardo. With respect to Liam Fox, it has been aptly said that he should perhaps tell us more about how the UK will beat the challenges of the 21st century rather than those of the 19th. These 21st-century challenges are those of policy, trust and communication, and to date—and indeed in the Bill—I fear that the Government have comprehensively failed to meet them. On policy, we have yet to see the Government communicate in any way what objective they would like to achieve in future trade negotiations and agreements. This relates to the existing trade agreements as well as to those to be concluded in future.
We have heard many experts, and Members of the House today, say that UK manufactured goods may not be eligible for tariff preferences in these replicated trade deals because trading partners will not accept the continuation of existing rules of origin once the focus is the UK, not the whole EU. Can the Minister give us an update on the Government’s progress on this matter, given the importance of this issue to companies here and now? It is equally important to understand what the Government would like to protect. For example, we have a verbal promise that our food standards will not be changed, but as far as I can see there is nothing to stop the Trade Bill being used to make such changes. Would it not be reasonable for our farmers to have that commitment written in legislation?
That leads us on to the crucial question of trust. As I have already pointed out, the Government have not yet done enough to create a position where we can trust assurances that Ministers will lay meaningful reports before Parliament stating the difference between the trade agreement previously and the proposed new one. That is why I believe we will need to consider amendments in Committee to ensure effective scrutiny. For example, I suggest the Government might commit to the report being produced or audited independently, perhaps by a committee of this House or of the other place or by an arm’s-length body. This simply echoes the kind of best practice that exists at this moment across the EU, and I am sure we would not want to depart from such practice or to lower existing standards of scrutiny in relation to the negotiation of trade agreements. Good communication lies at the heart of trade policy. Ultimately, Parliament has to hold the Government to account on this. The Secretary of State’s commitment on 16 July to keep Parliament closely involved with regular ministerial Statements and updates is welcome but not in any way sufficient, either for us to provide scrutiny or to give reassurances to businesses and individuals who will seek details from us as to exactly how they are going to be affected.
It is crucial that the Government should commit to providing Parliament and indeed the devolved Administrations with an update of all the negotiations covered by the Bill on a regular basis, which is to say perhaps three times a year. I do not believe that that is too much to ask. It would ensure that we were able properly and effectively to provide scrutiny and add our expertise to the Government’s efforts. There are Members of this House who know very well that negotiations even to replicate agreements can be very difficult. There are Members who appreciate that agreements with the likes of Norway and Turkey, for example, will be difficult to replicate without the UK maintaining a close relationship with the EU. I would like the Government to acknowledge that. How will these agreements be dealt with, and how will the challenges they pose be overcome? I will not hold my breath while I wait for an answer, but this is precisely why we need to consider an amendment along these lines in Committee.
The Government are currently treating Parliament and, I fear, business and civil society as the enemy in trade policy, who should be given as little information as possible. This approach is dangerous and counterproductive. Businesses, federations, trade unions, pressure groups and individuals all need to know what is being negotiated on their behalf and they need to be able to contribute meaningfully to the process, as indeed the Minister said in her opening remarks. I absolutely agree with her that people need to be consulted and to know what is going on. I hope that in Committee we can look to facilitate that process. After all, taking back control has to apply to them and to Parliament, not just to the Government.
I believe we need to start to create some consensus around the sort of trade deals that we want to conclude in future. That is so important after everything that has been happening recently. If we fail to create consensus, we will surely face an uphill battle to create a country that is open to trade and exporting successfully.
Lord Astor of Hever (Con)
My Lords, I support the Government’s objectives with the Bill. I also congratulate my noble friend Lady Meyer on her exceptional maiden speech.
This Bill is the necessary first step towards establishing ourselves as an independent trading nation, but we must now make the necessary changes to face up to the challenges post Brexit and to make the most of the trading opportunities in future. The DIT must be appropriately resourced; it is still a very poor relation compared to some other Whitehall departments. The mechanics have been changed in Whitehall, but often not abroad. I agree with my noble friend Lord Risby on the issue of resources being disproportionate at the moment. It cannot be right that there is a ratio of 10 DfID personnel to only one from the DIT in Africa. DfID has more personnel in Kenya than the DIT has in the whole of Africa, yet it is the DIT that is creating the wealth for our country, and I believe that we stand a better chance of lifting people out of poverty by trading with them and helping them to develop.
To make a success of exports and inward investment post Brexit, we must ensure that DIT trade promotion and the FCO teams in the embassies overseas work collectively and constructively together. They are on the same team, and they should be working together to support UK interests and to help to strengthen our economy. I have been very fortunate, as the Prime Minister’s trade envoy to Oman and formerly as a Minister, in my dealings with that country. At all times, from the excellent ambassadors down, the whole team at the embassy has been joined up. Like my noble friend Lord Risby, the embassy has had some huge export successes on both the military and civilian side. However, in some other countries there are internal conflicts within embassies. On very rare occasions, an ambassador or high commissioner has little interest in furthering Britain’s international trade interests.
Human rights are of course an important aspect of the FCO’s agenda, and that must be continued. But it must be done subtly. An ambassador who has chastised a foreign Government for their supposed human rights failings will often have caused huge offence to that host Government, so he or she cannot expect a warm reception the next day when accompanying a British company pushing for a huge export order in that country. That country would have good reason to feel aggrieved. Nevertheless, the human rights issue must not be neglected.
What is to be done in the very few cases when this does cause problems? Will the area trade commissioners be able to step in to ensure that trade interests do not suffer in that country? Most ambassadors who do their job well will have nothing to fear. I hope that the trade commissioners will not only express their opinion about the effectiveness of DIT staff in the region but will have an input into an ambassador’s or high commissioner’s annual report on the DIT staff in his embassy. I would be grateful if the Minister could confirm that this is the case.
Lord Kerr of Kinlochard (CB)
My Lords, it is a pleasure to follow the noble Lord, Lord Astor, who spoke so warmly of my old service, and to take part in this debate, introduced so clearly and convincingly by the Minister.
There is absolutely no doubt that, if we leave the European Union in March next year—something about which I am becoming increasingly doubtful—we need to have a Bill of this kind on the statute book. As the noble Baroness, Lady Henig, reminded us, there is a lot to be done on the detail in this Bill: the balance it strikes between the Executive and the legislature; future roles of and relationships between industrial, social, environmental, consumer and trade policies, and how transparent it should all be. In Part 2 of the Bill, I hope we shall look at the devolution aspects in relation to the Trade Remedies Authority. The noble Lord, Lord Browne of Ladyton, drew our attention to this. A threat that is seen as not particularly substantive UK-wide, could be seen as significant in a devolved part of the country.
I think we shall spend quite a long time in Committee. For reasons that escape me at the moment, we are about to be sent away on holiday. It is clear from this debate that we should take advantage of our last chance before the October European Council—which was meant to be decisive—to tell the Government what we think about deal, no deal, what it might take to get a deal and what no deal would mean for our country. I shall try to go into that territory too. I shall cover almost exactly the same themes as were addressed by the noble Lord, Lord Hamilton, in his typically splendid, rambunctious speech, although I may address them in slightly different terms. There is nothing between me and the noble Lord but a fundamental disagreement.
On no deal, I am not always sure that those of us who claim that it would be perfectly fine if we were to trade with the world and have the EU trade with us on WTO terms, understand what WTO terms would mean. I exempt the noble Lord, Lord Hamilton, from this criticism. The WTO’s guiding principle—the most favoured nation principle—means that, in the absence of any agreed bilateral or multilateral free trade agreement covering substantially all trade, WTO members must offer the same terms to all fellow members. Without an EU-UK free trade agreement covering substantially all trade, the EU could not offer us terms better than it was ready to offer everyone. This is what WTO terms means. It means tariffs, queues at Calais, UK supply chain disruption and queues at Dover because the trucks have to go in both directions. I am talking only of the effect of the EU being on WTO terms in relation to us, whatever we do.
What would we do? Take the United States. In the absence of a UK-US free trade agreement covering substantially all trade—and the President is not exactly rooting for trade liberalisation—any specific concessions that Dr Fox were to offer the Americans in order to try to open up their market, he would have to offer to all third countries. This would seem to be some way down the road, if ever. These are the WTO rules. Concessions outside FTAs, covering substantially all trade, have to be erga omnes. I have not heard Mr Gove explaining this recently to UK farmers.
Going to WTO rules would mean a major economic shock. Some would say that it might be salutary. Professor Minford is all for it. Perhaps the noble Lord, Lord Hamilton, is too—I do not know. Gardeners in the Cotswolds would come much cheaper if the car factories in Swindon and Oxford were to close. The Bullingdon boys would be just fine. They could carry on giggling about two-thirds of diddly squat. The country would not be fine. WTO rules, in the absence of a free trade agreement with the EU, would hit our producers and exporters. We would have left the world’s largest single market and seen it obliged, by WTO rules, to act against our exports. In the absence of the full rollover of and continuing participation in the EU’s 40-odd free trade agreements with third countries, or newer, successor free trade agreements with all 40, WTO rules would mean that we would have to allow wider market access. If we allowed it for a particular import from one country, we would have to allow it for that import from all. Professor Minford would love it. He wants the end of all tariffs, quotas and duties. UK farmers and manufacturers would not. Prices would undoubtedly fall, but so would employment, growth and revenue.
I might be accused of setting up a straw man. The 27 have said all along that they would like to have tariff-free trade with us. It has been in all their texts. I believe they mean it. They have said all along—or for more than a year— that they would be ready to offer us a Canada-type free trade agreement. I believe they mean that too. This assumes that there is a deal. If there is no deal, there is no free trade agreement. Why? Twenty-eight member state Prime Ministers, including our own, have defined the deal. They agree that it means a framework declaration about the future, although I fear this is increasingly likely to be alarmingly vague and aspirational. It also means a treaty covering citizens’ rights, the money we owe, a backstop solution to the Irish border problem and a transition period.
If Mr Rees-Mogg, Mr Johnson and their friends have their way; if we renege on the Prime Minister’s December commitment to pay the £39 billion we agreed we owed; and if we ignore Section 10 of the EU (Withdrawal) Act—recalled by the noble Lord, Lord Adonis—and renege on the Prime Minister’s commitment to find an acceptable backstop in Ireland, ensuring the Irish border stays open, there will be no treaty. The EU will see us in court. They will want their money back. There will be no UK-EU FTA, but tariffs at Calais. There will be no EU co-operation on rollover deals on the third-country free trade agreements and the division of quotas, and there will be no transition period, but a cliff edge in less than 200 days’ time. It is not a straw man. It is a clear and present danger because it is the consequence of what Mr Johnson is advocating, even if he does not understand that.
Actually, I think the money question is settled. I was alarmed by what the noble Lord, Lord Callanan, said at our Dispatch Box this afternoon, but I was fortunate enough to run it past the Chancellor of the Exchequer in a committee upstairs and was reassured by his reaction. He confirmed that, in the event of no deal, the United Kingdom would honour its legal obligations. I never thought that we would default. We never have.
The crux is the Irish border issue. Mr Johnson complains that it is the tail wagging the Brexit dog. Mr Rees-Mogg cheerfully talks about going back to the way the border was—or, rather, was not—controlled during the Troubles. Brexiteers dare to say that the Belfast agreement, the Good Friday agreement, has run its course. I find that shaming. It is certainly not the view of the other 27 Governments. I do not believe it is the view of our Government. It is an international agreement, so the others are entitled to have a view. In my view, that is not how anyone in this House sees it. It seems to me that we all stand by what the Prime Minister has been saying about the Good Friday agreement.
If there is no secure backstop, I do not believe that there will be a withdrawal treaty or a free trade agreement. My Brussels friends tell me that there has been no sign of the backstop deadlock breaking. Mrs May rejected the 27’s proposal. Her counterproposal, the Chequers idea of a customs partnership—with all imports at all UK ports to be examined, segregated and taxed differentially and then tracked to their ultimate UK or EU destination—looked pretty implausible from the start. The implausible became the impossible when the Government accepted the ERG amendments on the customs Bill, so purporting to require the other 27 to impose the same complex dual system on their ports, clogging them up and increasing their costs. Of course they will not, and the Government must have known that. Mr Barnier has certainly said it.
What is our next trick? I see only one workable solution. It would be warmly welcomed by UK industry, commerce and inward investors. The CBI and the TUC have both called for it. The Opposition parties all favour it, and this House voted for it in April by a majority of 123. The solution—or nine tenths of the solution—to the problem of the Irish border is for the UK to negotiate a customs union with the European Union. I very much hope that in addition to all the technical improvements that I am sure we will make to the Bill, we will add to it a provision requiring the Government to do just that. I hope that it will have the support of the noble Lord, Lord Tugendhat, as it did last time.
Without a credible Irish backstop—a commitment to a customs union would be the most credible—I do not believe that there will be a withdrawal treaty. Without a withdrawal treaty, there will not be a free trade agreement any time soon and we will be thrown back on WTO terms which, as I have tried to explain, will certainly mean an economic shock. Whether one sees that as a good or bad thing is a matter of judgment. I think it is a very bad thing. It is imminent, because no treaty means no transition period.
I cannot believe that our Government would be so irresponsible as to propose a no-deal Brexit, or this Parliament so irresponsible as to permit it. I do not see the charlatans being allowed to run the show. Rather, I foresee an Article 50 extension and an exercise in democracy to establish the will of the people—the informed will of the people—when the outcome of the present negotiation, at last defining the choice before them, is clear.
I must remind the noble Lord, Lord Hamilton, who is sadly not here, that the polls show that a majority across the country now believes that there should be such a poll. So, as in Whitehall in the distant past, I still stand with the noble Lord, Lord Butler. Meanwhile, of course, I do not oppose the Bill, although, like the noble Lord, Lord Taverne, I very much hope that events will render it otiose.
Lord Horam (Con)
My Lords, my knowledge of European politics and institutions is obviously much less extensive than that of the noble Lord, Lord Kerr of Kinlochard, but I remember that, when I was Science Minister in the Major Government in the 1990s, I went to a meeting of European Science Ministers to hear presentations from eastern European countries—they were not then part of the European Union, of course—as to why we should give them a lot of money; they were rather short at the time. I noticed my Danish colleague—the Science Minister from Denmark—making ticks after every speech. I asked him what he was doing and he showed me his note. It read: “Goethe 4, Molière 2, Shakespeare 10”. Those were the languages which the Ministers from the eastern European powers were using to make their case to us. Even then, in the 1990s, English had almost become the lingua franca of the European Union, much to the chagrin of the French.
It is rather sad that just at the point when that is indisputable, we are leaving the European Union. I still regard that as a fundamental error and regret it very much. However, as the noble Baroness, Lady Hooper, said, we are where we are. We have the Bill in front of us. As others have said, the Minister presented it clearly. An important part among the four elements that constitute it is that it gives the Government power to collect data from exporters for the purposes of trade promotion. Heavens, that is needed. As the Minister said, as a nation we have been great traders, but our performance in recent years has been extremely poor. Only 11% of companies in this country do any exporting at all: 89% do not export outside the United Kingdom.
The Minister made the point that we are the 10th-largest exporting nation in the world. Yes, but about 10 years ago, we were the fifth-largest. In the past 10 years, we have been overtaken by South Korea, France, Italy and the Netherlands, and Belgium, Canada and Mexico are snapping at our heels. This is a major cause of our continuing trade deficit. We have never had a surplus, apart from two years, in the past 15 years. Those trade deficits are getting worse. The only way we balance it is to sell off our assets—as Harold Macmillan might have said, selling the family silver. That cannot go on for ever and is very dangerous in many respects.
Brexit will make this worse, at least in the short term, because you always do more trade with your neighbours than with distant countries for obvious reasons. If there is any disruption to that, we will suffer. I am glad that the noble Lord, Lord Lilley, made the point that trade deals are no panacea in this area. Trade deals are not that important. He made the point that it is really trade in goods and services and having the right kind of goods and services that matters. Therefore, in or out of the European Union, export success will require hard work over a long period: more companies involved in exporting and investing overseas in existing markets and new ones, forming long-term relationships, which will really count.
I therefore welcome the one good thing which has come out of Brexit, which is a dedicated Department for International Trade, with all the elements in one pair of hands. They are good hands: I am grateful that the Minister comes with her interesting and important experience, as did her predecessor. One thing that the House of Lords can contribute to the Government is people with real experience of business—much greater, I suspect than we have in the other place.
I also take the point made by the noble Lord, Lord Risby, that this needs to be properly resourced. The killer facts which he spelled out about the relationship between the overseas aid budget, the Foreign Office and the Department for International Trade must be looked at. That must be remedied because it is completely out of kilter. The trade promotion aspect of the Bill is very important and I wish the Government and my colleagues well on all of that.
Finally, I will say a brief word about Brexit itself. The people have spoken and it is the Government’s job to deliver on Brexit as competently as possible. I totally accept that a lot of time has been wasted, though it is not entirely surprising given the strong feelings involved. We now, belatedly, have the Chequers proposals. I flag up the report from the External Affairs Sub-Committee of your Lordships’ European Union Committee—of which my noble friend Lord Risby and I are members—which will come out in 10 days’ time, more or less the same day as the Salzburg meeting. It goes into the customs aspect of this and is well worth a read, as many House of Lords Select Committee reports are.
The Government’s Chequers proposals are, without question, hideously complex. They have received a very poor initial reception both in the UK and, more importantly, in Europe. However, pushing aside for the moment the politics of the matter—difficult to do, I agree—they have very considerable merits in terms of trade in goods. The proposals deliver frictionless trade; there are no tariffs, cumbersome customs controls or rules of origin. There is no halt in the just-in-time arrangements which we have come to rely on in this country for the manufacture of motor cars and so forth. There is no hit on inflation because there are no tariffs and, in that respect, little disruption to trade in Ireland. Although they are not liked by hard-liners on the Brexiteer side or the relentless remainers on the other, that may be an advantage, given that the vote was 52% to 48%. People on all sides, whatever their opinion, should begin to realise that there comes a time when you have to compromise. If we expect Brussels to compromise and we have to too, people in the UK should begin to realise that they have to do it as well.
Latterly I have noticed that Brussels has begun to change its tone. I agree that it is only a change in tone, not in the content, and that is therefore less good, but the dogmatic legalism which my colleague Mr Raab pointed out is less obvious. There is a sense of a more pragmatic political approach. I agree with my noble friend Lord Tugendhat that it would be almost miraculous if some sort of agreement came in the way that we hope. Many, many hurdles have to be overcome, but it can be done and I hope it is. If the Prime Minister does achieve an agreement along these lines, it would be a great triumph for her and would deserve support from inside Parliament as well as outside.
Lord Liddle
My Lords, speaking as one of what the noble Lord, Lord Hamilton, so kindly described as the unreconciled, I do not like this Bill. It is an unnecessary Bill in pursuit of a foolhardy objective of having an independent trade policy, which is not actually required by EU withdrawal. Far from being technical and pragmatic, as the noble Baroness, Lady Fairhead, said in her introduction, it is actually a matter of ideological choice. It is a very bad choice to pursue this independent trade policy because the most obvious way of cutting the Gordian knot of frictionless borders and the Northern Ireland problem is for us to stay members of the customs union. I hope that, in Committee, the House will return to the question of the customs union and the European Economic Area. I was interested in what the noble Lord, Lord Cooper, said about public opinion and the public’s expectations of what Brexit would mean. The pursuit of an independent trade policy comes very low in the public’s priorities. Safeguarding our trade through membership of the customs union and single market is much higher.
This is a very misguided Bill, and I do not believe that the Government have presented any kind of evidence for the benefits of the UK having an independent trade policy. Could the Minister tell the House what research work the Department for International Trade has done on this question? If it has done research papers, why have they not been published? What are the gains that we believe we would achieve as a result of being able to conduct our own trade agreements as opposed to retaining the benefits of the single market which we are clearly on the point of losing?
The case for this independent trade policy is weak, and I have heard two arguments that for me completely destroyed the case. The first was a lecture by Sir Martin Donnelly, who was Liam Fox’s Permanent Secretary, in which he demolished the Government’s arguments for the policy, point by point. He ended up with the wonderful line that it was like forgoing a three-course dinner for a packet of crisps. That is what I believe it to be. The second was in this House when, on 18 April this year, we heard the most wonderful speech from the noble Lord, Lord Patten of Barnes. He took the Government apart on this question. I recommend that every Member of this House should read it. On all these Brexit questions, the Government have always completely failed to provide any rebuttal of serious intellectual arguments made against these ideological policies.
The Government have an aspiration for an independent trade policy but, beyond that, they are very confused. There is tremendous tension on the question of what we are trying to do. Are we prepared to sacrifice standards in order to get trade agreements with countries such as the United States? Michael Gove says we are not. So what sort of trade agreement are we going to be able to negotiate with the United States? In the Brussels negotiations on the withdrawal agreement, the Government are hanging out against the protection of geographical indications—the Scotch whisky-type thing—precisely because they know that that kind of protection is the sort of thing that the US trade negotiators would be going for straightaway, as soon as we tried to negotiate an agreement with them. I have a local worry about this. Cumberland sausage is about to suffer; it is going to be sacrificed on the ideology of this Government’s commitment to an independent trade policy. What a disgrace.
Another serious point is the one about rules of origin, which I raised with the noble Baroness, Lady Fairhead, in her clear introductory speech. I have not heard any satisfactory answer from a Minister on how this problem is going to be dealt with in the rollover of existing EU trade agreements. The very serious problem that gets in the way is this business of trying to pretend we are still in the EU when we are not, yet being able to negotiate our own deals because we are not in it. Yet, in order to have the rules of origin provision, we have to pretend that we still are. This is the total confusion of the Government’s approach to these negotiations.
The noble Lord, Lord Lilley, made a good attempt to justify the independent trade policy, but I rather agree with the noble Lord, Lord Horam, that the key question is competitiveness rather than trade deals. You have to ask yourself the question: if the EU is such an obstacle in its trade agreements to British success in export markets, why are the French and Germans beating us around the world hands down? It is not because of the EU but because we have fundamental problems of competitiveness that we have to address. On the argument about Switzerland, as I understand it, the Swiss have been unable to get any services provisions in their negotiations with China, and the argument that small countries are able to negotiate big deals is simply wrong about the modern world. When President Juncker of the Commission went to see Donald Trump, he managed to get him to back off from imposing industrial tariffs on the European Union. Why? Because the European Union is a very big market, and Trump thought that it was much better politics to have a go at China.
What we have here is basically an ideological obsession, which I am afraid is delusional, and I wish that the Government would abandon it so that we could have a soft Brexit around which a national consensus could be established.
Viscount Trenchard (Con)
My Lords, I thank the Minister for her clear and well-presented introduction to this debate. I also add my congratulations to my noble friend Lady Meyer on her most interesting and moving maiden speech. Like her, I have also lived and worked in Brussels and, like her, my feelings about the European Union were affected by my experience. I also strongly support what my noble friends Lord Risby and Lord Tugendhat said about the crucial need to protect and restore as far as possible the Foreign Office budget.
Last week, we had an opportunity to debate the customs Bill, which, as a money Bill, did not provide your Lordships with an opportunity to try to improve it. Your Lordships strongly rejected the regret Motion moved by the noble Baroness, Lady Kramer, on behalf of the Liberal Democrats, which sought to ensure that the UK would remain a member of the customs union and the single market. As the House is well aware, to remain in either would effectively prevent the country regaining the authority to make its own laws in this Parliament and would leave it powerless to negotiate new trade deals and resume our natural role and destiny as a free trading nation with an influential voice in the WTO and other international institutions.
The Trade Bill is absolutely necessary, whether we reach agreement with the EU on something like the Chequers proposals, negotiate a Canada-plus-type free trade agreement with the EU, or leave the EU without agreement and trade under WTO rules. Its purpose is to provide continuity in our current trading relationships with some 40 agreements with around 70 countries. If an implementation period with the EU is agreed, this should not be too difficult, but in the event that we leave without a deal, the Government will be under serious time pressure to roll over all those agreements in the time available.
Still, it should be remembered that our trade under these agreements covers only 12% of our total trade, and I imagine that a small number of those agreements account for a large majority of this. Can the Minister say how many of these agreements need to be rolled over in order to protect, say, 80% of our total trade under those agreements, and is she confident that we can achieve this in the event of leaving without a deal—in other words, move to trading with the EU under WTO rules as we do at present for all our non-EU trade? My noble friend Lord Lilley has mostly answered that by saying that over half of this trade is covered by Switzerland, Norway and a couple of other countries.
Those who seek to ensure that we remain as closely tied as possible to EU regulation in order to protect our existing trade, even to the extent of making us very unattractive as a new potential trade partner, are wrong, because they seek to protect the status quo, good and bad bits alike, and do not recognise the upside potential of being free once more as an independent nation to enter into new bilateral and multilateral trade agreements. They are also wrong because they seriously overestimate the threat to our existing trade.
I was encouraged to read in the Chequers proposals that the Government seek “potentially” to accede to the Comprehensive and Progressive Trans-Pacific Partnership, although the inclusion of the word “potentially” sounds alarm bells. Does the Minister agree that the degree of continued alignment with EU rules and regulations, especially the proposed subordination to a common rulebook, makes it questionable that we would be acceptable to the other members of the CPTPP as a partner? If under Chequers we are unable to take advantage of opportunities such as this, it negates the benefits of leaving the EU.
I doubt that the CPTPP countries would be willing to contemplate a restricted form of membership covering services but not goods. As Policy Exchange’s excellent paper Trading Tigers explains,
“comprehensive liberalisation across goods as well as services and investment”,
is,
“one of the core unifying principles”,
on which the partnership is founded. The CPTPP is not a customs union, and members are free to set their own external tariffs. Neither does it have,
“a common set of regulatory standards but seeks to harmonize regulations for those standards members have agreed to”,
harmonise. It therefore does not involve integration at the depth of the EU single market. Six of its members are Commonwealth countries, including Australia, New Zealand and Canada. It also includes Japan, whose Government have already expressed support for the UK’s accession. When fully implemented, it will eliminate 98% of tariffs among its members. It achieves more than most bilateral FTAs and much more than what the WTO has been able to achieve.
I am not sure whether the Government are planning to novate or enter into bilateral FTAs with countries such as Australia and Japan first and then later consider entering into multilateral partnerships such as CPTPP. Would it not be much easier and quicker just to apply to accede to CPTPP at a stroke? That would give 11 for the price of one, as it is not necessary also to have separate bilateral FTAs with each member. Besides, it might be 15 for the price of one, as four other countries have indicated that they wish to join soon. It is important to push ahead now with exploratory discussions with CPTPP member countries, and the fact that we were doing so would encourage the EU to be more reasonable in its approach to the UK. The UK’s accession to CPTPP might also encourage the United States to reconsider its decision not to join. It is also notable that Canada’s trade agreement with the EU, CETA, does not prevent its accession to CPTPP, which gives confidence that the UK’s accession would not be incompatible with a Canada-style deal with the EU.
As a result of an amendment to the Bill supported by another place, the Bill somewhat strangely deals specifically with the UK’s future relationship with the EU solely in the medicines sector. If full participation in the European medicines regulatory network is achieved as part of our withdrawal agreement, it will mean that the UK will be bound to follow evolving EU rules in this sector without any direct control over the formulation of those rules. As I mentioned during the debate on the customs Bill, I think this may well act as a disincentive to investment in the UK by international pharmaceutical companies.
I lived and worked in Japan for 11 years and continue to visit regularly. During my visit to that country in July, I met the CEO of a major pharmaceutical company which has made significant investments in research and development in this country. I have known him for over 40 years. He told me that, while he did not initially welcome Brexit, he was now looking for the upside of the UK’s escaping from the very bureaucratic EU regulation covering the sector. His company has invested a considerable amount in its “Plan B”, by changing its corporate structure and framework to ensure that it can continue to supply medicines in the UK and EU after Brexit, as it does now. He told me he believes that, whatever happens, the UK will continue to be the best country in the world in which to conduct pharmaceutical R&D and to innovate new treatments.
He expects that a future UK regulatory framework, while appropriately protecting patients from exposure to potentially harmful new products, could provide a more supportive regulatory regime, which will not give excessive weight to the precautionary principle when this is not supported by facts. It seems to me that he and others who think the same way will be disappointed if the UK does not institute its own independent medicines approvals mechanisms. Obviously, products developed for export to the EU will have to continue to comply with the letter of EU rules, but that need not unnecessarily impede our adopting a less restrictive, more innovation-supportive regime to develop products for the domestic market and for the wider world.
The noble Lord, Lord Grantchester, said that a trade bloc, in its ability to negotiate trade deals, is more powerful than an individual nation state. I cannot agree with the noble Lord. Rather, I wholly agree with my noble friend Lord Lilley, who clearly explained why it is so much easier as a single country to negotiate an FTA. I add that, in most EU trade agreements, the benefit accruing to the UK is proportionately much lower than for all other EU countries. I support the Bill and trust that your Lordships will not seek to obstruct it.
Lord Wigley (PC)
My Lords, I am delighted to follow the noble Viscount, Lord Trenchard, although I cannot possibly agree with him on most of what he said, particularly not on his last comments about medical products. I invite him to reconsider very carefully what he said about the precautionary principle not being overused where facts were not available. Surely the whole point of having a precautionary principle is to deal with cases where the facts are not always available, as a means of making sure in such cases. My real fear is that deregulation is going to drive us down this road and leave vulnerable people exposed. I also congratulate the noble Baroness, Lady Meyer, on her moving maiden speech, which I think was very well received in the House.
I can understand the logic of the Bill before us tonight, but it is a sideshow compared with the main issue, as outlined so clinically by the noble Lord, Lord Kerr. As noble Lords might expect, I shall be looking from the viewpoint of industry, business and consumers in Wales, as well as in the context of the powers of devolved Administrations. As I understand it, the Scottish Government recommended against giving legislative consent to the Bill, and the Welsh Labour Government said that amendments would be needed before they could recommend legislative consent. Government amendments to the Bill made in the House of Commons reduced the restrictions on devolved Ministers’ use of the relevant powers but did not address all the concerns raised by both the Scottish and the Welsh Governments. I noted from the Minister’s opening comments that the Government are willing to conduct further discussions with the devolved Governments. I very much hope that the House can be kept informed of progress on this, as was requested by the noble Baroness, Lady Henig, a few moments ago.
In this context, I seek an assurance from the Minister that nothing in the Bill will restrict the Welsh Government from maximising the extent to which their procurement policies encourage expenditure to go to suppliers in Wales, within the context of the existing EU guidelines. This is so that the Government’s expenditure in Wales can help to support the Welsh economy—something which has been done very effectively over the last 10 years. I also flag up the issue touched on by the noble Lord, Lord Browne of Ladyton, in relation to geographic labelling, which other colleagues also mentioned, including Scotch whisky, Welsh lamb and Cumberland sausages. I hope there will not be any question of these being actively discouraged as labels by the UK Government. The issue is already a hot potato in Wales, as was shown in the Royal Welsh Show in Builth in July, when it became a very controversial issue indeed. It is undoubtedly a matter that will cause rancour, and—I suggest to the Government—unnecessarily so.
Notwithstanding the comments of the noble Lord, Lord Tugendhat, I suspect that many colleagues on all sides might wish to ask the House of Commons to consider again an amendment requiring the Government to seek to remain in the customs union with the EU if it cannot negotiate a frictionless free trade area. I note that attempts to secure this in the Commons were defeated by a majority of only six votes, and that was after a considerable amount of arm-twisting. If the Government insist on pulling us out of the single market and customs union, their action will scrap existing free trade deals with over 50 countries outside the EU, as well as endangering our trade with the 27 member states themselves. That, of course, is what this Bill is all about.
Trade with third countries with which we have free trade agreements arising from our membership of the European customs union account for almost £140 billion of UK trade. If we were to lose, even for a transitionary period, any significant proportion of that trade, it would have a major effect on the UK economy. In moving Second Reading, the Minister claimed that the Bill will simply translate those deals into domestic legislation. However, the Bill’s Delegated Powers Memorandum describes the process of,
“transitioning EU-partner country trade deals into UK domestic law”,
as “uncharted territory”. Furthermore, the Bill’s own Explanatory Notes admit that:
“It may also be necessary to substantively amend the text of the previous EU agreements … so that the new agreements can work in a UK legal context”.
We are reliant on the immediate co-operation of 50 nations with which we have existing deals if those deals are to continue. That is something that the Secretary of State and his chief negotiator, Crawford Falconer, admitted in oral evidence, which they gave to the International Trade Committee on 1 November last year, to be matters on which they have been unable to secure guarantees. I understand that we still do not have cast-iron guarantees on those matters. Will the Minister tell the House what evidence she has that this has changed since last November? And in doing so, will she indicate whether the public consultations launched by the International Trade Secretary, Liam Fox, on 18 July, on potential future trade deals the UK might seek with the US and New Zealand, have proven to be fruitful in any way?
It seems to me that President Trump is blowing hot and cold on the promise of a trade deal with the UK in the wake of the Chequers declaration, and that this bodes badly for any assumption of an automatic endorsement on rollover agreements from such unreliable partners. I also ask the Minister, in this context, to address the issue of New Zealand’s opposition to the EU and UK’s proposal to split tariff rate quotas on lamb, which is clearly a matter of huge significance in Wales. In leaving the EU, the UK will have to separate its tariff rate quotas from the EU, and its new schedules would be subject to approval by all WTO members. New Zealand might well choose to block such approval.
I now return to the implications of this Bill for the devolution settlements in Wales. It seems to me that the Government are indeed ignoring the existing pattern of devolved powers and the engagement of devolved Administrations in helping to formulate new trade agreements. The Welsh Government have a responsibility for the economic development of Wales; they receive financial assistance from the EU for that purpose. The success of Welsh agriculture and industry in exporting its products is fundamental to the well-being of the Welsh economy. The Welsh Government have, over the past 19 years, undertaken a wide range of initiatives to boost Welsh exports for the benefit of both our own economy in Wales and that of the UK, and they have of course done so most often in partnership with the UK Government. We need to build on that, and in the post-Brexit world we need to harness all such resources. The UK Government should be seeking a new and ambitious role for the devolved Administrations that will ensure that they have a real say over important issues that impinge on their responsibilities. If the UK is a union of equals, the Government should really start to understand this.
Time is squeezing and I point out only that over the last year consideration has been given, in the context of securing some understanding between the devolved Administrations and the UK Government, to the need for the existing Joint Ministerial Committee to be overhauled and rebuilt into a statutory UK Council of Ministers covering the various aspects of policy for which agreement between all four UK Administrations is required. In my opinion, any future trade deals should require statutory endorsement by the devolved Administrations, and in this context there should clearly be Welsh and Scottish representation on the new UK Trade Remedies Authority.
The degree of wishful thinking on which this Bill is based beggars belief. I hope only that the Government will face reality: they cannot expect to have all rollover trade links in place by 29 March next year, less than seven months away, and, in a panic to achieve that wholly artificial and unnecessary deadline, they will sell out on myriad issues in order to get nominal trade deals in place in time. This is not the way to conduct international trade agreements. In considering the Bill in detail in Committee, this House should do its utmost to force the Government to face up to the folly of a rushed Brexit and, more than anything, enable the other place to think again on the central issues of an ongoing customs union relationship with our European partners, which would make this Bill totally unnecessary.
Lord Cavendish of Furness (Con)
My Lords, however much I disagree with the noble Lord, it is always a pleasure to listen to him and I admire enormously his commitment.
I thank and congratulate my noble friend the Minister on her elegant opening speech explaining to the House the purpose of the Bill. It is a technical Bill, in my view. I recognise that it is important and I wish it safe passage, but I will leave it to others better qualified than me to comment in detail on its contents.
I have grown accustomed to addressing your Lordships as part of a minority whose members believe, as I do, with some passion that it is in the best interests of this and future generations that my country is out of the European Union. However, today’s debate is about trade and I share with others a burning interest in the subject. Although I believe that becoming once more a self-governing country trumps all other considerations, I also say with absolute conviction that, with or without a deal, Britain will prosper mightily outside the EU, and I shall give your Lordships my reasons for saying so.
I speak today as a minority in one other respect. I have listened patiently over many months, and even years, to lectures about trade from the large cohort of people who lay claim—many with some justice—to having made significant contributions to Britain’s trading performance. However, for the most part, these very clever people have never traded so much as a brass button in their long and distinguished careers. That they make a contribution is beyond doubt, but it is one, I venture to suggest, that should be kept in perspective. As with previous debates, the mandarin class told us all how the country was not clever enough to understand the issues, and I will come back to that in a moment.
Meanwhile, I declare an interest. Although I relinquished chairmanship of my family’s business, I remain involved, and details of my interests appear in the register.
The SME sector, to which my family business belongs, accounts for some 90% or more of UK businesses. It is a sector that has difficulty in making its voice heard; we are usually too busy to go to those seminars and conferences so well attended by officials. Personally, I have traded goods and services for more than half a century and have operated in a huge array of markets around the world, including some quite challenging ones—at least, I remember thinking as I was trying to secure an important export order that being kidnapped at gunpoint in a South American jungle was a little out of the ordinary. I succeeded in securing it, as it happens.
I agree with my noble friend Lord Risby that the role of our ambassadors is hugely important. Looking back over some years, from my perspective a good ambassador meant that you did trade, certainly in Latin America, and a bad one meant that you did not. It was as simple as that.
My main point, however, is that the endless and often tedious debate about trade deals tends to obscure the fact that there would be no trade without British companies being able to produce goods and services that overseas customers want to buy at prices they can afford—a point made very forcefully by my noble friend Lord Lilley. To those who wag their fingers at me and say ad nauseam that business needs certainty, I shall respond as gently as I can and tell them that they are talking tosh. Conceivably there are some big tier 1 companies that, without fail, and without much effort, receive a monthly order from Her Majesty’s Government and operate at negligible risk, but never—literally never—in my working life have I woken up to certainty; nor have I wanted to. Certainty is not a feature of normal commercial life.
I have made the point before that I find little evidence that the Government and their official class place much value on the SME sector. Regulation, high taxation—much of it stealthy—and a generally hostile environment among the numerous public bodies that impact on our lives combine to erode margins and discourage investment. My own family business recently deferred—perhaps indefinitely—a £13 million local investment that only a few years ago would certainly have gone ahead. That may sound like small beer but if others do likewise as real returns diminish and risks increase, then I fear for the future.
However, that is as nothing compared with the hostility that the SME sector faces from EU institutions. Brussels plays host to tens of thousands of lobbyists paid for by big business. Their job is to influence officials so that regulation is framed to benefit their companies and, more importantly, harm their smaller competitors. Lobbyists become especially active and vindictive when they spy a small competitor coming over the horizon. I have personal experience of that and I am pleased to put on the record that, after a seven-year battle, we fought off a significant fiscal injustice with the valuable support of Her Majesty’s Treasury.
We all understand and accept the need for regulation. However, I can think of no regulation that does not entail cost, and that cost will always fall disproportionately on the smaller enterprise. It will also curtail innovation unless the burden is kept to a minimum.
In economic terms, the real benefit will accrue to Britain outside the EU from policies of free trade. History teaches us that this path is not always painless—and I do not expect this one to be—but it is always successful where the political will exists to see it through. Precisely because the European Union is a protectionist organisation, one of the great benefits of leaving it is that the consumer—that person whose cause is so rarely championed in Brussels—will be substantially rewarded by not having the common external tariff. Benefits will ultimately flow from abandoning the indefensible CAP and the morally loathsome fishery policies.
Another advantage for trade will be escaping from the corruption that is endemic in the EU. In 2014, the Commission reckoned that corruption cost the EU €129 billion—not far short of the EU’s annual budget. The promised update from the Commission never materialised. However, a study commissioned in 2016 found that those costs might be as high as €990 billion —that is, eight times higher than previous estimates. I have not invented those figures; they were commissioned by the European Parliament. Therefore, it can hardly come as a surprise to hear Mr Drago Kos, chairman of the OECD working group on bribery, say:
“It is obvious that the fight against corruption has never been a priority for the EU”.
EU officials lecture us interminably about the importance of rules while, without blinking, driving a coach and horses through their own rulebook whenever it suits them. If you add to that the squalid scandal of the recent promotion of Mr Martin Selmayr, I wonder whether there is any limit to the Commission’s bad practice, which does not fall short of that of the worst kind of banana republic.
The party opposite, not being the party of government, is entitled to the luxury of not having to explain too precisely its policies. Given that a large number of its supporters voted to leave and given its manifesto commitment, I think it is time we had a clearer idea of where it stands. I have asked over the years whether the Labour Party cares about the inhuman impact of the EU on real people, and I shall probably address these questions particularly to the noble Lord, Lord Grantchester, who brought up the human qualities of the EU. Do its members care, I wonder, as professed internationalists, about the Europe-wide astronomical levels of youth unemployment or the fate of the Greeks? Does the impact of the common external tariff on the poorest in our society bother them at all, with a tax of between 18% and 20% on clothes, footwear and food? Are they concerned about the protectionism implicit in a customs union that damages poor developing countries? Finally, do they look at the EU and not see the huge risk of remaining in that dreadfully flawed construct, that lurches from crisis to crisis studiously ignoring the suffering of its citizenry? No, I fear that the party has morphed from a movement that once championed the poor and the vulnerable into a smug, self-satisfied elite that feels most comfortable talking to itself inside the borders of the M25.
More generally, given that this House is so strongly remain, I wonder if noble Lords ever reflect on the strange fact that this is probably the first time in modern history when the expression “Peers and people” has lost its meaning: gone for ever, I fear, is the public perception that the House of Lords is on the side of the people. Aside from the class—and the individuals within it—that benefits from EU largesse, and socialists who love to redistribute our hard-earned cash without needing to account for it, I remain utterly baffled why normally sensible people should want to bind themselves to the midden of corruption and venality that is the modern EU.
The people understand, as we all do, that the consequence of unaccountable power is not sometimes a car crash: it is always a car crash. They understand, as we all do, that uncontrolled corruption has appalling social and political consequences, and its chief victims are always the poor and vulnerable. I hope that they understand, as most of us do, that the rule of law that evolved in this country over 1,000 years, and was exported successfully to the rest of the English-speaking world, has held citizens in good stead and guaranteed their freedom. The institutions of the EU have become terminally infected with all the most pernicious viruses that one associates with rotten self-serving governance. The country voted for a new and glorious dawn. It understood perfectly what it was voting for. It is not just time that we left: our departure is long overdue.
Lord Livermore (Lab)
My Lords, it is a privilege to speak in this debate with so many who are expert in this field. It is a pleasure to follow the noble Lord, Lord Cavendish of Furness, although I do not think that I agree with anything that he said. I also join other noble Lords in congratulating the noble Baroness, Lady Meyer, on her powerful and fascinating maiden speech.
I will concentrate my remarks on the provisions in this Bill to implement an independent trade policy, and to transition the existing trade agreements between the EU and third countries. I will focus on these provisions because they neatly encapsulate the futility of the Brexit process, which involves recklessly dismantling all the benefits that we currently enjoy, with the promise of a better—but as yet unspecified—replacement at some distant point in the future, only for us to end up in a far worse position than we started with.
When this Bill was debated in the House of Commons—and this point was repeated by the Minister in her opening speech—the International Trade Secretary, Liam Fox, said that it was about,
“continuing what we have at the present time”.—[Official Report, Commons, 9/1/18; col. 210.]
What then, we might ask, is the point of it? Why are we expending huge amounts of time and energy? Why are we setting ourselves red lines for the negotiations that are proving impossible to reconcile with each other, and threaten to scupper the chances of any exit deal at all, with the hope only of continuing what we have now? Surely such effort is worthwhile only if we end up with more trade than we had before?
As the noble Lord, Lord Cooper, made clear in his speech, the point is certainly not to honour the referendum result. Only 12% of the public even recall independent trade deals ever being mentioned in the course of the referendum campaign. The fear must surely be that once again theological obsession is being allowed to take precedence over the economic well-being of our country. As my noble friend Lord Browne of Ladyton argued earlier, the central question must surely be: is the goal of simply maintaining what we have now itself realistic?
Noble Lords will know that the UK is currently party to more than 40 EU trade agreements covering more than 80 third countries. Indeed, the EU has trade deals in place with more countries than the US, China and Australia combined. These third-country trade deals amount to 15% of the UK’s total trade, over and above the trade we do with the EU.
The Government have acknowledged that transitioning these existing trade agreements will not be a matter simply of rolling them over, but they have not yet explained how they will be replicated. Other countries will need to agree to transition their existing agreements without asking for substantive changes, otherwise the UK will need to renegotiate many, or possibly all, of these agreements before we leave the EU.
At last year’s Conservative Party conference, Liam Fox said:
“Well believe me, we’ll have up to 40”—
free trade agreements”—
“ready for one second after midnight in March 2019”.
I would be very grateful if the Minister could confirm, when she responds to this debate, whether the Government remain confident of achieving this commitment, on this timescale, and update us on how many third countries have so far agreed to roll over their existing trade agreements on the exact same basis as now.
In reality, renegotiation will be complicated because of rules of origin, clauses tied to service sectors and investment flows, mutual recognition and tariff rate quotas. It will take only one of those 40 countries to renegotiate their existing agreement to our detriment for us to be in a worse position than we are now as a member of the EU. Furthermore, if we were to leave the EU with no deal, Britain would be the only country in the world which did not have a single trade agreement with anyone else. In fact, I might be wrong. I believe that there are two countries in the world that trade only on WTO terms: Venezuela and Yemen. Quite an ambition for a country such as ours.
This Bill is necessary only because of the Government’s decision to leave the customs union and the single market—a decision taken without first undertaking any economic analysis of the consequences. With Europe on our doorstep, the UK’s current annual trade with countries in the customs unions is £466 billion. It is estimated that leaving the customs union would cost the UK £25 billion every year, and leaving the single market some £45 billion. New tariffs alone would cost UK exporters £4.5 billion a year. HMRC has estimated that new customs checks would increase the cost of imported goods to businesses and consumers by 24%. The National Audit Office estimates that the number of customs declarations each year will increase from 55 million to 255 million and that UK-based companies will have to comply with far higher levels of bureaucracy and additional costs. To take just one example, Honda, which is based in Swindon, receives 2 million components every day thanks to the free and frictionless movement of goods. Outside the customs union, to store the minimum nine days-worth of components on site, it would need to build the third-largest building on earth, measuring 300,000 square metres—the size of 42 football pitches. The Government have repeatedly committed to delivering a future trading relationship with the EU that has the “exact same benefits” as we currently enjoy, yet they have no realistic, viable or acceptable proposal to do so.
The Cabinet spent several months of valuable negotiating time arguing over either a streamlined customs agreement or a customs partnership, neither of which was actually workable and both of which had already been rejected by our negotiating partners. When the Prime Minister chose between the two, it prompted the resignation of her Brexit Secretary and her Foreign Secretary, and it was promptly and predictably shot down by the EU. We now have the spectacle of the Government unable to save their Chequers proposals but without any credible strategy to put in their place, while the more extreme Brexiters in the European Research Group have abandoned publishing their alternative plans for fear that they could be “too easily ridiculed”.
We have frequently been told that the great prize of Brexit is the ability to strike free trade deals with new countries. Presumably for Brexit to be worthwhile, the new trade deals would, at a minimum, replace the trade with the EU that by the Government’s own admission would be lost by leaving the customs union and the single market. Yet many of the countries cited as targets for new trade deals barely compare to the nearly 50% of our trade that is currently with the EU. Australia accounts for just 1.7% of our trade, India 1.7%, Indonesia 0.2% and New Zealand 0.2%. According to analysis by the National Institute of Economic and Social Research, the estimated increase in UK trade from free trade agreements with Australia, Brazil, Canada, India, Indonesia, New Zealand and the US combined would be less than 5%.
By contrast, leaving the single market would see a reduction in UK trade of between 22% and 30%. Even the Government’s own analysis shows that new free trade deals will add only between 0.2% and 0.7% to UK GDP, compared with their own estimate of a 5% reduction in GDP from leaving the single market. Moreover, the long-term benefits of a free trade deal with the US, their most prized goal, are estimated by the Government to be worth just 0.1% to 0.3% of GDP. As my noble friend Lord Liddle pointed out, Sir Martin Donnelly, former Permanent Secretary at the Department for International Trade, has said that leaving the single market and the customs union to seek new trade deals is like,
“giving up a three-course meal now for the promise of a packet of crisps in the future”.
These economic effects are to say nothing of the practical difficulties. New agreements will take many years to negotiate, with huge trade-offs and large countries holding the whip hand in negotiations. Third countries will not be in a position to even start negotiations until they know what the UK’s future trading relationship with the EU will be, which currently looks several years away. Agreeing an independent status at the WTO will not be straightforward, with the US, Canada and Brazil already raising concerns. In talks with the US, negotiators will demand that the UK lowers its environmental and food standards and accepts products such as hormone-treated beef and chlorinated chicken, while US healthcare companies will lobby for the right to bid for NHS contracts. What is more, all this relies on dealing with President Trump, who is yet to show himself as an advocate of mutually beneficial trading relationships.
It is clear that transitioning existing trade agreements on the same beneficial terms we currently enjoy cannot be taken for granted. It is also clear that new trade deals with other countries will not remotely come close to making up for our lost trade with the EU, the largest free trade area in the world. The reality is that this Bill will reduce UK trade, not increase it or even maintain it. On trade, as with so much of Brexit, the damage will be huge, the benefits illusory and the reality so very different from the promise. The case for giving not only Parliament but the people a meaningful vote on the final deal is ever more compelling.
Lord Lansley (Con)
My Lords, it is a pleasure to follow the noble Lord, Lord Livermore, not least because I did find occasion to agree with him on certain points. I was particularly pleased that he reiterated the metaphor used by the noble Lord, Lord Liddle, because those of us who are gathered here at the moment are all giving up our three-course dinners for the purpose of Brexit.
I join with others in congratulating my noble friend Lady Meyer on her maiden speech. The character of what she had to say, her heritage, experience and proven values all demonstrate what a valuable addition she will be to our debates and to the House. I should like to add from my own point of view that this is the first occasion on which I have spoken this year. My medical treatment made it very difficult for me to participate in debates until now, so I am particularly grateful to colleagues for their many kindnesses over that period. I want to put on the record that this House is a very good place for looking after people. Lastly, I draw attention to my entry in the register of interests, in this instance my co-chairmanship of the UK-Japan 21st Century Group. Six parliamentarians from this House and the other place were in Japan the weekend before last for the annual conference of the group, so perhaps I may return to the issue of Japan. I agree with much of what my noble friend Lord Trenchard had to say; he understands Japan extremely well.
My noble friend Lady Fairhead gave us an excellent introduction to the Bill, and she spoke very well back in December in our previous debate on trade policy. I agree with her that the Bill is necessary to ensure continuity. There is a frustration, made perfectly clear by the noble Lord, Lord Livermore, at the effort that is having to be expended to maintain the status quo. This is part of that effort. However, in this instance, if we go down the path of Brexit—especially if we do not have a withdrawal agreement in place at the end of March next year—the need to have this Bill in place is obvious to all.
Few noble Lords have mentioned the Trade Remedies Authority. It is important that a shadow TRA is in place, even if there is an implementation period and the European Commission continues to exercise those responsibilities during that period. Many years ago, I was responsible for the generalised scheme of preferences in the chemical industry at the DTI and anti-dumping cases. I know that the degree of knowledge one has to acquire of not only the trade environment but the industry to which those remedies are to be applied—internationally, too—is not acquired quickly. It is the product of long and sometimes exhausting work. Getting a Trade Remedies Authority up and running is a priority for us, even if it takes the best part of two years before it is imposing remedies.
My main point concerns the customs union. I will not repeat what was said by the noble Lord, Lord Kerr of Kinlochard— he said it better than I could and I agree substantially with him—but I want to come back to the customs union, which I voted for in the withdrawal agreement legislation. My noble friend Lord Tugendhat said that we asked the Commons to think again and it did, but answered that it did not endorse this point. Of course, the other place was not strong-armed into it, as I think somebody said. I know colleagues there who supported this matter, a significant number of whom did not support that amendment because they supported the Chequers deal and wanted it to go ahead. In a nutshell, if we could get everything that the Government are looking for in the Chequers deal, including no rules of origin, frictionless trade and diagonal cumulation—meaning that in the free trade agreements, local content in the UK is treated as EU content and vice versa—we would be pretty close to what we genuinely need. That is the beauty of the Chequers deal. If the EU sign up to it, all will be well and good. But it may not, and the point at which it may not because it regards the deal as trespassing on too many of its red lines is the point at which colleagues in the other place will have to reconsider whether we should be in the customs union or out, on a no-deal basis. That is a different question, on which they should be asked to think again. Frankly, I suspect that during the passage of this legislation we will have the opportunity and occasion to reconsider the issue in broadly those terms.
As my noble friend Lord Trenchard said on Japan, it is very clear that we should be moving through a sequence and grandfathering the EU-Japan agreement. People are asking whether Japan will do it; the answer is yes, because it does not think that the agreement is long term. It is very pleased about and supportive of us joining the CPTPP, which offers us some advantages. For example, the e-commerce provisions in the TPP 11 agreement significantly benefit our strong digital market offer, relative to what is in the EU-Japan agreement, so there is a reason to transition to that multilateral agreement. As part of talking about our future trade policy, we should look for such opportunities, specifically multilateral trade arrangements. There is a reason why President Trump likes bilateral agreements: in a world of purely bilateral agreements, might is right, and more often than not, he will win on a straight bilateral trade negotiation because of the sheer weight of his economy. Frankly, that is why we are in the EU: to give us the weight in trade negotiations to counterbalance the United States, and now China. He fights those battles thinking that he still has the weight to do so. We should not allow him to go down the path of bilateralism and dismantling WTO machinery, as referred to by my noble friend Lord Tugendhat. That is what he aims to do and we must frustrate him by being advocates of multilateral agreements across the globe.
I have two final points. First, supporting the WTO also means reforming it, which we have not talked about. Perhaps we will be able to introduce some of these issues in debating the Bill. We should be very clear: the WTO should do more on e-commerce, mutual recognition of standards on an international basis—as President Obama set out to do in 2012, although he did not get very far—and developing the General Agreement on Trade in Services, which it is in our interest to push through in that forum. As my noble friend Lord Tugendhat said, we should make sure that the dispute settlement works because at the moment, that is the one bit of the WTO that everybody has to rely on more than anything else and the Americans are trying to dismantle it.
Secondly, I will not reiterate everything that has been said about trade promotion and export support, but FTAs are only as good as the use we make of them.
Many points have been made by my noble friends Lord Lilley, Lord Horam and Lord Cavendish, and others, about the necessity of supporting export promotion. It is not just about government; it is about industry’s capacity to do it. When I was deputy director-general at the British Chambers of Commerce, we introduced the active exporting scheme and ran the Export Marketing Research Scheme. The trade bodies and the chamber of commerce movement could—and should—come in and support the Government internationally. Look at the Handelskammern in Germany and what they are able to do in support of German industries. I encourage us also, in debating this important and necessary Bill, to talk about how we can develop our international trade policy and export promotion effort.
Lord Hannay of Chiswick (CB)
My Lords, it is a great pleasure to follow the noble Lord, Lord Lansley. It is good news that he is back playing an active role in our debates. I say that all the more so because I agree with a large amount of what he just said, but that is not the only reason. The only point I make on what he said is that I think a link with the CPTPP—the Pacific grouping—is of great importance, but it is much more likely to be achieved by the European Union in a more successful way. That is why I support the idea that we should stay within a customs union and negotiate with that objective.
A great deal of the Bill is highly technical and process-driven. The Minister made an excellent effort to persuade us that that was all that it was about, which is not the case, but those aspects require careful scrutiny, and perhaps amendment in Committee and on Report. I intend to focus my remarks today on the broad political thrust of the Bill, which is the imperative view of the Government that this country must have an independent trade policy outside the EU and its customs union—within which this House voted to remain, I recall, as others have done, by a three-figure majority when the issue was discussed in another context.
The contention of those who supported Brexit in the referendum campaign—it since remains the Government’s view—is that an independent trade policy is absolutely vital and that it will be good news for the United Kingdom. Outside the EU and its customs union, Britain, they say, will emerge on to the sunlit uplands of a free trading world, freed of the shackles of the EU’s trade policy with prosperity assured. Negotiating trade deals around the world would be easy as pie—that is what the Secretary of State for International Trade told us, although his assurances were slightly undermined by the fact that he has never negotiated a trade agreement. If only that picture were true the Government would have a case, but it is not. It is, frankly, false.
First, take the EU’s trade policy. It is, of course, not perfect and it has some protectionist features which need to be changed. That is what the EU was attempting to do in the Doha multilateral trade negotiations and in the TTIP negotiations with the US; the EU was not responsible for the failure of either. When the EU was founded, it did have a pretty protectionist trade policy but, over the decades, that policy has been progressively liberalised, not least by the leadership of a whole succession of British Trade Policy Commissioners: Lord Soames, for whom I worked, Lord Brittan, the noble Lord, Lord Mandelson, and the noble Baroness, Lady Ashton. Britain, as a member state, was at the forefront of that liberalisation campaign with great success. Now, the results of that campaign, in the form of the European Union’s trade policy, are being denigrated, belittled and cast off. Nor is the EU and its trade policy in any way the only important point. After all, we export only about one-third of the amount that Germany does to China. That is not because we are shackled by the EU but because we are not quite as competitive as the Germans. That will not be solved by leaving the EU or by negotiating separate trade agreements.
There is then the still-growing network of bilateral trade deals that are an integral part of the EU’s trade policy and its customs union: most recently the agreement with Japan, but also those with South Korea—where our exports have hugely increased since that agreement came into effect—Turkey, Chile, Colombia, Mexico, the 50 or so African, Caribbean and Pacific associates, and the countries of eastern Europe, the Mediterranean and the Caucasus. There are negotiations now under way with Mercosur, which hopefully will lead to a successful conclusion, and with Australia and New Zealand. Are we going to do better than those deals that are being handed to us on a plate? Will we do more for developing countries than the EU’s “Anything but Arms” policy? I rather doubt it.
How about those sunlit uplands? Well, the sun is not shining up there any more, as President Trump rampages through the international trade commitments that the United States has, mistakenly believing that trade wars are easy to win and that trade between nations needs to be bilaterally balanced. This is the very antithesis of this Government’s trade policy, yet the US seems to be the jewel in the crown when it comes to our negotiating independently. Some hope.
Then there is China, which has negotiated free trade deals such as the one it did with Switzerland, which gave China tariff free access to the Swiss market straightaway and told the Swiss that, with a bit of luck, in 20 years’ time they might get something like that.
Lord Lilley
The noble Lord said in 20 years’ time. Actually, the Swiss deal with China reduces tariffs by two percentage points a year. The high tariffs are 18%, so in nine years they will all be gone. They are already half way through. Where are we, in our membership of the European Union, in the process of getting free trade with China?
Lord Hannay of Chiswick
That remains to be seen, of course. If we were in a customs union, I have no doubt that the issue of freeing up trade between the European Union and China would become a very important point—and, since the Chinese are now being sucked into a trade war with the United States, they might take a rather different view of a free trade agreement with the European Union than they have in the past. I do not know. All I can say is that they are more likely to do so if what they are offered is access to a 500 million single market, with the UK in a customs union with it, rather than what they have at the moment.
Then what will we say to India and Brazil, for example, which undoubtedly will raise with us issues about the visa burden on their students, businessmen and researchers? It is obviously desirable that we should have agreements with Australia and New Zealand, but what will that mean for our producers of sheepmeat and beef, who are already at risk of being struck by the loss of their continental European markets if all does not go well with our negotiations with the EU. What will we say to that?
One day, I hope, when President Trump’s memorial library is being constructed—there will not be many books in it, I imagine—the world will resume the search for multilateral and plurilateral trade agreements to remove tariffs and non-tariff barriers to trade. What role will we play in such negotiations as an independent actor with our own trade policy? I can give noble Lords a clue: a very modest one, is the honest answer. I was a very junior member of the negotiating team in the Kennedy round, which was the last occasion on which the UK operated independently before it joined the European Communities. We were in a much stronger position then than we are now. Our share of world trade was much greater and we had a stronger economy on the whole compared with other people. However, even then, in the 1960s, the deals were cut between the US, Japan and the European Community. In future, it will be between the US, China, the European Union, Japan and India. Of course, we will be there on the margins, our eye glued to the keyhole, saying, “Me, too”, when they reach an agreement, but our role will be that of a watcher and not, as we are at the moment, an actor. So the case for an independent trade policy does not stack up. It is a chimera and a mirage, doomed to disappoint.
Of course, if we were to remain in the customs union, we would need to raise some quite important issues with the EU to ensure that we had a proper consultative role in shaping its trade policy and that any trade deals negotiated by the EU applied fully to all members of the customs union, including the UK, and did not require separate negotiation. But how can we find out whether these possibilities are even faintly viable if we are not ready to ask for them to be put on the table and to discuss what the reaction of the other side would be? Since this would greatly help the problems of Northern Ireland, I suspect that it would be pretty positive.
The other day, I heard a representative of one of the think tanks that supports Brexit and an independent trade policy, the IEA, say, quite clearly, that an independent trade policy is “the only prize” remaining from Brexit. But is it a prize? I very much doubt it.
Lord Elton (Con)
My Lords, your Lordships are weary and so am I, so I shall be short. As far as possible, I shall restrict myself to the structure of the Bill and its purposes, and not the great field of foreign policy and philosophy in which it is being fought out.
I begin with pleasure in congratulating the noble Baroness, Lady Meyer, on a most remarkable maiden speech. I suspect from what she told us that she will bring to this House a bigger measure of both patience and wisdom than most of us are able to offer. I also welcome my noble friend Lady Fairhead to the Front Bench and to her first Bill, an experience in relation to which she has my great sympathies—I remember being in the same situation many years ago. I should also welcome my noble friend Lord Lansley in breaking his silence in such a welcome manner this evening.
The Bill has four functions, all of which are necessary. Our job is to see whether they are effective or can be made more so. In Part 1, the particularly sensitive area seems to be the devolved authorities. I hope that my noble friend the Minister will give us a little more detail than we have had so far. I am interested particularly in the effect of the absence of any Northern Ireland Assembly and how that will bear on proceedings where its existence is assumed in the Bill. I would like to know more also about Scotland’s reluctance to give its approval to the Bill. I realise that it does not have a veto, but, on the other hand, there is a political price to pay if it is not listened to.
On Clause 6, I am happy to rely almost exclusively on the advice of the noble Lord, Lord Kakkar, who is expert in that area.
I am interested also, as is the noble Lord, Lord Kerr of Kinlochard, in the balance between Parliament and Executive as it is affected by Clause 4, which gives Ministers an exemption from parliamentary supervision. Paragraph 46 of the department’s memorandum on delegated powers states:
“There will be textual changes to current agreements that ensure future operability. There could be consolidation of agreements. The power is broad enough to allow implementation of substantial amendments, including new obligations”.
It seems to me that we need to look very carefully at that exemption, and I look forward to my noble friend’s explanation of their necessity.
On Part 2, concerning the TRA, along with the noble Baroness, Lady Falkner of Margravine—I am always glad of an opportunity to agree with somebody in the Liberal Democrat Party—I think we need to look closely at the composition, membership and powers of the TRA.
On HMRC and data, I am no expert on information and my only view is that data is, at the moment, a highly sensitive subject and its control is not entirely understood.
The position from which I start is that I am anxious to improve the Bill, I regard it as necessary and therefore I wholeheartedly support my noble friend on the Front Bench in getting it on to the statute book—if possible, in a slightly better form.
Lord Whitty (Lab)
My Lords, the Minister has been rightly commended for her comprehensive, elegant and precise introduction to the Bill: it was, indeed, a good introduction. However, she did not disguise—indeed, she did not attempt to disguise—that the Bill is very limited in its application and in its relevance to the kind of questions that are being asked out there as to what our future trade position is going to be.
Like many other noble Lords, I have had to absent myself from the Chamber for much of this debate, but I have taken part in two other important, relevant debates. I have been upstairs with your Lordships’ Select Committee, which is finalising its report on customs arrangements. That report will fall on Ministers’ desks, and the rest of our desks, in a few days’ time and it asks a huge number of questions about what the future customs arrangements are going to be, none of which is answered by the Bill.
Then, just now, I was at a reception for the manufacturing sector, for electronics and electrical manufacturers who are asking a lot of detailed questions about how their trade is going to be affected post Brexit, none of which, again, can be answered by the Bill. That is disappointing because, if noble Lords cast their minds back a few months, just post the Lancaster House speech there was an announcement that we were going to have eight Brexit Bills, two of which would be a trade Bill and a customs Bill, which, between them, would describe the whole new golden age of global Britain and its trading place in the world. I fear that this Bill, even taken together with the Bill we considered last week and were not allowed to amend, goes nowhere near giving any answers to the people who are actually doing trade or who wish to trade with us as to what Britain’s position will be.
I will restrain myself, like the noble Lord, Lord Elton, and try to concentrate on what is actually in the Bill, rather than what is not in it. I shall start with the provisions on the rollover of agreements that the EU currently has with third parties. This sounds simple, but it is not a straightforward situation. Not only will we have to get the agreement of those third parties, we will also have to make sure that that the provisions of it do not alienate the EU, and it will also eventually have to be endorsed by the WTO. None of those is straightforward. We heard from my noble friend Lord Grantchester that already there have been objections to the rollover in relation to tariff quotas from Japan—one of the biggest agreements that the EU has, and a new one—and from Chile, and I am sure that other countries will be the same. We know that, in the WTO context, the independent rescheduling of the UK tariffs is being objected to by some of those very people we would expect to be having agreements with: both those third parties that are in an arrangement with the EU, such as Japan, and others such as Brazil and Australia. This is not a straightforward arrangement, and the fact that the Bill provides for the legal implementation of it is all very well and good but it does not actually reflect the trading and negotiating reality.
My second point is rather different. The Bill does not at all address the wider issues of trade negotiations. Clause 1 signs us up to the Agreement on Government Procurement, which is a good thing, in principle, and straightforward. But the other issues that exist in world trade agreements these days are more value laden and have actually caused major agreements such as TTIP to fall flat on their face in the end. These issues include: the rights of workers and ILO conventions; human rights generally; how we implement and reflect within trade agreements the Paris commitments on climate change; food standards; animal welfare; the protection of endangered species—we were debating the Ivory Bill only this week; and the protection of our public services. No doubt the noble Lord, Lord Cavendish, and others will say that the raising of these issues is part of the protectionist mode of the EU and actually you should leave all these extraneous things out of trade agreements, but that is not the politics of trade these days—or of our country. We have developed those things through the EU and they should find an important place in any modern agreement. Yet the Bill, which purports to be the basis of a new determinant for trade policy, does not reflect that at all.
Another area that is only partially touched on in the Bill—the noble Lord, Lord Kakkar, referred to it earlier and it was the subject of an amendment that was carried in another place against the wishes of the Government—is the reference to the medicines agency and the medicines network. I hope that we can build positively on the amendment, but it ignores the fact that even in the transition period, and certainly beyond it, the UK’s future association with so many agencies of the EU is not addressed anywhere in the Bill, not even in relation to the rollover treaties. This is vital for so many areas, but the Bill makes no mention even of those areas that the Prime Minister herself has picked out, such as aviation and chemicals, and our future relationship with those agencies, let alone the food standards and animal welfare agencies, which are vital to both our trade and our agricultural sector.
Clause 4 provides for the Trade Remedies Authority. I welcome the commitment to establishing that early on. My sub-committee of the EU Select Committee did a report on state aid post Brexit in which we recognised the need to establish such a body. I am a bit worried about how its composition is described. Although I do agree on occasion with the noble Baroness, Lady Neville-Rolfe, I rather take the opposite view that leaving the appointments entirely to the Secretary of State without any constraint regarding the sectors, concerns and expertise that should be covered by that agency is not helpful to its positive development.
It was also clear in our report—the noble Lord, Lord Lansley, was already a member of my committee at that point—that the Trade Remedies Authority will deal with only one aspect of future trading problems relating to state aid and procurement. Where there are problems such as dumping, unfair procurement practices or unfair state aid, it is not only the trading partner’s behaviour you have to address but your own. How we are going to deal with the provisions of state aid within our own country in the light of Brexit and the different roles of local authorities and public bodies is an important part of it. That role will be handed to the CMA. It is the congruent part of how we are going to approach state aid in our trade arrangements, yet the role and powers of the CMA are not in the Bill; nor, as far as I am aware, have they yet been spelled out by the Government in any other piece of legislation.
I will touch briefly on the devolved Administrations. The early reference to the devolved Administrations is more inhibiting than empowering. But in relation to state aid, you also have to take account of the role of the devolved Administrations, both in how they implement actions against other countries and how we administer state aid internally within the UK. None of that is covered by the Bill.
Limited though the Bill is, it is too limited and it needs to address some of these problems. I hope that the Minister and her colleagues can address them in the course of debates on the Bill, because there will be amendments brought forward and questions answered. She said in her opening remarks that the Bill was about detailed practicalities and technicalities. My colleagues—who I have left having a drink downstairs—from the electronic and electrical manufacturers of Europe, as well as of Britain, want to know some of the details of those practicalities. This Bill will not tell them.
I end on the same inadequacy with which I ended my remarks on the other Bill last week: the inadequacy of the provision for parliamentary scrutiny. Although this Bill provides for a report to Parliament, and for the statutory instruments to follow, that is at the end of the process when the Government have negotiated with other parties, whether those are rollover countries or others. We need a system of trade scrutiny within this Parliament at least equivalent to that which the European Parliament has had on our behalf for the last 40 years, and that which Australia, Canada and the United States have within their own parliamentary systems. This House and this mother of Parliaments should insist on nothing less.
Lord True (Con)
My Lords, it is a pleasure yet again to follow the noble Lord, Lord Whitty. I like to think it is because we are under T and W but perhaps it is because I am rising from the graveyard to fill the final Back-Bench slot in what has been an excellent debate. I am sorry that my noble friend Lady Meyer is not here but I think we all agree that it was graced by her moving and brilliant maiden speech.
I support the Bill and congratulate my noble friend the Minister on the way in which she introduced it. The Bill is needed to maintain smooth trading arrangements for this country outside the EU, which is where the British people have voted to be. We should get on with it. Yes, of course scrutiny and revision are our job but we should not be using them as a stage for the kind of wrecking tactics that failed in the other place, by tacking on a customs union or a second referendum—although having heard some of the contributions today, I rather fear that we are heading that way.
I would like to highlight one salient truth of the Brexit debate: the decisive, and I would submit shameful, role of the Labour Party in the fight to subvert the referendum verdict. At the last election, Labour promised its electors in the north of England and the Midlands that it would honour the referendum result: that we would come out of the single market, have control of immigration, end EU interference in our laws and leave the customs union. Since then, in vote after vote, Labour has dishonoured the promises it gave the British people. It signalled yet again today from the Front Bench that it wants to use this Bill to keep Britain in the customs union which it promised to take us out of. It has provided the compliant troops in both Houses for the schemes and devices of those who wish to reverse the referendum result. In this, as in so much else, Mr Corbyn’s Labour Party simply cannot be trusted and everyone who voted for Brexit should mark this fact. There would have been no problem in any vote to implement Brexit in either House if Labour had not voted to stop it. A factional thirst for power has consistently been put before the democratic duty not to renege on promises given to the British people.
For all the words of gloom we have heard today—and we have heard many—I submit that on Brexit, we have nothing to fear but fear itself. Project Fear proved a total failure. Do your Lordships remember threats to pensions, the warnings of slumps, mass unemployment and the flight of capital from the City? People saw through it; Project Fear was fantasy. Now, in place of Project Fear, outside this House, we have Project Panic: claims that after 29 March planes will stop flying, trade will halt, food supplies will run out and the Army will be on the streets—fantasy, my Lords. In whose interest is it exactly to stop trade, the flow of French food or German car parts into the UK? Mr Macron—sorry, should I call him “Monsieur”, or “Monsieur Le Président”? If French vegetables were rotting in Calais, Monsieur Le Président would soon hear the rumbles of French farmers’ tractors coming down the Champs-Élysées. It will not happen under any model for Brexit unless a malevolent hand wills it to happen.
Last week, sadly, I attended the funeral of my only brother, who was a victim of an unpleasant cancer. Recently some of the authors of Project Panic have talked of cancer victims dying because supplies of medicines and isotopes would be blocked after 29 March. Who precisely would block them? Do those who spin these kinds of things have any conception of the anguish they cause patients and their families? Do they care? Such pedlars of panic, in my most generous estimation, are jackals.
I repeat: we have nothing to fear but fear itself. Outside the EU, Britain can be the country that I demonstrated for as a young man: a trading nation open to the world, confident in its future, competitive, innovative, job-creating, a champion of free trade and a beacon to the world of civility, culture and common sense.
Today we have heard several more attacks on those who argue for Brexit; indeed, we were described as “denizens of another world”—and that was one of the kindest things said. We have heard many pleas that even now, we must stay in the EU. I must respond to that. I declare an interest as a part-time resident of Italy for 40 years—and one, frankly, without an ounce of fear that even under a WTO deal, the carabinieri would come knocking at my door. That is another fantasy of Project Fear.
When in Italy, I contemplate the catastrophic failure of the European project and the euro project that was piled on top of the previously widely accepted EEC. I see 600,000 to 700,000 illegal immigrants, most of them fit young men with iPhones and designer clothes, many begging in the streets from Italians who have lost their entire life’s work in the 2016 earthquake. I see 31% of young people without a job. I see a country that has barely grown since it entered the euro. I see a country that has lost 16% of its industrial production since it entered the euro. I see a country where 158,000 small businesses have closed in the last eight years. That is the monstrous toll of the amoral euro project, not just in Italy but across the Mediterranean.
I see a country that, when it votes in politicians who want to control immigration and change some of these things, first faces a failed coup to impose a Government of pro-EU austerity technocrats and then, when they are seen off, is told by a German EU Commissioner, “The markets will teach Italians how to vote”. That is the behaviour and the language not of partners but of masters.
I see a country where the EU promises to help with illegal immigration but delivers nothing but lectures, where criticism of the Commission is declared inadmissible and Monsieur Le Président turns back 50,000 immigrants at the French border and fraternally declares himself the principal opponent of the elected Government of a neighbouring country. I see a country where politicians who step outside the tent of the overweening EU elite and talk about problems that really confront ordinary people are condemned as extremists or populists. The problem that some cannot stomach in Italy, Austria, Hungary, Poland or Britain is that these so-called populists are popular and Brussels is not. Tens of millions of people voted for them. Precisely who elected the Brussels elite, or, come to that—I hate to say it—their useful allies in this House? Whatever else we think in this debate, we should dispose of the canard that, inside the EU, all is joy and strength and outside is doom and despair. Things may well be well, as we heard, in Denmark, but there is something rotten in the state of the European Union.
We face a historic choice between a free and fast-moving economy in a fast-changing world, or taking our rulebook from an organisation where what is once agreed can never be changed and anything new takes months or years to agree. It is a choice between free trade and lower prices, and tracking the part of the world which has seen the lowest growth in the last generation. A clear way forward was once offered—a free trade deal on the Canada model. I wish it had been grasped then and I hope it will be pursued now. Whatever route we choose, we need this Bill, which my noble friend has so excellently presented. We should speed it on its way, fast.
Lord Purvis of Tweed
My Lords, with all the travails afflicting Italy, they should be relieved that they can rely on the sunny optimism of the noble Lord, Lord True, to see them through in the future. I am perhaps in the same pickle as the noble Lord, Lord Browne of Ladyton, who could not find any common cause with his previous speaker, the noble Lord, Lord Hamilton. I shall take a trick out of his book and find something positive to say by congratulating the noble Baroness, Lady Meyer, on a wonderful maiden speech. I see she is back in her place.
It seemed easier a year ago, when Liam Fox suggested at the Conservative Party conference—reportedly to cheers from activists—that it would be a breeze to get all the existing EU trade agreements in place before Brexit in March. He said,
“believe me, we will have up to 40 ready for one second after midnight in March 2019”.
The Trade Secretary added:
“All these faint hearts saying we cannot do it—it’s absolute rubbish”.
I have never considered the noble Lord, Lord Tugendhat, to be a faint heart, but the term he used was “miraculous”. I think that that is more accurate. Perhaps Dr Fox, on the Marr programme 10 days ago, showed himself a little faint-hearted. When asked if he stood by what he said then, he replied:
“That remains our aim. Of course a lot of countries are waiting to see exactly what that relationship will be with the European Union”.
Well, they are not the only ones. However, the noble Lord, Lord Callanan, seemed to be back on track for the second-after-midnight position during Questions today.
As the noble Lord, Lord Browne, and others have said in this debate, we are expecting the Minister, in her summing up, to clarify how many countries have confirmed, in writing, to the UK Government that there is agreement in principle to ratify agreements before March 2019, and on what terms. If they have not, what are they asking of us? This information should be with the Government. If it is not, it is extremely alarming. If it is, the Government need to tell the House and the best opportunity would be for the Minister to do so when she sums up.
Time is nearly up. Businesses cannot wait any longer. I told the House before the Recess that our pharmaceutical industry was starting to stockpile because there was no clarity on what customs arrangements would be. As the industry has said, it is estimated to take 10 years for the technological side of any new customs arrangements to be in place and operational. The Government have rolled over and rubbed out one of their previous red lines, of being distinct and separate from the European Medicines Agency, thereby ultimately now accepting the jurisdiction of the European Court of Justice by taking its rules and having no say in the making of them. Irrationally, they cannot see the case for other regulatory bodies critical to UK trade. As the noble Lord, Lord Whitty, asked, why is this the case? What is the Government’s position as to why they are not in this Bill?
The trade association EURIS, which represents thousands of British businesses and £148 billion of UK trade, together with the independent UK Trade Policy Observatory, has published a survey just today, showing that 83% of British industrial product manufacturers support continued regulatory alignment in order to remain competitive in a global market. Respondents overwhelmingly say that they see no benefit in moving away from the EU regulatory system for industrial and manufactured products. The report states:
“UK companies told the survey that their supply chains have already been disrupted by post-referendum currency changes and that EU27 companies have started to select non-UK suppliers amidst the ongoing uncertainty of post-Brexit arrangements”.
It added:
“It is not a choice of exporting to Europe or the rest of the world. If we become less competitive in the EU we will be less competitive in other international markets. The UK Government’s target to develop stronger trading relationships with other non-EU countries is a positive move, but this can only be achieved if we maintain a strong alignment with EU regulations and supply chains”.
That is an industry response to the position of the noble Lord, Lord Lilley, who is not in his place for the winding-up speeches. Perhaps, as he did this afternoon, he has nipped out to be in Committee Room 9 to share a desk with Boris Johnson, if the BBC reporting is accurate. It is telling that one of the first to speak up for the Government left this debate to be with Jacob Rees-Mogg and Boris Johnson, when they said this afternoon that the Chequers position, which the Minister supports, is now worse than the status quo of staying in the European Union. I wonder what the Minister’s response to that will be.
The Bill is all about disruption, or the futile attempts to prevent or minimise it. The UK has a trading relationship or is in discussion for one, over and above WTO base rules, with 143 countries. In addition to the single market with the EU 27, we have an FTA with 36 countries, with a further 46 where the agreement is provisionally applied. Agreements with eight countries are pending ratification, and five are being updated. With a further 21 countries, negotiations are ongoing or paused, and we have had a role in all those discussions.
This cannot possibly, by any stretch of the imagination, be called a cut-and-paste job simply to put it into UK law. For the noble Lord, Lord Lilley, to indicate that that would be a straightforward process is a flight of fantasy. The agreements in place are also indefinite. I hope that the Minister will be able to answer this, too. Are we asking them to ratify an indefinite deal but also telling them that it will last for only three years unless we renew it? Can she confirm that she has stated that to all of our partners? What of those likely to mature into force after next March but during the implementation period?
It is now incumbent on the Government to publish what they have told each of those countries and let Parliament know. If we rollover those deals and then deviate from them—because we will be part of a common rulebook, as is the Government’s position, but from which the Government say we will be able to deviate—we will, by definition, deviate from all the agreements that we will have rolled over because we are adopting the existing EPA or FTA components. Parliament cannot possibly approve any of those agreements with confidence when we do not know what our customs or non-tariff regulations will be.
I take just one example: food and plant health imports from South Africa, where the Government say that we are having constructive discussions. If we are part of a common rulebook, importing a vegetable product from South Africa requires 13 sets of regulations out of 43, from warehousing to labelling and exports. All are under the jurisdiction of the CJEU, which will define whether they are being met. A third country will go to that court if it thinks that we are not satisfying those criteria. I hope that the Government can be clear on the relationship between their position on a common rulebook and their view on rolling over the agreements.
Some of the EPAs which we have said we shall be rolling over include ongoing discussions on services. Are we also committed to run a parallel process on those services, because they are currently part of the discussion that the EU is having on them? The SADC EPA agreement includes a joint council and proposals for structures and a framework. What is the Government’s position on rollover agreements and joint framework arrangements to discuss them?
A government statement recently promoted the rollover for the South African customs union agreement, representing 0.7% of all UK trade—less than one-quarter of what we export to Belgium. No. 10 spun that as the first new trade agreement that is now going to be in place for after Brexit. However, the SACU Ministers said that they welcomed the UK’s intention to avoid disruption for its trading partners as it withdraws from the European Union. If you study the fine print, it states that we are committed to having the agreement in place in the event of no deal. It is not even necessarily going to be in place if there is an agreement on the withdrawal.
This leads on to why Parliament needs to have an enhanced position in the scrutiny of it. Under the existing EU arrangements, a mandate would have been sought and secured by the Commission from the Council to enter any of these discussions and then published for Parliament to see. A public scoping exercise would have been carried out and published and Parliament would have been able to see that too. This Bill and the Government’s proposals, not just for the rollover agreements but also for other trade agreements, will afford this Parliament fewer opportunities to provide scrutiny than the European Parliament currently does to the Commission and the Council.
In her opening remarks, the Minister said that the Bill was about transparency and heralded consultation. As preparation for this debate, I was enthused to go on to the DIT website and complete the consultation for the United States. I filled it in as an individual business from Scotland, potentially concerned about the impact there may be for Scottish farmers on beef products et cetera. I was asked my age and ethnicity and where I lived; that was all fine. The first question was:
“What concerns, if any, do you have about a free trade agreement (or related trade talks) with the United States, and why?”
I filled in a simple response. It then asked:
“Which of these areas of a free trade agreement best describe the concerns that you have outlined above?”
I clicked: “Products. Standards, regulation and certification”, because of the concerns, mentioned by other noble Lords, about animal products, environmental regulations, health and safety et cetera. In order to provide feedback, as the Minister said, I was expecting to see what the current discussions were, what the terms were, and what was being outlined with America. What turned out to be the final question then came up, asking:
“Is there anything else that you would want to say about the UK’s future trade relationship with the United States?”
That was it. I do not think that that is sufficient consultation with the public, so I am submitting my comments in Hansard instead.
Why does this matter? It matters because one of the key elements of the discussions with the United States and with Europe is the equivalence of how we see and interpret these regulations. They are core to any of the discussions. Do we consider equivalence with the European Union, as the White Paper has said, or see equivalence in the United States’ regulations, as it has asked us to do? As the noble Baronesses, Lady McIntosh and Lady Jones, said, we will not be able to do both.
On issues concerning devolution, there needs to be much greater clarity—in paragraph 3 of Schedule 1 and paragraph 9 of Schedule 2—on devolved Ministers having to consult Ministers of the Crown. What happens if Ministers of the Crown disagree? When there are joint actions with devolved Administrations, UK Ministers cannot act alone without the approval of devolved Ministers. What if they refuse? We need to know more about the Government’s intentions for the operation of a UK single market. You cannot separate that from any of the trade agreements either.
The noble Baroness, Lady Neville-Rolfe, may have built up her hopes about Liam Fox stating that we can rely on passing this Bill because any future trade agreements will require primary legislation, so Parliament will have a much greater voice. I will quote from what Dr Fox actually told the House of Commons. He said that the Government would,
“bring forward a bespoke piece of primary legislation when required for each new future trade agreement that requires changes to legislation and where there are no existing powers”.—[Official Report, Commons, 16/7/18; col. 42.]
Therefore, by implication, if a new trade agreement does not need changes to legislation, or if those changes can be made using existing powers, Parliament is bypassed. That is simply not acceptable. This is why the International Chamber of Commerce told a meeting that I chaired last week that the Government are proposing a 19th-century approach for approving trade agreements in a 21st-century trading environment. That is why the Bill will have to be scrutinised and, most likely, amended in Committee.
A trade policy for the 21st century for a truly global Britain would be based on zero tariffs to our largest and nearest trading partners and be an open market to those who share our high values; based on combined regulations where we have a say in how they are made and shape them for the economic and new trade challenges and opportunities of the future, such as e-commerce and technology; and based on principles of openness and fairness, especially for the least-developed countries that we trade with. This was at the heart of the commission that I chaired with the Nigerian Trade Minister for the All-Party Group on Trade Out of Poverty. A truly global Britain would use that group of trade partners to help us negotiate free trade with partners further afield, with no trading cost to our businesses, to take advantage of the growth potential of non-EU countries. Therefore, a truly global Britain would see that the Bill necessarily has to be changed in order ultimately for us to meet those kinds of “Global Britain” requirements—which is to continue to be part of the European Union customs union and, if necessary, to give the British people the option of the right to make the decision that we remain a truly global Britain in a customs union based upon open principles, transparency and accountability. That is sorely lacking in what is currently offered.
Lord Stevenson of Balmacara (Lab)
My Lords, I thank the Minister for the many meetings and discussions we have had in the rather extended period while we waited for the Bill to come into your Lordships’ House. We have learned a lot about each other’s positions, as was reflected by her speech today—rather annoyingly, because she anticipated some of the things that I might have said later. But that has been useful in building up a relationship, particularly as she comes new to the job of taking a Bill through the House. I also congratulate her, as other noble Lords have, on the clarity of her introduction; it is rare to have such a clear exposition of a Bill, and it was helpful to the debate that followed.
I join other noble Lords in congratulating the noble Baroness, Lady Meyer, on her maiden speech. She shared with us some dark and difficult moments on a long journey of great interest, and I look forward to hearing more of her contributions as she builds on her career in this House as well as on her previous life.
This has been a good debate, except, as was picked up by the noble Lord, Lord Purvis, for a slight deterioration towards the end of the speeches from the Back Benches. I was sorry to hear that. I do not think that we earned any of the disapprobation levelled at us by the noble Lord, Lord True, and it did not seem to fit in with the generally engaged debate and discussions we have had. Nevertheless, he has the right to make his own speeches as he wishes, and we must learn from them and move forward as best we can. But this debate has been enhanced by contributions from former Secretaries of State, former Ministers and officials who have worked in trade, and envoys who have had experience in the real world; they have brought their experience to bear in the comments they made, and we have all learned a little from that.
The Minister talked warmly about this House’s skills and ability to scrutinise Bills, and I share her view on that. It is therefore something of a surprise, as the noble Lord, Lord Fox, noted in his introductory speech, that while we know about the business through to 21 October 2018, no dates have yet been suggested for Committee. One wonders whether in fact it will proceed; at the present rate, it is unlikely to be ready for Royal Assent until perhaps the end of December 2018, which seems rather late and does not quite fit with the urgency that was expressed about certain aspects of it.
The Minister tried to persuade us that this was not a Brexit Bill and that it raised no issues about the timing or the content of any withdrawal agreement that might be emerging from the current negotiations. But the House, by a ratio of about 4:1, as I made it, has taken a contrary view. Indeed, thanks to the interesting contribution by the noble Lord, Lord Cooper of Windrush, and other noble Lords, I feel much better informed about where we are in the post-Chequers situation. Indeed—although it might have been concealed by my strictly temporary face covering—I allowed myself a small smile of satisfaction at the thought that we might as a country be coming to our collective senses and finding a way through the muddle we are now in. The Government might wish to reflect on why they have misjudged the view of the House on this issue. I suggest that there is more than a grain of truth in the comments made by my noble friend Lord Liddle. His assessment was that it stemmed from the feeling that the Government’s current position on Brexit, and on trade in particular, is economically illiterate and quite probably politically unsustainable.
Let us roll back for a moment and use the benefit of history to review where we are. Many Members of your Lordships’ House will remember that the Cobden-Chevalier Treaty was signed with France in 1860, marking the world’s first free trade agreement. A Back-Bench supporter of the treaty told the House of Commons that it would both advance the prosperity of our country and benefit peace and happiness. His point, of course, was that trade is a tool, not limited to promoting self-interest but also uniting and shaping our world. “Prescient” is a great word for that; he certainly seemed to know what was coming.
In the following century and a half, no agreement has in my view better demonstrated this principle than the European Union. It has brought nations together into sustained peace and, at the same time, offered and delivered economic prosperity: security, peace and prosperity are a pretty potent mix. Yet, as the UK’s departure from the EU looms, our Government are preparing for a trade policy that shies away from that proven principle. They do not welcome calls to allow civic society, trade bodies, trade unions and consumers to feed into negotiations; they have not worked out how to engage properly with the devolved Administrations, the English regions and our great cities.
Ministers are trying to claim that this Bill is nothing more than a technical measure. But the questions raised today go far further, getting to the heart of what we are as a nation and how we engage with the world. What will be the basis of our trade policy? Who will operate it and how will it be agreed? How will it impact on ordinary people in the UK and outside?
Assuming that there will be a Committee stage, we will be laying amendments in the hope of improving this Bill. The way the government procurement agreement will work in practice, how to ensure protection for our high-quality services, labour and environmental standards, and how we will preserve our human rights protections must all be tested and made clearer in the Bill. At the same time, we have to make sure that UK firms can compete for the procurement on offer in signatory countries on a fair and equitable basis.
We need to strengthen the independence and integrity of the TRA, the Trade Remedies Authority. The model here is surely the CMA and the Information Commissioner’s Office, or even Ofcom. It is not, and certainly cannot be, simply another non-departmental public body under the control—or under the thumb, perhaps—of the Secretary of State; it needs resources to be guaranteed on the face of the Bill.
Recognising the calls from all around the UK for a proper, open, transparent and inclusive system, under the control of Parliament but engaging with the devolved Administrations, we need a system, perhaps a Joint Committee of both Houses, for setting up a trade policy, agreeing a mandate, receiving information on the progress of free trade agreements, and making recommendations to Parliament, for Parliament to decide, on whether or not to accept the proposed deal.
The noble Lord, Lord Whitty, was right to spell out the many issues that now need to be included in a modern free trade agreement. This sparks the thought that we are talking at present about rolling over, without question or scrutiny, something like 40 free trade agreements. Some could happen during a period when these issues are not at the forefront of negotiations, or they could fail, as the recent CETA agreement does, to do justice to human rights or other issues; surely this makes the case for proper scrutiny. The Government have begun to move on this issue, but they need to go much further, including continuation deals as well as any new ones. We need to spend some time on tariff rate quotas, as mentioned by my noble friend Lord Grantchester. GIs were raised, as were state aid rules and, more generally, how we protect UK businesses and raise productivity in the United Kingdom as a result of all this work, which was a key point raised by many people.
Finally, we need to return to the question of a customs union. I agree, for the reasons given by the noble Lord, Lord Lansley, with the argument for looking again at this. I add one additional point: there are very few successful customs unions in the world, and very few with the depth, breadth and strength of the EU. I think the evidence is there to make it absolutely clear that there is no remotely realistic scenario under which businesses in the UK outside such a customs union would be in a better trading position than if the UK stays inside. Our businesses will suffer outside a customs union and it will be far more difficult for them to sell their goods abroad.
The noble Baroness, Lady Neville-Rolfe, made the point clearly that trade is the way to prosperity. We have to make sure that, whatever we do, laser like, we focus on that. Put simply, a stand-alone UK is extremely unlikely to secure a more effective trade deal than one struck while we are within the EU. Whether or not we have zero tariffs, non-tariff barriers to trade and their impact on our services—the golden egg of our economy —will destroy the UK economy and reduce living standards. I look forward to the debates that are to follow.
Baroness Fairhead
My Lords, I am grateful for the insightful contributions from across the whole House to this evening’s excellent and wide-ranging debate. We are fortunate to have heard so many well-articulated, informed and expert contributions from noble Lords with considerable interest in and experience of trade issues, including my noble friends Lord Lilley, Lord Tugendhat, Lord Cavendish of Furness, Lord Trenchard, Lord Lansley, Lord Horam and Lady Neville-Rolfe. I loved the point that customers need to want to buy what we make or buy our services.
The debate was also well informed by our trade envoys, my noble friends Lord Risby and Lord Astor of Hever. We are well served by trade envoys across this House. The noble Viscount, Lord Waverley, focused in particular on services, and the noble Lord, Lord Kerr of Kinlochard, has extensive knowledge of this area. This considerable experience will be invaluable in helping us to put in place an effective independent trade policy after we leave the EU. I also thank the noble Lords, Lord Stevenson of Balmacara and Lord Purvis of Tweed, for the very active engagement that we had before this debate.
I confess that I join the horde of instant admirers of my noble friend Lady Meyer, and I am delighted to welcome her. She made an exceptional and utterly compelling maiden speech, and I have no doubt that this House will benefit greatly from her unique experience, her vibrancy and her tireless work against injustice. I am grateful for her recognition of the importance of the Bill and for supporting its speedy passage—and I loved her assertion that she is a true Brit and a true European.
I am pleased to have heard support for the Bill from a number of other noble Lords, including the noble Baroness, Lady Falkner of Margravine, and the noble Lord, Lord Butler of Brockwell. I am grateful also to my noble friends Lady Hooper, Lord Astor of Hever, Lord Cavendish of Furness, Lord Lansley, Lord Elton and Lord True for their support.
A number of issues have been raised in this thoughtful debate and I will try to cover as many as I can. I may not be able to respond to each point, but of course my door is open.
I am aware that many noble Lords hold strong views about the wider Brexit issues. As I mentioned in my opening remarks, that is not for this Bill, so I will try to focus primarily on your Lordships’ questions that have direct application to the Bill, and I will put them in the following blocks: continuity; the GPA; readiness for no deal; standards, including on medicines; devolution; the TRA; the World Trade Organization; and the Northern Ireland border situation.
The Bill is about providing continuity. That is our overriding objective and clear ambition, and I welcome the support expressed by many noble Lords for the importance of maintaining the effects of the agreements which we currently benefit from as a member of the EU. Almost no one who contributed to the International Trade Committee’s inquiry into continuity suggested that that objective was wrong. I also welcome the suggestion from my noble friend Lady McIntosh of Pickering about the practices in Denmark. I promise to pick those up with her at an early stage.
As well as having the legal power to provide for the continuity of existing agreements, we must also agree to do so with our trading partners. This point was raised by several noble Lords, including the noble Lords, Lord Grantchester, Lord Browne of Ladyton and Lord Fox, as well as my noble friend Lord Tugendhat. The Government’s aim is supported by our partner countries, whose own businesses and people will benefit from keeping the arrangements in place. We have had positive discussions with our trading partners about how best to continue these agreements. That is why we agreed that our continuity programme is a technical exercise, not an opportunity to renegotiate terms.
Of course, it is not surprising that some can see ways in which the agreements might be improved when we are no longer a member of the EU. But our partner countries agree with us that it makes practical sense, in the first place, to provide continuity. The negotiations are in different phases, but I can reassure the noble Lord, Lord Fox, and the noble Lord, Lord Browne of Ladyton, who raised concerns. One example is Canada, which has agreed that our bilateral trade and investment relationship will continue to go from strength to strength, has welcomed the approach to provide continuity during the implementation period and envisages a swift transition to a new bilateral arrangement once the implementation period has passed.
We are confident of securing continuity during the implementation period, under the terms of the draft withdrawal agreement. However, we of course continue to prepare across government—this is a cross-government initiative, with the FCO, DIT and DfID all working on these agreements—for a range of possible scenarios to maintain continuity, including one in which we do not reach an agreement with the EU on withdrawal.
Many noble Lords, including the noble Baroness, Lady Kramer, the noble Lord, Lord Liddle, and my noble friend Lady McIntosh of Pickering, raised the important area of rules of origin. In the debate today we have heard many detailed points. Rules of origin are a vital and very complex part of most trade agreements. Noble Lords raised detailed, technical questions that are difficult to cover fully in this debate.
We are, however, confident that we will be able to put in place provisions relating to rules of origin in our continuity agreements. They will seek to achieve maximum continuity for exporters in the UK and in our partner countries, who will continue to benefit from preferential trading terms. During the implementation period we will operate as if we were in the EU. The rules of origin in each agreement are a matter for agreement between the parties, including the EU and third countries. A number of noble Lords talked about diagonal accumulation, whereby we act as if we were part of the EU.
On a point raised by the noble Baroness, Lady Kramer, on rules of origin—
Lord Liddle
Is diagonal accumulation envisaged as applying during the implementation period, or as continuing after the implementation period? And what is the basis for the Minister’s confidence that our trading partners will agree to it?
Baroness Fairhead
Clearly, this is subject to negotiation. During the implementation period we will act as if we were in the EU and be treated as such. Diagonal accumulation is about agreeing with a third country that it will accept the UK beyond the implementation period. That was the point about rules of origin raised by the noble Baroness, Lady Kramer. I am happy to reassure noble Lords that it is common in trade agreements for the signatory countries to agree to allow accumulation of content with other countries. The approval of those other countries is not required, so the EU does not have a veto over what we can agree with our partner countries.
The subject of geographical indications, GIs, was raised by the noble Lord, Lord Browne of Ladyton, and the noble Lord, Lord Liddle. I can again reassure the House that the UK will be establishing its own geographical indications scheme after exit, through the European Union (Withdrawal) Act 2018. This will be in line with, and indeed above, the requirements of the WTO agreement on trade-related aspects of intellectual property. I appreciate how important Scotch whisky and GIs are to Scotland. The new framework will provide a clear and simple set of rules and continuous protection for geographical indications in the UK.
Baroness Fairhead
We are working with the devolved Administrations and stakeholders to ensure that this future scheme takes account of the interests of all producers from the regions of the UK. Finally, in relation to the rest of the world, we are ensuring that the continuity agreements that we transition will fully protect UK GIs.
I turn now to the points made by noble Lords about scrutiny of the use of the GPA. The noble Lords, Lord Hain and Lord Grantchester, said that there is no ability to scrutinise the GPA. I disagree, but let me clarify that. The power in Clause 1 enables changes to be made to domestic procurement regulations in order to reflect the UK’s independent membership rather than membership through the EU, but in order to exercise this power, our accession will first have to be accepted by Parliament through the CRaG procedure. That is why the power is subject to the negative procedure—because Parliament will have had the opportunity to scrutinise the GPA before the powers in Clause 1 are exercised. The schedules to that have already been shared with the ITC and we would expect CRaG by the end of 2018 or early 2019. In order for the UK to accede quickly to the GPA after ratification, this Bill is necessary to avoid any loss of legally guaranteed market access for UK businesses.
My noble friends Lord Hamilton of Epsom and Lord Risby asked about the GPA and whether we must accede or lose our access. The truth is that we must accede or we will lose our access, so to provide continuity for UK businesses, we are already working on a timeline which sees the UK accede to the GPA as an independent member in time for EU exit, regardless of whether we have a deal.
I turn to readiness and the question of no deal, which was raised by many noble Lords, including the noble Lords, Lord Butler of Brockwell, Lord Taverne and Lord Purvis of Tweed. I have to confirm that it is absolutely not the Government’s plan to leave without a deal. Our plan A is to secure an agreement with the implementation period. We are confident of securing continuity for our existing trade agreements and indeed securing agreements to the implementation period under the draft withdrawal agreement. A number of noble Lords talked about resources. What I can say in response to my noble friends Lady Hooper, Lord Horam and Lord Astor of Hever is that the Department for International Trade is already recruiting staff to support the trade negotiations. We have recruited approximately 600 staff, who have made significant progress. I hope that that and the fact that we are closely focused on this issue meets the appeal of noble Lords to get on with it.
However, we need to continue to prepare for a range of potential scenarios if we do not reach such an agreement with the EU. In so doing, we will seek to bring into force the bilateral agreements with partner countries from day one. The powers in this Bill are an essential element in that process. We are actively engaged with partner countries. As one noble Lord mentioned, my honourable friend George Hollingbery, the Minister for Trade Policy, has said that it is clearly a challenge. There is no doubt that the timing is very tight but it is still our aim to maintain the effect of those agreements even if there is no deal on 29 March 2019.
Lord Purvis of Tweed
I am grateful to the Minister for giving way. The noble Lord, Lord Callanan, told the Chamber in response to my Question to him earlier today that it was still the Government’s position that they will all be in place one second after midnight on 29 March 2019, as the Secretary of State Dr Fox has already said. The Minister has said that this is a challenging timetable but that it is still the Government’s aim. Will she inform the House how many countries have currently stated to the Government in writing that they are willing to accede to that timetable? There will be a long gap between the Second Reading and the Committee stage of this Bill; in fact, we do not know when the Committee stage is going to be taken. Given that, between now and then will she also commit to providing written information in the Library on whether any of those commitments are provided to the Government between now and the Committee stage?
Baroness Fairhead
I can confirm that we are still aiming to have them in the case of a no deal so that they can be signed. That is our clear aim, but the timing is tight. I can write to the noble Lord; I was actually going to do so, in detail, before Committee. I can say that conversations are ongoing. The noble Lord referred to statements from South Africa, some of which said that they supported it even in the case of no deal, which I think that statement was about.
The issue of our approach to future free trade agreements was raised by a number of noble Lords, including the noble Lord, Lord Monks, the noble Baronesses, Lady Henig and Lady Jones of Moulsecoomb, and my noble friends Lady McIntosh of Pickering and Lady Hooper. I understand the desire to discuss such issues—they are important—but it is worth reminding ourselves that we propose a very different approach for those future agreements. We want to consult and involve a wide range of stakeholders and others before we decide how best to proceed. Once we have left, we will establish appropriate mechanisms to scrutinise future free trade agreements. As mentioned by the noble Lord, Lord Purvis of Tweed, the Secretary of State has already announced that the Government will bring forward bespoke primary legislation, if required, for each future trade agreement. He also committed to keeping Parliament updated in negotiations through the provision of statements and updates to the ITSC. This is in addition to our commitment to engage more widely. The aim is to be transparent and inclusive. Our 14-week consultation is ongoing, as many noble Lords discussed, and will feed into the government process. We aim to ensure that both Houses have adequate time and ability to scrutinise. The Government will set out in due course how we will proceed.
I want to address specifically a question asked by the noble Lord, Lord Monks, about trade union involvement. As the Secretary of State announced on 18 July, the consultations launched by the Government on future trade agreements provide one of a number of means by which trade unions can have their say on the government approach.
I touched on parliamentary scrutiny in my opening remarks. I want to cover the issue of how we may use the reporting exemption in Clause 4, as raised by the noble Baroness, Lady Falkner of Margravine. We do not plan actively to use the exemption. However, it is right that the Government prepare for a range of scenarios to ensure that we can deliver continuity. In exceptional circumstances, the Government must reserve the right to ratify agreements before they lay a report on the changes. This reflects a similar position in the Constitutional Reform and Governance Act that has never been used.
The noble Lords, Lord Grantchester, Lord Fox, Lord Monks and Lord Whitty, and the noble Baronesses, Lady Jones of Moulsecoomb and Lady Henig, raised the issue of standards. It is clear that future trade policy must work for UK consumers and businesses. High standards are what our domestic and global customers demand and that is what we should provide. I am pleased to have this opportunity to provide reassurance that the Government are committed to upholding the high standards that this country is rightly proud of. Not only that, we want to champion standards as a world leader. The noble Lord also mentioned that free trade automatically leads to a lowering of standards. I invite noble Lords to look at the EU trade agreement with Canada, CETA, which makes it clear that the lowering of standards is not an option.
I turn now to the European Medicines Agency. Life sciences are a critical part of our nation’s strength. The noble Lord, Lord Kakkar, raised a particular issue on which I have a detailed response. We made clear that we want to provide noble Lords with the strongest possible reassurance on our commitment to implement the CTR. If it comes into force during the implementation period, as is currently expected, it will apply to the UK. If not, we will take certain steps. I will write to the noble Lord with more detail on that and I will place a copy in the Library.
The noble Lords, Lord Kerr, Lord Grantchester and Lord Wigley, and my noble friend Lord Elton raised the issue of the devolved nations. The UK Government want all parts of the UK to support the Bill. We have been clear from the Bill’s introduction that on the elements of this legislation, namely relating to Clauses 1 and 2, we want to engage the legislative consent process. We are working with the devolved Administrations and have made significant strides through amendments tabled in the other place. I reiterate the Government’s commitment to continue to engage with the devolved Administrations, and I remain confident that we will reach a position which the devolved Administrations can support.
On our independent trade policy and the independent Trade Remedies Authority, I am grateful to the noble Baroness, Lady Falkner of Margravine, and my noble friends Lady McIntosh of Pickering and Lord Elton, who expressed recognition of the vital importance of putting in place an effective and independent Trade Remedies Authority. I listened with interest to the view of the noble Lord, Lord Hannay of Chiswick, on the prospects for the UK’s independent trade policy. I do not share his views and I think we need to have this TRA to be able to support our independent trade authority.
The noble Lords, Lord Monks and Lord Whitty, questioned why we could not have individuals with particular expertise on the board. My noble friend Lady Neville-Rolfe stated the opposite. We believe that it is vital that board appointees are not beholden—or perceived to be beholden—to the groups whose interests they represent, otherwise it could undermine their independence. We are committed to staffing the TRA board with the appropriate range of background and experience. On the sort of experience and specification, we have consulted the Scottish and Welsh Governments on the job description and the person specification for the Trade Remedies Authority chair, ahead of launching the recruitment campaign. Appointments will be made on merit alone.
I welcome the interest expressed by the noble Baroness, Lady Falkner of Margravine, in ensuring that the TRA is set up and staffed appropriately. We have restricted it to a maximum of nine members to ensure that the senior membership can be resourced flexibly in response to business needs. It is broadly consistent with an arm’s-length body of that size.
My noble friend Lord Tugendhat raised the issue of WTO membership and the recent policy towards that body. The President has said that he wants to see the WTO modernised. At the G20 we have started this discussion, and the recent EU-US discussions included an agreement to co-operate on WTO reforms.
Finally, the noble Lords, Lord Hain and Lord Adonis, as well as my noble friend Lady McIntosh of Pickering raised the Northern Ireland border. This is crucial: the Prime Minister has been clear that we need to respect the Belfast agreement—there will be no hard border—and the constitutional integrity of Northern Ireland. She has rejected the backstop proposed by the EU—these are ongoing negotiations.
Baroness Fairhead
I am just coming to the noble Lord’s question. The noble Lord asked some very specific questions and I will write to him and take up his kind offer.
Baroness Kramer
My Lords, I have just looked up the WTO rules and I believe that the Minister will find that she unintentionally misspoke. May we talk afterwards, or could she write to me with the accurate information?
Baroness Fairhead
I am happy to follow that up with the noble Baroness. If I misspoke, I apologise, but I will happily meet with her and follow up afterwards.
I have tried my best in going over 20 minutes to address as many points as I can. I appreciate that there are a number of questions that I have not been able to cover and I undertake to write to noble Lords in detail ahead of Committee.
Lord Hannay of Chiswick
I thank the Minister for allowing me to speak before she sits down. It is very helpful. Could she clarify the point on Northern Ireland and the interrelationship of WTO rules? If there is no deal—and I accept that that is not the Government’s first choice—then, under WTO rules, we will have no alternative but to place tariffs on imports from the south to the north at the border if we do not want to have zero tariffs to the whole world. Is that the case?
Baroness Fairhead
If there is no deal, that would be correct. Clearly there are other options for what to do with tariffs, but that is a correct statement in the limited definition that the noble Lord gave.
Of course, I am happy to meet with any of your Lordships to discuss these matters further and I look forward to the opportunity for more detailed discussions in Committee. A cliff edge in our trading arrangement is in no one’s interest—that is something on which I think we can all agree. The Trade Bill takes a sensible, responsible, reasonable step to prevent this. It places continuity at the heart of our approach, to the benefit of customers, consumers, business and individuals across the UK. I beg to move.
Trade Bill
Monday 21st January 2019
(5 years, 10 months ago)
Lords ChamberRead Full debate Trade Bill 2017-19 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 127-II Second marshalled list for Committee (PDF) - (21 Jan 2019)
16:06 - Division on Baroness Smith’s amendment - Ayes: 243 / Noes: 208 - Amendment agreed.
Lord Taylor of Holbeach
That the House do now resolve itself into Committee.
Amendment to the Motion
Baroness Smith of Basildon
At the end insert “and resolves that the committee’s report be not received until Her Majesty’s Government has presented to both Houses proposals for a process for making international trade agreements once the United Kingdom is in a position to do so independently of the European Union, including roles for Parliament and the devolved legislatures and administrations in relation to both a negotiating mandate and a final agreement.”
Baroness Smith of Basildon (Lab)
My Lords, as we start this Committee stage of the Trade Bill, my amendment seeks to be helpful to your Lordships’ House in finding a constructive framework for further scrutiny of the Bill following Committee. It is now well over a year since the Bill was introduced in the House of Commons, and I think that the 132 days since the Second Reading in your Lordships’ House set a record.
Following consideration in the other place, the Bill was passed to us to undertake our responsibility of scrutiny in the normal way, and we will fulfil that obligation. My amendment recognises that, in 2017, it was perhaps understandable that the Government introduced a skeleton Bill. However, as time moves on, it is essential that we conclude our deliberations within a clearer policy framework before the Bill returns to MPs for further consideration. There are three key reasons for asking the Minister and the Government to accept my amendment today.
First, at its core, this is a no-deal Brexit Bill to deal with a situation which only very few want to see happen, and the other place has already indicated its clear intent that it must not happen. MPs from all parties are urging the Prime Minister to take action to rule out such a catastrophic outcome, as indeed your Lordships’ House did in a Motion passed last Monday by an incredible majority of 169. That alone makes it hard to justify the Bill in its current form.
Secondly, when it was first introduced, the Government presented it as a short and uncomplicated Bill dealing with issues related to a possible no-deal scenario; indeed, the Minister described it as pragmatic and technical. We were informed that the substantive issues about how the Government would deal with new international trade agreements once the UK is in a position to do so independently of the EU would be in a second Bill. I am aware that the Government are consulting the Constitution Committee, and that the Prime Minister is consulting the Liaison Committee in the other place, but no further legislation has been introduced. There is not a White Paper or even a Green Paper, and time is running out. It is not unreasonable that before we complete—not continue, but complete—our consideration of this Bill we should have more information about, and proposals on, such an important policy issue.
I have carefully read the report of our Constitution Committee, which refers to this Bill as a “framework measure” which provides the Government with,
“extensive … delegated … powers, to effect new trade policy”.
That committee raised several issues of concern. At the time, the Government justified the loose drafting by claiming a need for flexibility given the uncertainty over the withdrawal agreement. With no second Bill, the time for flexibility is disappearing fast. Decisions have to be made and mechanisms and processes have to be in place.
Thirdly, we should welcome the fact that, in recent months, we have seen a growing public interest in how and on what basis we should negotiate and operate our trade policy in the future. This is partly due to recognition of the misplaced and misleading optimism—to be polite—of Ministers and others, who told us all how easy trade agreements would be. This is not an issue that Ministers can make up as they go along; it needs serious, forensic, evidence-based policy-making. We know that the terms of future trade with the EU remain unclear, and now the true picture of the lack of progress in securing rollover deals to replace those we currently have with non-EU countries through our membership of the EU has been exposed by the Financial Times.
The International Trade Secretary, Liam Fox, is on record telling us how easy it would all be. Back in July 2017 he said:
“The free trade agreement we will have to do with the European Union should be one of the easiest in … history”.
He then said that all agreements would be ready and in place “one second” after Brexit, with “no disruption of trade”. Not only were those statements irresponsible, they were gravely wrong. Now, the International Trade Secretary says only that he “hopes” they will be in place, and that this depends upon whether other countries are,
“prepared to put the work in”.
Apparently, he has signed a mutual recognition agreement with the Australian High Commission in London to maintain all current relevant aspects of the agreement it has with the EU. But the EU does not have a free trade agreement with Australia.
When this legislation was going through the Commons, we argued that a legally distinct new trade agreement was required. The Government claimed they could simply roll over the existing agreements, but that is clearly not the case. Our country needs a sensible and appropriate scheme for trade, rooted in reality not in fantasy. Trade negotiations are complex and difficult. They require a proper and effective system involving Parliament and the devolved Administrations, in relation both to the negotiated mandate and the final agreements. We should also engage civil society, feeding in the views of consumers, trade unions and companies.
In conclusion, we will be unable to fulfil our obligation of scrutinising the Bill effectively without further information on how the Government intend to provide proper accountability and scrutiny of current and future trade agreements. We need to know how the devolved Administrations will be involved; we need to be assured of the mechanisms for ensuring that our trade policy is compliant with our international obligations; and we need legal commitments that in any future independent trading policy there will be no reduction in, for example, the rights of employees or consumer and environmental standards.
One way in which the Government could do this is by tabling amendments to the Trade Bill in Committee or on Report, but there may be other mechanisms. My amendment does not dictate what they should be but merely states that this House should not receive the Committee’s report on the Bill until both Houses of Parliament receive proposals on the process for making international trade agreements once the UK is in a position to do so independently of the EU. As the Report stage is expected at the end of February and the leave date is 29 March, it is not unreasonable to expect the policy framework by then, with just one month to go.
My amendment is designed to help your Lordships’ House in its deliberations. The Chief Whip is smiling at me, so I hope that is an indication that the Government are inclined to accept it. However, if that smile is misleading and the Government are unable to support us today then, given the seriousness of the issue and my concern for the role of this House in dealing with the legislation, I will seek the opinion of the House. I beg to move.
Lord Newby (LD)
My Lords, it is now over four months since we had Second Reading on this Bill. That is an unusually long gap, and one that I suspect the whole House thinks has been caused by the unwillingness of the Government to expose themselves to defeats on it. It certainly has not been because your Lordships’ House has been otherwise too busy.
Whatever the reason for the delay, during that time people might reasonably have expected two things to happen. The first is that, in line with the commitments made by the Secretary of State for International Trade in 2017, the Government would have negotiated the rollover of the 40 trade deals that the UK has with the EU. Instead, only one has been signed—as we have heard, of a slightly dubious nature—and very few are due to be signed in the near future. Why is that? According to Dr Fox, it is a combination of factors: some countries are unwilling to do so because they simply do not believe that a no-deal Brexit is going to occur; some are having elections; and some have, in his phrase, “no effective government”.
Lord Newby
He must have a lot of sympathy with them. The truth is that it was always unrealistic to expect these deals to be in place by 29 March because most of the EU’s free trade partners will want big UK concessions, particularly on issues such as food imports, requiring long and difficult negotiations that are likely to last several years. The Government sought to deny this but the truth is now there for everyone to see.
The other thing that might reasonably have happened is that the Government might have been clearer about their expected trade policy, how it might work and how they might bring it to Parliament. What would their red lines be? What processes would they follow to get future deals discussed and approved by this Parliament and the devolved assemblies? We still have no clue. In the circumstances, it is completely reasonable for this House to decline to proceed beyond Committee with the Bill. Indeed, it could be argued that we should not even proceed to Committee at all, but the Motion before us allows us to make some progress on the Bill while giving notice to the Government that they really must clarify their intentions if the Bill is to complete its passage through the House.
It will no doubt be argued that this amendment is unprecedented. Perhaps it is but, as we are seeing in the Commons, at a time when the Government have all but collapsed, it is inevitable that Parliament should assert its control over proceedings. That is what the amendment seeks to do, and it has the support of these Benches.
Viscount Hailsham (Con)
My Lords, I will briefly explain why I support the amendment to the Motion. Any outcome of the present Brexit stalemate other than crashing out without a deal will require more time. I do not believe that there is any national or parliamentary majority for crashing out without a deal. That means we either have to extend the 29 March deadline or revoke Article 50. At the moment, the first option is probably the most acceptable course, but I could live with either. Supporting the amendment to the Motion is a method of encouraging the Government to obtain more time. It also enables the Government to respond to the perfectly sensible points and demands for information made by the noble Baroness and the noble Lord.
I will make two final points, if I may. First, we have arrived at the time when the national interest must be put first, before any narrow party interest. That is the duty of all parliamentarians. In fact, it also happens to coincide with the pragmatic interest. Secondly, speaking directly to my Front Bench: if we crash out without a deal, this Government and their Ministers will not be forgiven lightly, either by the electorate or by the millions of those—myself included—who have historically voted Conservative.
Lord Hannay of Chiswick (CB)
My Lords, I support the amendment and point out, as have others, that this Bill is being brought forward in a totally different context from when it was debated and passed in the Commons last summer, and at Second Reading here in September. At that time, it was envisaged and presented by the Government as a minor technical measure which would complement an EU withdrawal deal and political declaration, and provide a 21-month transition to fill the gaps that are currently there and which prevent it being fully equipped to provide for an independent trade policy for a UK outside the EU. Those gaps remain and they are highly relevant given the Government’s unwillingness to rule out a no-deal exit on 29 March and the consequent need to operate an independent trade policy from that date.
For example, we do not even know—and more importantly, our businesses do not know—what tariff rates we would apply to imports from the EU and preferential trade partners of the EU on 30 March in the event of no deal. No satisfactory indication has been given of how parliamentary oversight of trade policy will operate in these circumstances. Currently, the situation is clear: the EU Commission can conduct exploratory talks with third countries but it can negotiate with them only when it has received a mandate from the Council; that is, the member states. That gives a measure of democratic control. What will we do to replace that? There is a complete absence of indication. It would be really poor if we went into a period like that without any parliamentary oversight at all; that is hardly a policy that could be called “taking back control” for this Parliament. Surely this gap needs to be filled before the Bill becomes law.
I believe it is being argued that this is unprecedented, as the noble Lord, Lord Newby, said. Perhaps it is, but we are dealing with an unprecedented situation, and unprecedented situations call for unprecedented solutions. Is the amendment unreasonable? I do not think so. It does not place any impediment at all on the completion of Committee, which should proceed precisely as planned. It gives the Government about a month to fill in those gaps in the Bill before Report begins. What is unreasonable about that? I hope the Government will accept the amendment, which I do not think stands in the way of this measure arriving on the statute book in time.
Baroness Taylor of Bolton (Lab)
My Lords, I do not want to follow the two previous speakers by talking about what happens, deal or no deal, but I will say a word about the difficulties facing the House on this Bill and on other legislation before us. My noble friend mentioned the Constitution Committee, which issued a report on the Trade Bill in October last year. We did so because we wanted to get ahead of the game by advising the House on our approach to that Bill, as we had done on the EU withdrawal Bill in a way that I think was constructive for the whole House and, ultimately, helpful to the Government because our constructive criticisms meant that the Bill was more fit for purpose when it left this House.
We did that early because we knew of the weight of legislation that would come before us. We have tried to get the Government to give us more information on what legislation we will face and asked to see some things in draft, which we would have been willing to see in confidence. The House will have to face other legislation. We are already seeing arguments about the number of SIs and the difficulty of giving them proper scrutiny in the time available. Time is running out. The Constitution Committee—and, I think, the House as a whole—wants to be helpful in making sure that any necessary legislation is actually fit for purpose and will do what is expected of it, but also so that we as parliamentarians can fulfil our role and responsibility to give proper scrutiny.
I ask the Chief Whip and the Leader of the House to reconsider their approach to giving information to the House about what our future work programme will be. It will be extremely difficult to consider as we should all the legislation that will be before us, whatever the outcome of discussions in another place. I have been a member of the usual channels, albeit in the other House. I know that there are indicative timetables on all occasions—maybe more than one in this instance. If the House is to function properly and fulfil all its obligations, it needs greater information to come through the usual channels about what our programme will be and what responsibilities we will face to get the necessary legislation fit for purpose, and to allow us to fulfil our responsibilities.
Lord Purvis of Tweed (LD)
My Lords, the House will have seen that there are a number of amendments in my name, as well as those of other colleagues, on the Marshalled List for this Bill. We are taking our role very seriously by approaching this Bill in a constructive manner and, where there are opportunities to try to strengthen its measures, to reflect, as the noble Baroness, Lady Smith, said, the complex, deep and comprehensive trading relationships we have with countries and to take into consideration new standards of quality in provision, and ethics and values in trading. The amendment to the Motion should also be seen in that light.
The United Kingdom has trading arrangements with 104 countries by virtue of our membership of the EU. Thirty-five countries have arrangements in place, 47 partly in place and there are 22 agreements pending. A further five are being updated and there are ongoing negotiations with a further 21. All told, this represents 66% of all United Kingdom trade. That has brought down the average tariff for anyone who trades with United Kingdom to 2%. If there is no deal and no agreements are in place to secure the continuity of the trading relationship, under most favoured nation status under WTO rules trading with the United Kingdom would immediately become 5.7% more expensive. Tariffs would go up almost threefold. That would be a direct consequence of this Parliament not having the ability to scrutinise these arrangements.
As the noble Baroness, Lady Smith, and others have said, the Bill will also set the parameters of future trading relationships, in particular our relationships with the least-developed nations around the world. The countries that trade with us that have most at stake are not necessarily those such as Japan or Korea, which have deep and comprehensive trading agreements —although we have heard nothing from the Government about whether they are even in a position to roll those over legally—but the least-developed nations, which rely almost entirely in some sectors on their trading with the United Kingdom and are now being left in limbo.
It was deeply insulting for Dr Fox to make his statement about countries not lifting the heavy burden to trade with us when we have asked them to do so. For us as a House to give due consideration to such an important measure, which has been slipped at the Government insistence time and again, it is necessary for us to say that the Government now need to bring clarity on how many agreements are ready to be brought forward. On the Government’s calendar, there are fewer than 30 sitting days. How on earth will we be able to afford proper, full scrutiny of nearly 100 international agreements, on which our economy is dependent?
Lord Campbell of Pittenweem (LD)
My Lords, I can be very brief. The circumstances we are discussing are entirely of the Government’s making. They may now reflect on the fact that they opposed the amendment proposed by the noble Duke, the Duke of Wellington, which would have given them more flexibility in this matter. It is a great pity that they did not anticipate the difficulties they now face, which are entirely against the interests of the British people.
Lord Strathclyde (Con)
My Lords, am I alone in finding this a most extraordinary debate? It is deeply disappointing given the eminence from which it comes. The noble Baroness, as Leader of the Opposition, is a leading light of the usual channels. She could have raised any of these issues—perhaps she did—during the course of discussion through the usual channels.
The great principle which underlies the work we do on legislation in this House is that we believe and understand that the Queen’s business should be carried. That means we scrutinise and revise legislation. The amendment—the Motion—says that there should be a full stop. We will do all the work in Committee, we have agreed the business on Second Reading but after Committee, a full stop. There is a theme here: a couple of weeks ago, we had the noble Lord, Lord Foulkes, saying that we should all go on holiday. Now, the noble Baroness is asking us to stop work after Committee.
There is another practical aspect to this. For many years, I was a member of the usual channels. We did not always get it right, but we worked in the interests of the whole House—every aspect of us—to try to find the right time and the right stages to do various bits of business. This Motion drives a coach and horses through all that. For the noble Lord, who was formerly my noble friend, to pray in aid the kind of behaviour that we have seen in the House of Commons and say that what they are doing there, we should do here, is completely ridiculous and absurd. The noble Lord said that we should take over the running of all this. In this House, the Government have no majority. It proceeds only because we have the agreement of the whole House. We trust and ask the usual channels to do this.
Perhaps the second most disappointing thing which the noble Baroness said is that she will ask the opinion of the House and have a Division. If the business of the House will always be decided by a Division, then God help us. I really hope that she will consider, however important the great issues are, that they can be dealt with in the Bill by amendment in the usual way; they should not be decided like this.
Lord Kerr of Kinlochard (CB)
My Lords, it was good to hear from the noble Lord, Lord Strathclyde, and to be reminded of the days when everything worked swimmingly. I do not know if he was here on Second Reading, when the Government were perfectly honest and straightforward in admitting that there was a big lacuna in the Bill. They accepted that there was and said it would be filled in at a later stage. We were talking of a two-Bill scenario at that stage; we were also thinking of an implementation period.
I agree with the noble Lord, Lord Hannay: we are now in a completely different scenario. The modesty of the Leader of the Opposition’s proposal is admirable. She is not saying that we should not proceed with the Committee stage, and she is right. We should not down tools. We should go on doing our job trying to improve this Bill. However, the lacuna is still there. We do not know what the machinery will be for legislative scrutiny of future trade negotiations.
Lord Lansley (Con)
My Lords, the point made by the noble Lord, Lord Kerr, would be valid only if this Bill were designed to give the Government a power to make a free trade agreement with a country such as Australia or New Zealand, but it is not. I participated at Second Reading, as did the noble Lord. Therefore, he will know that the Bill is designed as a continuity Bill. It is not a Bill to provide a power for establishing new free trade agreements, but to give the Government a power to ensure that the existing free trade agreements which the European Union has with third-party countries are able to be continued in law in this country after exit day. Much of that is already able to be incorporated into our law by virtue of the EU withdrawal Act, but some aspects would not. On that basis, this Bill is not, as most people in this debate seem to be saying, a mechanism by which to establish new free trade agreements with lots of new countries and we need therefore to know what the scrutiny process is; it is a continuity Bill and we should see it solely in that context.
Lord Reid of Cardowan (Lab)
My Lords, I have only one brief point to make in response to our noble colleague the noble Lord, Lord Strathclyde. He said that this is an extraordinary procedure. That is because we live in extraordinary times. No one in this country would have imagined even two or three years ago that we would be standing on the eve of the biggest act of self-immolation in economic terms in some 80 years and yet have no plans for the future. I was going to say that the continuity of which has been spoken is a vacuum, but that is too substantial a word for it. It is the most extraordinary set of circumstances that we have seen in my memory, having been involved in politics for over 40 or 50 years, and every day it gets more extraordinary.
Quite apart from the Bill, this morning Downing Street was apparently briefing that the solution would be for Downing Street to amend the Good Friday agreement—forgetting that even if that course of action might commend itself to this House, the Good Friday agreement is the product of two sovereign nations in a bilateral agreement, along with an American President and eight parties in Northern Ireland itself. Yet they speak as though they are ordering a pizza—as if they can just phone up and suddenly the order will be changed. If the noble Lord worries about extraordinary measures taken by this House, he should seek to remove the Government from the extraordinary position of incompetence and blindfold Brexit in which they find themselves.
Baroness Deech (CB)
My Lords, I would not pretend to know a great deal about trade, but this I do know: we live in extraordinary times, and it is all the more important that one sticks with constitutional procedures and the rule of law. Imagine if we had a different Government; it is extremely dangerous to play fast and loose with our established procedures. At this moment, we should be clinging to them; it is really important.
We cannot take back control until we leave on 29 March. Taking back control has always meant that we do so in relation to other countries, not that we fight internal warfare in this House and in the other House. We would not be in this position if the leadership of the party of the noble Baroness, Lady Smith, who moved the amendment, had been more co-operative and constructive. We would not be in this position if the EU itself had been more constructive and co-operative. Its failure to do so is a sign of a lack of confidence in its own future.
It is absolutely essential that we stick with our constitutional procedures and do not play fast and loose with them, because imagine what would happen in a future circumstance with a future Government. That could be far worse, and we must proceed as our procedures require us to do.
Lord Davies of Stamford (Lab)
My Lords, I think it is the turn of this side of the House—
The Lord Privy Seal (Baroness Evans of Bowes Park) (Con)
My Lords, it is the turn of the Conservatives.
Lord Naseby
My Lords, it was my privilege for five years of my life to be Deputy Speaker in the other place. In that time, I took through the Maastricht Bill with 28 days and five all-night sittings for five clauses. I submit to your Lordships that we should not be trying to filibuster in this area. As far as I can see, if I were sitting in the other place this has all the signs of a filibuster if I ever saw one. With due deference to those who have spoken already and to the Leader of the Opposition, I say: let us proceed with today’s business, and for the next three days or whatever it may be. None of us in this Chamber knows what is to happen in the next two weeks or whether there will be a normal pause between Committee and Report. Why do we not just wait and see what happens, and then act accordingly? It is not for this House to try to take the initiative away from the Government of the day.
Lord Davies of Stamford
My Lords, it is quite unjustifiable that anybody should accuse people in this House of filibustering on this matter. One can see that we have taken only 35 minutes on a very important matter and I do not think that a single intervention has lasted for more than three minutes. By no stretch of the imagination can that be regarded as a filibuster; it is quite possible that, given the gravity of the situation in our country, the public may well feel that we have spent too little time so far on this Bill.
It has already been said that we live in exceptional circumstances. Is it not exceptional that, over two and a half years, we have had a negotiation with the EU about our future relationship with it and have just decided by an enormous majority that the whole of that negotiation has to be terminated? It was the right decision, but it is the most extraordinary situation. Equally, on the matter of trade agreements, Dr Fox has been happily running around the world for the last two and a half years, no doubt at the taxpayer’s expense, and achieving precisely nothing.
This country’s handling of the whole Brexit issue has been marked by the most extraordinary incompetence; the whole world knows that. That incompetence has often consisted of a quite extraordinarily naive tendency to overestimate our own bargaining power and underestimate the intelligence and bargaining power of other people. That is the very basis of incompetence in a negotiation, but that is the way this has been handled.
If you go to any country and say, “I am afraid we have just walked out of the trade arrangements that we have had for many years. We are in a bit of a mess and would like to negotiate a trade agreement with you. We would like to roll over the existing agreement you have with the EU and have the same benefits as we had when trading with you under it”, they will naturally say, “We will be interested to talk to you about that, but we have a number of points ourselves that we would like to settle on this occasion”. You have somebody else with an agenda, seeking advantages, and it takes a long time for the negotiation to come to any conclusion. That is the rule of business throughout the world. I do not think that Dr Fox has much experience of international business, so he might be surprised to find that is the case, but it would not be a surprise to anybody with the slightest experience of the field.
This is a serious matter. Is it really true, as the noble Lord, Lord Strathclyde, said, that if the Government are completely paralysed and completely fail in achieving their purpose after two and a half years, Parliament should do nothing about it? Of course it should: we exist to make sure that there is a proper balance in the constitution. If one part of the constitution is obviously not performing as it should, the other parts should do something about it. There is no question of filibustering on the Bill. It is an extremely urgent matter. All noble Lords should be paying attention to it and deciding what the country needs to do about it. Under no circumstances should this House abdicate its responsibility for doing that in this crisis.
Lord Taylor of Holbeach
My Lords, I rise to respond to the amendment in the name of the noble Baroness the Leader of the Opposition and to subsequent speakers. I note what the noble Baroness, Lady Taylor, said about the roles of the usual channels and the Government, and the relationship between the two. I also note the comments of my noble friend Lord Strathclyde. However, I cannot allow the speech of the noble Lord, Lord Reid, about the Good Friday agreement, to go without comment. I have no hesitation in saying that what he reported to the House was completely untrue.
Lord Reid of Cardowan
My Lords, I am not sure that it was parliamentary to accuse another noble Lord of putting an untruth before the House. I said that we read reports this morning. The noble Lord might check the Daily Mail or the Daily Telegraph, for instance. I may be mistaken, but I would be grateful if the noble Lord would withdraw his comment that what I said was an untruth.
Lord Taylor of Holbeach
All I said was that what the noble Lord reported was an untruth; he himself was not, perhaps, being untruthful. Those newspapers are not in my reading.
The House has heard the arguments made by the noble Baroness and subsequent speakers, and it will have to take the amendment she proposed at face value. However, it is difficult to understand why the House should agree to it. After all, we are shortly going to go into Committee, when all the arguments which have been expressed this afternoon will, no doubt, appear again in the form of amendments and in the debates that surround them. I can only agree with the comments about the Bill by my noble friend Lord Lansley.
The effect of the amendment is to prevent Report stage proceeding until a subjective condition has been fulfilled. I note that in recent weeks many noble Lords opposite have expressed their desire to continue with the Bill, apparently frustrated that the Committee was not scheduled to start earlier. Yet here is an amendment to delay the passage of the Bill. The oddest thing of all is that the noble Lord, Lord Stevenson, who is leading for the Opposition on the Bill, has tabled amendments covering the issues listed in the noble Baroness’s Motion. It seems pre-emptive of her to ask the House to reach such a conclusion now, before the noble Lord, Lord Stevenson, has even started to make his case.
Baroness Smith of Basildon
My Lords, I listened carefully to the Government Chief Whip. Perhaps the most encouraging comment he made was that he does not read the Daily Telegraph or the Daily Mail. However, I challenge him on some of the things he said. It is not our intention to delay the Bill. If that were my intention, I would have proposed not to proceed with Committee, but I think it would be wrong for this House to take that move. The noble Lord could have resolved this. It would not, as the noble Lord, Lord Strathclyde said, bring a full stop to the Bill. I find it extraordinary that the Government did not come forward today and say, “Of course you should have that information before Report”. It would have been the easiest thing in the world for the Government to say that it would ensure that this House, in order to fulfil its responsibilities and duties—the issue of process that my noble friend Lady Taylor raised, about being able to function properly and fulfil our obligations—will have the information we need to do so.
As for the comments of the noble Lord, Lord Strathclyde, I have said before that I think that there are two Lord Strathclydes. There is the Lord Strathclyde who was Leader of the Opposition—but that Lord Strathclyde seems to have disappeared into a puff of smoke. I was alerted to the fact that when he was Leader of the Opposition his party backed a Motion that referred the Constitutional Reform Bill to a Select Committee and defeated the then Labour Government. That was approved by your Lordships’ House and it was the first time in 30 years that the Lords had backed a delaying move, and it practically delayed the Bill until the next Session.
I have no intention of taking such an extreme measure as that. All I am asking your Lordships to do is to ensure—I take the point made by the noble Baroness, Lady Deech—that we can fulfil our constitutional procedures and objectives. We want to have Committee and Report, but in an informed way. It would be ridiculous for this House to consider the Bill in its entirety, given the comments made by the Constitution Committee about the gaps, the comments made by the noble Baroness at Second Reading and the commitments made that further legislation would come forward. For us to continue with Report after Committee without that information would be irresponsible.
The noble Lord the Chief Whip, the noble Lord, Lord Strathclyde, and others, said, “We don’t want to delay the Bill”. They are absolutely right. We have not wanted to delay the Bill; we have not delayed it for 132 days since Second Reading. All we are saying is—it is so reasonable that I am stunned that the noble Lord does not agree with me—“Please let us have information: the framework of government policy and the context in which we should proceed to Report”. I cannot see why the Government do not accept that. We want to proceed with the Bill in a responsible, measured and informed way. Our only condition before Report is, “Please give us more information”.
I listened to what the noble Lord the Chief Whip had to say and to the comments from around the House. We will be moving to debate some of those comments in detail in Committee, but as regards Report, we need a lot more. I beg to test the opinion of the House.
“( ) Before making regulations under subsection (1)(e) or (f) an appropriate authority must consult such bodies as represent the interests of persons likely to be affected by the regulations including, where appropriate—(a) the Scottish Ministers;(b) the Welsh Ministers;(c) a Northern Ireland devolved authority;(d) a local authority or local authorities; and(e) representatives of appropriate consumer groups, businesses, trade unions and non-governmental organisations.”
Lord Stevenson of Balmacara (Lab)
My Lords, we intend to exercise a considerable amount of scrutiny on the issues in Committee, but—as hinted at by the Chief Whip in his elegant speech, in which he kindly named me—we will also raise other points not specifically relating to the original narrow focus of the Bill but fitting more closely into the debate we have just had. I make no apology for that, because it is important that we probe the Government on their longer-term intentions and receive some assurances about where the particularities of this Bill fit in relation to that.
In moving Amendment 1, I shall speak also to Amendments 2, 3 and 100. This first group relates to the provisions in Clause 1(1) to set out the arrangements under which the Government can sign up to, and through regulations make changes to, the Agreement on Government Procurement. The GPA is an agreement between the EU and currently 18 countries to open up their public procurement markets, operating under a WTO framework. The Government intend that the UK should remain part of this system, becoming an independent member, and the Bill provides delegated powers to facilitate this, should it be required.
We have a number of concerns at that, some of which, in Amendment 1, are largely connected with the question of consultation about this process. The GPA itself is not a particularly interesting or informative document, but it does attempt to do something that I think all Members of the House would regard as a very good process and something we should support. It attempts to level the playing field for those who bid for and get government procurement contracts. It therefore makes it fairer, as all those involved in the GPA are able to bid for and secure work for their workforces, to earn money and to make profits out of that. In a sense it is an economic growth scheme founded on work that has been going on for some time trying to identify why relatively small numbers of companies bid for contracts offered by government under this system. I am sure the Minister, when she comes to respond, will say the UK is at the forefront of trying to open up its procedures; I know previous Ministers have also been concerned that we should have an open playing field and an open market here, so anything that can do that must be good and we would support that.
However, it is important that it is done in a process that reflects the wishes of the people more generally. It is therefore a little unfortunate that the Bill does not spell out the need for consultation not just among those directly involved, particularly local authorities and those groups, but also the Scottish Parliament, the Welsh Assembly and the Northern Ireland Assembly, when it is resumed, which have a considerable amount of contract work going forward. So this is a widely spread requirement that the GPA will open up for broader discussion and debate and, I hope, greater access to it; it is reciprocal in the sense that it should also make it available to UK companies. Before we make regulations, we should encourage much more consultation to make sure that the regulations are appropriate and that the benefits and interests of those concerned are taken into account.
Amendments 2 and 3 are largely taken from comments made in the report referred to in earlier debate on the Select Committee on the Constitution in its report in October on the Trade Bill, which raised a few issues on how the regulations will be framed and brought forward. The starting point is that these regulations will be enacted with powers under the provisions modifying retained direct EU legislation, but the committee pointed out that there was some variation in the wording. I do not wish to quote the committee directly, but the conclusion is that the Government were recommended to include in the Trade Bill the definitions of retained direct principal EU legislation and retained direct minor EU legislation as used in the European Union (Withdrawal) Act 2018, and these make the substance of our Amendment 2.
Amendment 3 follows the comment made in the next part of the report that the Bill’s Explanatory Note states:
“Parliamentary approval for ratifying the UK’s membership of the GPA will be sought separately from the powers in the Bill itself and will be done in accordance with the procedures set out in the Constitutional Reform and Governance Act 2010”.
However, there is some doubt about exactly what the sequencing of that should be and which particular regulations and powers would relate to which. The suggestion therefore made in our Amendment 3 is to restrict the timing and quantum of regulation to a point in the system where previous approval has been received from Parliament under the CRaG Act.
The final amendment relates to what type of regulation should be required. The comment in the Constitution Committee’s report is that the regulations should be subject to the affirmative procedure and our Amendment 100 would put that in clear prose on the face of the Bill. The Bill itself may have been due to be amended by the Government when they came to respond to the Constitution Committee report, but so far I have not seen those amendments so we have aided them by tabling them and I commend them to the Committee. I beg to move.
Lord Purvis of Tweed
My Lords, I support these amendments and will speak to Amendment 100, which is in my name and that of the noble Lord, Lord McNicol. The Committee will be grateful to the noble Lord, Lord Stevenson, for tabling these amendments and allowing us the opportunity of looking in a little more detail at some of the consequences of the Government’s intention to, in effect, join an institution by virtue of leaving it. It is not automatically as straightforward as the Government may suggest. My understanding is that the approval in principle that has been made for the UK to join the GPA in its own right, separate from being a member of the European Union, has a number of riders attached to it that we will discuss when we come to Amendment 4A in my name. But on the strength of the amendments tabled by the noble Lord, one core element of consultation will now be important.
I took the opportunity to look at the schedules to the Canadian annexes relating to its membership of the GPA. It was interesting. One annexe specifies the 82 federal bodies; there are further annexes for each of the federal provinces with the organisations, bodies or elements of government that are included at a provincial level and the exceptions that they all bring to the GPA agreement. There is no automatic consistency across Canada because it is a federal system. In many respects, it is a model of what the United Kingdom’s could be when it comes to procurement policy and procurement agencies.
Lord Wigley (PC)
My Lords, I am grateful to the noble Lord for introducing this amendment. As far as it goes, I support it, but I shall take up a point that was made a moment ago by the noble Lord, Lord Purvis, from the Liberal Front Bench that trade agreements will certainly need not just consultation with, but the agreement of, the devolved authorities. Let us think of, for example, the trade in lamb in Wales and how basic it is to the rural Welsh economy. Pressure is coming from New Zealand, which is threatening to block movement in the international trade discussions on these matters. If New Zealand were pressing for certain agreements that would undermine our Welsh lamb sector, that would be devastating. The devolved authority has responsibility for economic development, agriculture and rural affairs in Wales. That is an example from Wales. I can well imagine examples from Scotland, such as in the whisky sector. There should be more than just consultation. As I said at Second Reading, there should be a requirement for statutory agreement, a statutory endorsement by the devolved authorities in these areas. It may not be necessary in all areas, but there are certainly some where it is needed.
Therefore, between now and Report I hope there will be an opportunity to explore this area more in conjunction with the devolved Administrations to make sure that at this stage, before a specific difficulty arises, these matters are thought through because when a difficulty does arise, the tension builds up and it becomes a battle of attrition. We need a system that avoids that, and now is the time to get the system right.
Lord Hain (Lab)
My Lords, I apologise to the Committee for coming into the Chamber just a couple of minutes into my noble friend Lord Stevenson’s speech. I hope that it is in order to continue to make a brief contribution.
I follow the speeches of my noble friend Lord Wigley and the noble Lord, Lord Purvis, as well as that of my noble friend Lord Stevenson, in saying that it is vital that, particularly in respect of the devolved Administrations— I speak as a former Secretary of State for Wales and Secretary of State for Northern Ireland—we do not see an action replay of what we saw earlier in this whole fiasco. I am talking about a power grab by the Government that repatriated to Westminster powers that had already been devolved but were under the European Union’s aegis. That showed a cast of mind in the Whitehall machine of the Government that I encountered as a Secretary of State, whereby the natural instinct of other departments—particularly Defra and the Home Office, although it went more widely—is to centralise, grasp and keep power, not to devolve it. It is essential that, as the amendment seeks, there is a recognition by Ministers that the natural instinct will be to consult the devolved Governments—and in the case of Northern Ireland, whatever is there; maybe senior civil servants, as now. That should be the immediate instinct of every Minister and every senior official in every government department as they process all this.
My second point relates to paragraph (e) in the amendment, which refers to “appropriate consumer groups” and so on. Will the Government consult the CBI, the FSB, the IoD, the TUC and consumer groups, let alone all the other NGOs that might have an interest? Will that be a natural reflex, as in consulting the devolved Administrations, or will they have to come back in right at the end? I hope that the Minister will be able to give us some reassurance on the record about all that.
Lord Lansley
My Lords, perhaps I may start with Amendment 3 in this group. I am not sure that I understand why it is necessary to do this, as Parliament is approving our membership of the government procurement agreement by virtue of this legislation. It seems to me that we are going through that process now, and the amendment is therefore unnecessary.
Again, I am not sure that I understand why Amendment 2 is needed. Section 7 of the European Union (Withdrawal) Act makes provision for how legislation can be modified by subordinate legislation. I do not see anything in the Bill that disapplies Section 7 of the withdrawal Act, and therefore it applies. We do not need to say it in order for it to apply.
I think that there is a point in Amendment 1, although the drafting is not quite right. In so far as the regulations would relate to changes to government entities for the purpose of the rules on public procurement or the annexes to the GPA, surely it should particularly draw attention to consultation with those government entities or specifically focus on the business organisations or others that would be affected by that public procurement issue. There is a drafting issue about who is likely to be affected. I know that the amendment states that they should be consulted but we need to focus on the entities concerned and how they are changed by virtue of these regulations.
Lord Monks (Lab)
My Lords, perhaps I may interject, having been general secretary of the European Trade Union Confederation for eight years and, during those eight years, having been consulted on the trade arrangements and negotiations being made by the European Union, particularly with Canada, South Korea and, to some extent, Japan. It was a very structured and ordered process, and the logic of it was that free trade generates tremendous wealth and a lot of economic activity but can result in wiping out areas of activity where our industries are less well placed than those in some other countries. So, having a social dimension or some social protection was always our aim in the discussions in the European Union—with mixed success, I might say. The South Korean agreement I am rather pleased with; less so, probably, the Canadian one, surprising as that may seem.
I want to see in the agreements balance between free trade and some protection for the sectors that will be particularly affected. I do not necessarily mean protectionist protections. Welfare state protections, adjustment protections, retraining and redeployment programmes were the kind of things that were encouraged in the trade agreement process. That was because trade unions, employers and others were encouraged to take an active part in the formulation of these agreements. I am looking for assurances from the Government in support of these amendments that, as they approach this new responsibility for a British Government for the first time in many years, they will have that sort of philosophy and approach, and will not simply—desperate as no doubt Dr Fox is to make some agreements pretty quickly—let these be agreements that give up on the need for proper protection for the people who will be adversely affected, as they will be by these agreements.
The Minister of State, Department for International Trade (Baroness Fairhead) (Con)
My Lords, we begin this first day in Committee with a discussion about some really important matters. I recognise the vast experience of your Lordships on many of these matters and am clear that this experience will be invaluable to the process. Even before we began this debate today, I held a number of meetings with noble Lords from all sides as—I want to underline this from the very beginning—I am very keen to hear all views and to ensure we have a full and proper discussion on these issues. I want that to continue. My door is open to any of your Lordships who wish to speak to me. I look forward to working closely with noble Lords as we scrutinise the Bill’s provisions.
The Trade Bill will put in place the necessary legal powers and structures to enable us to operate a fully functioning trade policy. This will ensure that the UK is ready for exit. It provides continuity for individuals, businesses and our international trading partners; it also ensures that we can protect them. With the leave of the House, I will say that some of the comments made relate to future trade policy and others are about continuity, which is really the purpose of most of the clauses of the Bill. Therefore, I will try in these early amendments to focus on the continuity aspects of what we are discussing. Later in Committee we will look at future trade agreements and will have some time to discuss those.
In the previous debate in the name of the noble Baroness, Lady Smith of Basildon, my noble friend Lord Lansley made the point that this is about continuity. I want to stress that point: we need continuity for our businesses and for our people. The Agreement on Government Procurement, or the GPA, is an element of that continuity. As noble Lords will know, it is a plurilateral agreement within the framework of the WTO. Not all WTO members are party to the agreement. However, the UK has been a participant since its inception through its EU membership.
I turn now to Amendment 1, tabled by the noble Lord, Lord Stevenson of Balmacara, and underline the purpose of subsections (1)(e) and (1)(f) to which it refers. These give a power that is intended to be used to make regulations that reflect technical changes to a list in the UK’s GPA annexe 1, made to ensure that it provides an accurate picture of central government entities. These changes would be made only after machinery-of-government changes and the transfer of functions from one to another. They would therefore be strictly technical changes—such as, for example, BIS becoming BEIS.
Lord Lansley
I am sorry to interrupt my noble friend. She will know that part of this process is, as she rightly said, the sharing with the WTO of the prospective schedules for our accession to the GPA. Those schedules are about not just which government entities are on the list but also the coverage. Is it the Government’s intention, presumably already shared, that the coverage schedules—for example, and this is something to be particularly aware of, the extent to which health service procurement is covered by the GPA rules—are the same as the EU’s? Could my noble friend share with us by what mechanism a consultation would take place if the Government proposed to change the coverage schedules?
Baroness Fairhead
I thank my noble friend for that important question. I think this issue comes later in the amendments, but I can confirm that we intend essentially to take exactly the schedules that currently exist for the UK, as they exist through membership of the EU, and put them into our new independent membership, so that those do not change.
Lord Stevenson of Balmacara
With respect, I think that the noble Lord had a second and more important part to his question. What happens if we want to change them?
Baroness Fairhead
My understanding is that any regulations would go through the normal procedures of scrutiny. No changes in law would be allowable without scrutiny.
Lord Stevenson of Balmacara
The Minister must put me right if I am wrong. She just said that these were such small changes that they would not warrant anything other than simply negative scrutiny. However, as the noble Lord pointed out, they could affect the materiality of how we administer and run our National Health Service, which would be a major change. Surely the whole argument that she is making needs to be resolved: if the Government are going to say that these changes are so small and trivial that they do not warrant the full scrutiny of consultation, the corollary of that is that they would need to be done by the affirmative system, not the negative.
Baroness Fairhead
I can confirm that we are copying the existing schedules directly across. There are no changes, so there is no need for scrutiny of changes, because no changes will be brought across.
Lord Lansley
I want to come back to that, because I think there is a point we need to establish. There is no question about the continuity of the existing schedules; the Minister has made that clear. However, if the Government wished to change the coverage at any point in the future, where is the power to do that? It is not clear to me that Clause 1 provides that power. It takes specific power in relation to the list of government entities, but not the coverage schedule. Of course, if there were such a power, we could look at the scrutiny process applied to that power.
Baroness Fairhead
I reassert that there is no power in the Bill to make any changes to those GPA schedules. We can come on to future policy, but this Bill is about continuity and making sure they are put in for the UK as an independent member. As the noble Lord will be aware, there are very explicit protections for our National Health Service. They exist as an exemption in our existing GPA; with the schedules being carried over, they will continue to exist as an exemption. We are very clear it is for the UK to look after the NHS and we intend to continue to do that.
Lord Purvis of Tweed
I am grateful for the Minister’s explanations. The WTO at the end of November—I think this relates to what the Minister is saying—stated:
“The UK reiterated that it intends to update its proposed GPA schedule of commitments within three months of their coming into effect”.
So in effect that is a continuity commitment—it has given a future commitment for activity. We are trying to find out when this will come into effect—assuming there is a withdrawal agreement, this will be after the implementation period—and by what mechanism the Government will consult on the changes that they are likely to bring in in the future. As the noble Lord, Lord Lansley, said, some of the most important aspects will be the extent of what is covered and what can be procured, rather than necessarily the names of the bodies. That is of critical importance to agencies in Wales and Scotland when it comes to what can be opened up as a market for some of them.
Baroness Fairhead
I reiterate to your Lordships that this Bill, and the powers we are requesting, do not allow changes in our schedules to the GPA. Any future changes will need to be brought forward, and that is the subject of a different discussion. Going back to exactly what this clause is about, this discussion is about the addition of any changes to make an accurate description of the central government entities—and that alone. It is only Annexe 1; it is none of the other elements of the annexe in terms of the lists.
Lord Purvis of Tweed
Have the Government therefore discussed and agreed under what parliamentary procedures they are likely to bring these forward?
Baroness Fairhead
Again, we are talking not about the future but about continuity. When we discuss these clauses, I would ideally like to focus on what we need for continuity. We have time allocated to discuss future changes in Committee; I think that that will be the right time to discuss them.
Lord Wigley
On that point, might there be a disagreement between Westminster and Cardiff, or Westminster and Edinburgh, on what continuity is —in other words, on the interpretation of where these definitions apply? For example, it is not just medical matters that arise in the health sector: purchases for hospitals and all the rest cover foodstuffs, et cetera. In Wales, we have succeeded in raising the level of local procurement from 35% to 50%, which has had a significant positive economic knock-on. One does not want any of that to be lost in any of these changes. If the Minister could give an assurance that there is no possibility of that happening it would help us.
Baroness Fairhead
I will confirm this, but my understanding is that the schedules will be exactly as they are now. The procurement agencies in Wales will be able to put in their own procurement rules in that context, provided that they meet the GPA rules and are done on a level playing field. That will continue. The whole purpose of this is to make those changes and to have continuity—but if there is any change in what I said to the noble Lord I will revert.
Amendment 2 would require the regulations under Clause 1 to make provision to amend retained direct EU legislation only in accordance with the provisions of the European Union (Withdrawal) Act 2018. As I understand it, the amendment seeks to ensure that the powers in Clause 1 cannot be used to amend retained direct EU legislation in a way that is contrary to the provisions of the EU withdrawal Act. This is a concern that I have sympathy with and which the Government have considered carefully. I am therefore happy to assure the noble Lord that the powers cannot be used in this way. I hope that noble Lords will take reassurance from this and will agree that the amendment is unnecessary. Paragraphs 10 to 12 of Schedule 8 to the EU withdrawal Act cover powers to make subordinate legislation on or after the day the Act was passed, so they will bind legislation made under Clause 1 of the Trade Bill without further provisions being made. In addition, I inform the Committee that the Government intend to bring forward an amendment on Report to include the same definition of retained direct principal EU legislation used in the EU withdrawal Act in this Bill to clarify the position even further.
I again thank the noble Lord, Lord Stevenson of Balmacara, for bringing forward Amendment 3. Parliament’s ability to scrutinise the UK’s independent accession to the WTO Agreement on Government Procurement prior to ratification is incredibly important and one that the Government have considered. I can assure noble Lords that it is entirely the Government’s intention to comply with their legal obligations under CRaG to offer Parliament the opportunity to scrutinise the UK’s accession to the GPA. In the light of this assurance, the Government believe that it would be unnecessary to have an amendment that compels this. However, to provide further reassurance to the Committee I will state clearly that the UK’s accession to the GPA is to be on the same terms and with the same rights and obligations that we currently enjoy as a participant through the EU. As with all the Bill, this is about continuity. The UK’s GPA schedules, which have been accepted in principle by the GPA parties, can be viewed publicly on the WTO’s GPA website under the UK portion of the EU schedules.
The noble Lord, Lord Purvis of Tweed, raised some issues about Canada and how we might think about our policy in future. Again, that is for the future and not related to this clause and the Bill.
Amendment 100 was tabled by the noble Lords, Lord McNicol of West Kilbride and Lord Purvis of Tweed. It seeks to change the regulation-making powers in Clause 1 from being subject to the negative procedure to being subject to the affirmative. As drafted, this power would apply only when the powers are exercised by a Minister of the Crown. They would remain negative when exercised by one of the devolved Administrations.
I understand entirely and share the House’s desire to ensure that due parliamentary scrutiny is given to the use of any statutory instruments. However, the report of the Delegated Powers and Regulatory Reform Committee did not raise any issues with the power, which I hope provides further reassurance that the Government are using appropriate procedures under the power in Clause 1.
Baroness Neville-Rolfe (Con)
My noble friend helpfully explained how the implementation of the Agreement on Government Procurement would work and referred us to a website with useful detail. She said that where there was accession by another party, there would not be anything major. The whole idea of the provision was continuity, so you would be implementing things that had already happened. I have a simple question—I apologise that I am not expert in this area. The Government say that they are negotiating with a whole list of countries, including Albania and Australia, for example. If they were suddenly to accede to the GPA, which sounds quite positive—because it would mean more trade between countries in public services and in other sorts of procurement—would that then simply be added in, or would it be done in some other legislation? That is not quite continuity. It is very sensible to use an existing system, but I am keen to understand whether we are agreeing to that today or whether it would be done somewhere else. I apologise if my noble friend has already clarified that.
Baroness Fairhead
I thank my noble friend for the question. My understanding is that it puts us in the same position as we are today. When parties want to withdraw from or join the GPA, a process is gone through with the EU in which they demonstrate their intention and present their schedules to the WTO. Each member then decides whether they are prepared to accept that new addition or withdrawal. That is the process that we would go through. If that should happen, the Bill gives a power to implement under SIs. Parliament would be able to decide whether new members could join or leave.
Lord Stevenson of Balmacara
I thank all speakers in this short debate. The early contributions were to do largely with devolved issues. I think that we will come back to them, but they raise exactly the thorny difficulties that can emerge from making this work in practice. My noble friend Lord Hain spoke of not wanting to see an action replay of the “power grab”—his words, not mine, but I understand where he is coming from—by the Government in relation to the withdrawal Bill. We do not want to see that repeated, so I hope that the Government are able to reassure us that progress has been made on this and that some sensible and effective negotiations will be in place to allow it to be done effectively and with support all round.
It has not taken us very long to stumble into areas which were exactly the point of the amendment to the committal Motion made by noble friend Lady Smith. We are talking about “what happens if” rather than just about continuity. The noble Lord, Lord Lansley, has stumbled across quite an interesting point—I am in no sense making a point about him; the noble Baroness the former Minister also picked up something about “what happens if” and how it is resolved. I am not saying that we are doing anything wrong here, but it illustrates the difficulty of trying to narrow down to a continuity mode without thinking about the wider context.
I draw from this several things. First, on whose powers we are talking about when the regulations are in place, the Bill uses curious phraseology:
“An appropriate authority may by regulations make such provision as the authority considers appropriate”.
That could be extended to the power being exercised by Ministers in the Scottish Parliament, the Welsh Assembly or the Northern Ireland Assembly when it is reformed. There is nothing wrong with that—if they have the powers and the right to use them, they should do so—but it is a very different scenario from that pointed to by the Minister, about us always having the security of the negative resolution procedure when looking at how the regulations operate. The noble Baroness, Lady Neville-Rolfe, made exactly that point: these things are live and moving. They will change quite rapidly and we will have to exercise some of these arrangements. I am not sure that the negative resolution procedure is right for that.
However, the Minister’s reliance on the procedures under the Constitutional Reform and Governance Act 2010 is surely misplaced. Much of our debate on this Bill will be about the inadequacies of the CRaG procedures at present. To rely on them taking us forward because they are already in statute is to deny a whole series of debates and questions raised by them. I will not go into this at this stage; it will come up later. But it surely cannot be right for this Parliament to accept that a simple Motion to approve a complicated trade agreement, a complicated set of arrangements around procurement, or anything else that falls into that category can be done without amendment, debate or the ability to go through them in the form of primary legislation. We will come back to that.
We have had a good debate on these issues; I shall read Hansard carefully, and I am sure that there will be things that we pick up later in correspondence. For the moment, I beg leave to withdraw the amendment.
“( ) Regulations under subsection (1) may make provision for all contracts for services tendered by Her Majesty’s Government under the 1994 GPA or the Revised GPA to include conditions, so far as these are consistent with the 1994 GPA or the Revised GPA, with regard to—(a) the transparency of laws, regulations, procedures and practices regarding government procurement;(b) minimum employment standards, rates of pay and similar employment rights;(c) maximum periods for the payment of invoices;(d) environmental standards;(e) human rights obligations;(f) equalities legislation;(g) any other such measures as may be required to protect national security interests, the public interest, human, animal or plant life or health, and intellectual property.”
Lord Stevenson of Balmacara
My Lords, the previous debate was about process and how approval mechanisms were in play. This amendment has been grouped with Amendment 5, in the name of the noble Lord, Lord Lansley, which I support.
Amendment 4 shows the sorts of arrangements and concerns that we might have in trying to ensure that procurement works more generally in favour of social objectives—a point made earlier by my noble friend Lord Monks about the work he did in Europe in relation to trade Bills and discussions on these areas. We do not need to spend much time on Amendment 4. The list that appears in it is a familiar one to anyone involved in policy on business during the last three or four years. There has been a sense of the Government beginning to emerge from a period of non-engagement with many of these issues into having similar concerns to those on this side of the House about the way in which it is occasionally necessary for government to raise standards, by making it clear that certain behaviour within business is not acceptable. For example, many Members of the House present today will be aware of the long-running saga over the maximum periods for payment of invoices. Over the years, we have tried to get some movement; yes, there has been some, but it would be nice to see the Government pick up and run with this issue for a change.
The list in the amendment is variable in what it does. There are some high-level issues, for example, to do with,
“the transparency of laws, regulations, procedures and practices regarding government procurement”.
I hope that that provision would be unexceptional. The amendment refers to,
“minimum employment standards, rates of pay and similar employment rights”,
which I think feature in the Statement that we are shortly to receive which was made in the other place earlier this afternoon. I have mentioned the payment of invoices and the scandal of late payment; the drag on the economy from that is now worth something like £40 billion. The list also refers to,
“environmental standards … human rights obligations … equalities legislation”,
and all those arrangements have been well worked through in terms of discussion. Would it be so difficult to require that anything done under the GPA in relation to Her Majesty’s Government’s work, or by those devolved authorities which are also involved, tries to ensure that we raise standards in the workplace? These proposals are worthy of consideration and I beg to move.
Lord Lansley
My Lords, Amendment 5 is in my name. At the risk of being chided gently by the noble Lord, Lord Stevenson, to an extent I guess it must be regarded as moving from continuity. We will inevitably enter a series of such debates, but this Committee will be none the less useful for at least exposing some of the issues that policymakers will need to consider as they look at using the powers that we propose to give the Government.
Amendment 5 is intended to reflect that under the government procurement agreement, a number of other countries—not the European Union—take the opportunity to put in exceptions to their procurement arrangements that are consistent with pursuing objectives for promoting small and medium-sized enterprises in their own economies. I suppose that the most prominent such example is the Small Business Act in America. Those countries have done this because, in certain circumstances, it can lead to some discriminatory behaviour on the part of government entities undertaking procurement. I freely acknowledge that the European Union does not do this; essentially, because it takes the view that it has created EU public procurement rules that are intended to be wholly non-discriminatory. Those are non-discriminatory between all 28 member states and, by extension, the view the EU took was that it would be unreasonable for it to attempt to discriminate between EU and non-EU countries in taking advantage of the general procurement agreement.
Lord Fox (LD)
My Lords, I shall speak to Amendment 5 and before going any further I want to associate ourselves positively with its spirit. We are probably going to hear the word “continuity” many times over the next four days, but I feel that the noble Lord, Lord Lansley, has forfeited the right to use it. The clue is in the word “revisit”, which, by its nature, is not continuity but is proposing what he and we believe to be a beneficial discontinuity. It is quite clear that in this country and in other countries—as the noble Lord set out, this covers not just UK SMEs but SMEs in general, and certainly that is the wording in his amendment—economies and employment flourish where SMEs flourish. That is a good thing and we would ask the Minister whether this amendment is necessary for the future, to make sure that we do not fall foul of our own rules in terms of discriminating in favour of small and medium-sized companies.
I reiterate the fact that, as well as trade policy, commercial policy is central to this. The noble Lord, Lord Lansley, mentioned the government strategy: it is about how the Government choose to drive these policies home, through their commercial strategy and through the size of the packages they put out to bid, for example. We saw a recent example around the broadband structural bidding, in which it was quite clear that the overall size of the package militated against small and medium-sized companies bidding. That is nothing to do with trade policy, it is to do with the commercial policy of the Government at the time. So we support this with the proviso that the Minister comes back and says whether it actually achieves what the noble Lord, Lord Lansley, is hoping to achieve. I also enjoin all members of the Government to deliver the commercial part of the spirit of this amendment.
Baroness Hooper (Con)
My Lords, both these amendments provide us with a useful opportunity for discussion on important areas of trade, but both are without a doubt, to my mind, without the Bill. If we approach them in this spirit I think we can accept them as a useful addition for the future. I support my noble friend Lord Lansley’s Amendment 5 and will concentrate upon it because there is always a lot of rhetoric about SMEs and the need to encourage and support them, particularly in this context of increasing and developing international trade and their trading opportunities, and especially in this brave new world that awaits us after Brexit. Therefore, to have a specific quota for procurement is a very good way of drawing attention to the needs of small businesses and to encourage them to come forward when the time comes. Because it is not just a question of legislation: with all trade, it is a question of getting people out and about in the countries where we hope that they will find trading opportunities.
When we talk about international trade, of course there is much more to it than that. There is the whole issue of language skills and specialised negotiating skills which, by their very nature, small and medium-sized businesses may not be able to cope with. They are not likely to have the specialised staff or even the budgets to deal with this. I think that for the future we can certainly build on this amendment and the intention behind it, but as I said at the outset, not in this Bill. I trust that my noble friend the Minister will be able to reassure us that these interventions are not wasted but will be of great use when we come to deal with individual trade Bills in the future.
Baroness Young of Old Scone (Lab)
My Lords, I support Amendment 4 in the name of my noble friend. I declare an interest as president of the Woodland Trust and as president or vice-president of a range of environmental organisations.
The noble Lord, Lord Fox, was absolutely right when he said that these would be the “continuity” four days. I will make that point shortly with regard to what we are trying to do with this amendment. It is important that we ensure that our joining of the GPA as an independent entity maintains all sorts of standards: employment and human rights equalities, SME targets, other government national priorities and, in particular, on the environment. I therefore support Amendment 4 to enable conditions to be applied to tenders for services.
I will say more about the importance of maintaining environmental standards when we come to the group starting with Amendment 8. However, on Amendment 4 I will simply say that it is a very different thing to operate as one of the EU 28. It was pretty easy to have high environmental ambition when we were sailing as a pack, as it were. It will be very different when we are negotiating as an isolated country, either with the World Trade Organization or in bilateral agreements. I therefore do not believe that the Bill can be just about continuity, because continuity is not an option; in the future we will be operating in a very different environment in all our trade arrangements. It is important to ensure that standards—in my case, particularly environmental standards—are reinforced in all the trade mechanisms we are putting in place as part of a Brexit mechanism.
I therefore very much support Amendment 4 with regard to our changed membership of the GPA and subsequent tenders and contracts, which are an important part of that wider trade system that we are now entering into—which is not an issue of continuity.
Lord Livingston of Parkhead (Con)
I echo the comments from my noble friends Lord Lansley and Lady Hooper, that of course the Bill, and in particular this part of it, is not about changing policy or procedure but about continuity. I think they are raising points to consider in future trade negotiations. On Amendment 5, it is important to recognise the more important part about SMEs rather than just SME procurement policy. I know that the Minister has done a lot of work in promoting SME trade around the world; the UK’s policy has been moving towards supporting SMEs, not just in UK procurement but around the world, taking them to see other Governments and incorporating them within the supply chains. The UK has already taken a lot of steps over a number of years. Indeed, in one of the negotiations the EU and the UK had on trade, we tried to incorporate an SME chapter to have more focus on understanding, across any business, that SMEs are important. It is important here, and it keeps on appearing as an issue.
It is fine for us to talk, as noble Lords have, about things we would like to see in future trade agreements with future countries in future ways. However—I know that the Minister will make the point again—we are replicating where we already are. It is right and appropriate to set up signposts for the future, and on SMEs, I am sure that the Minister will say how as a Government we have done a lot, and how we expect to do a lot more and be incorporated, not just within trade agreements but in trade support, and what we do in areas such as trade fairs and in leading many trade delegations. Indeed, a number of noble Lords do a great deal around the world to support UK SME trade, along with the trade department.
Lord Purvis of Tweed
My Lords, the noble Lord, Lord Livingston, has great experience in this regard, and I take note. I am grateful to the noble Lord, Lord Lansley, who has opened the floodgates to talking about the future. Part of the discussion about continuity is that none of these discussions which have been taking place over the last 18 months—I am sure that the Minister will correct me if I am wrong—will have been taken in a vacuum of considering what the UK’s position going forward may well be. Those countries that we have the agreements with have not been approached like that. The noble Lord and other Members of this House will have met many Members of Parliament, government officials and Ministers who do not simply look at continuity but look at what may well be the ethos in which their relationship will begin. Therefore, the line to draw is not an easy one, although I respect the noble Lord and I have great respect for the remarks of the noble Baroness, Lady Hooper.
Lord Risby (Con)
My Lords, as one of the Prime Minister’s trade envoys and as a long-standing deputy chairman of the Small Business Bureau, I support the amendment put forward by my noble friend Lord Lansley. I salute my noble friend Lord Livingston’s efforts, who helped to transform our external commercial activities.
Highlighting the importance of the small business sector is key to what the department is now doing. That is a huge cultural change because, although our small and medium-sized businesses sector is vibrant, it has not been brought into the loop of trade promotion. Huge effort is being undertaken there. I mention that because, earlier in the debate, there was an implication of inaction in the department. I have seen for myself how utterly untrue that is. For example, you can see on the website how small and medium-sized businesses are being offered communication skills and efforts are being made to encourage them; a sophisticated system is being put into effect.
My noble friend talked about strategy. Simply, there has been something of an oversight as far as the sector is concerned, particularly in terms of trade promotion. What is happening now is definitely a considerable change. The amendment highlights the importance of the sector for the future of this country and its future dynamic economic activity, which I hope will happen post Brexit, and offers a framework for participation in procurement. I hope that the Minister will give some sort of encouragement or indication of whether this is at the forefront of her thinking and that of the department when she replies to the debate because I believe that an important message was relayed by my noble friend in his remarks.
Baroness Neville-Rolfe
My Lords, I am a huge supporter of the small business sector and its growth. Indeed, some of the issues raised in Amendment 4, moved by the noble Lord, Lord Stevenson, are also important. However, like other noble Lords, I am not sure that they should be written into the Bill. I want to take this opportunity to ask the Minister a question, which she may prefer to answer in writing. Essentially, I want to pick up on the points about the importance of small businesses made by my noble friend Lord Livingston —who, as has been said, did so much as Trade Minister—and my noble friend Lord Risby.
My noble friend Lord Lansley is right that some countries try to discriminate in the procurement process in various ways. He rightly quoted the US Small Business Act. What can we do about that in policy terms? In particular, can we improve the process facing SMEs trying to win contracts either internationally or here in the UK? From my own experience, including a period serving on the Efficiency Board in the Cabinet Office, bidding rules are complex and vastly expensive—as a result, it is said, of European Union laws and requirements. Is work in hand to simplify our rules as we leave the EU to help SMEs win a bigger share of procurement, as I think we would all like?
Lord Davies of Stamford
My Lords, I have been listening to the debate with great interest, but I am worried that the House may be making a technical mistake that could have wider implications. With the best intentions in mind, many noble Lords have spoken in favour of the suggestion to place quotas on companies to do with the beneficiaries of public procurement for the portion of the contract supplied by small businesses. It has been said that the small business share in defence procurement is much lower than it ought to be. The House should be very careful about that. It is probably not possible to increase that greatly; I speak as a former Defence Procurement Minister, as the House will know. If we send our young men and women into battle, we must give them the very best equipment money can buy. There can be no compromise on that. In my view, we cannot under any circumstances accept something second-best when the best is available.
Defence equipment generally involves a great deal of research and development; the products are often high-tech, modern and unique, designed to our specifications and not for anybody else, so there are not the economies of scale that are generated with substantial sales. That is a problem because most of the big defence contractors have an overwhelmingly large share in this country’s defence business. When I was the Defence Procurement Minister, the five big defence procurement suppliers included BAE Systems, Thales, Lockheed Martin—which is American, of course—and Boeing. They are large companies, some of which are supplied with components and parts by small businesses, to a considerable degree. However, some of them are not and, in practice, it is impossible to force them to do that.
We must buy the best, which is often very expensive. We cannot place such conditions on its procurement. Let me give an example. Of course, we spent billions of pounds buying the F-35, which is a wonderful aircraft. We buy it from Lockheed Martin; it is built and assembled in Fort Worth in northern Texas, close to Dallas. I have been there many times. The British share in its procurement project is considerable: about 15% is produced by BAE Systems, but that is not a very large company. One would have to look at the extent to which BAE Systems procures from small businesses. In the United States, to some extent—but, again, to a limited degree—Lockheed Martin buys goods, equipment, services or software from small companies, but they are American small companies, so they do not help us to reach that particular kind of quota.
In some cases, like the Boeing contract for the Chinook helicopter—I once placed an order for 24 of them, so that was a very substantial contract—again the suppliers are largely American. It is not possible to insert British suppliers into the chain because they do not produce what is required for that particular aircraft. It was designed in America according to specifications set down by the American Department of Defense. I do not want to go into too much detail on this; rather, I want to give the Committee an indication that it might be worth thinking carefully about these matters before defence procurement is automatically considered as being part of the desirable targets for increasing the share of the market for small businesses. I fear that almost certainly the only sensible solution would be to leave defence out of this altogether. I started off by mentioning the fact that life and death issues are involved, and we should not be imposing any additional constraints on our defence procurement.
Baroness Fairhead
My Lords, we have discussed a number of elements of the GPA, but at its heart it opens up mutually a government procurement market among its parties. That has come about as the result of a number of rounds of negotiations. As I stated earlier, the parties to the GPA have now opened up procurement activities worth an estimated £1.3 trillion annually. This benefits UK businesses and the public sector, as well as our consumers.
Amendment 4, tabled by the noble Lord, Lord Stevenson of Balmacara, seeks to make provision for regulations to be made when implementing the UK’s accession to the GPA that would compel procurement entities which are part of Her Majesty’s Government to include various standards and obligations in their GPA-covered contracts. I understand the reasoning behind the amendment, but the Clause 1 power in the Bill is to implement our current accession to the GPA on the basis of our current commitments, rights and obligations. This is to ensure—I beg the leave of the noble Lord, Lord Fox, once again—continuity for UK businesses, public entities and our partners. We are not seeking to change any of the rights and obligations that procuring entities currently have, nor are we seeking to implement new or future changes to the procurement rules, which is what this amendment seems intended to do.
The Government have been clear that they will maintain the current levels of protection. Indeed, my right honourable friends the Prime Minister and the Secretaries of State at Defra and the DIT have made public commitments to this end. Section 8 of the withdrawal Act will bring all existing regulations into UK law, and our commitment to international standards remains unchanged. These standards include those on the environment through multilateral environmental agreements; labour rights through the International Labour Organization fundamental conventions; and human rights and equalities legislation. The noble Baroness, Lady Young of Old Scone, discussed some of these standards and I believe that we will consider them in more detail in the fifth group of amendments. I will say only that standards are important and that we are aiming to maintain them.
Procuring entities are able to apply their own additional measures of environmental, social and labour standards to contracts, and in fact they do so regularly. Membership of the GPA does not prevent standards being applied to contracts. The Public Contracts Regulations 2015 allow such standards to be applied where they are relevant, proportionate and consistent with the GPA; for example, a recent contract for the refurbishment of Quarry House, the home of the Department of Health and Social Care, included a requirement for sustainably sourced furniture.
There are other means available to the Government to achieve the effect that the noble Lord is seeking. The Chancellor of the Duchy of Lancaster announced in June that the Public Services (Social Value) Act 2012 will be extended in central government to ensure that all major procurement projects explicitly evaluate social value. We will require all departments to report on the social impact of major new procurements. We will train 4,000 commercial buyers on how to take account of social value. The Government are already able to issue public procurement notices which set out our policy on certain aspects of procurement, and these are binding on all government departments. I hope that the noble Lord will be reassured to hear that.
Lord Stevenson of Balmacara
I am grateful to the Minister for her comments. I think she summed up very accurately the sense in the debate that we have issues here that are worthy of further consideration and should be brought forward and considered, but in another place—and that they can inform and improve the quality of what we do more generally in terms of the Government adhering to high standards in the work they commission, but also that there is a role for SMEs in that which is embraced by the Government. She gave some evidence of work moving towards that.
I think all noble Lords who have contributed to this debate will get something from it—even my noble friend Lord Davies of Stamford, who counselled us not to get too carried away with the drift of trying to get everything included, particularly for SMEs in relation to the safety of our Armed Forces, whom we count on to defend us and for whom only the best can do. The SME world would not necessarily accept that it is not performing at its best. It will have a role. I think the key was in something that the noble Lord, Lord Lansley, said: we need to be quite clear what we are talking about here. It is not main contracts.
Lord Davies of Stamford
I want to be absolutely clear about something. I did not suggest for a moment that SMEs do not have a valuable part to play in defence procurement. I said simply that it may be impossible or expensive in terms of the risks for our soldiers and other servicemen and servicewomen if we insist on a particular quota of procurement from small businesses. We should first of all decide what is necessary to procure for our Armed Forces, then we should procure it. We should hope that as a result SMEs have as large a part as possible, and we should encourage the major contractors to have as large a number of small suppliers as possible, but we should not take any risks to meet some arbitrary quota.
Lord Stevenson of Balmacara
I fully accept what my noble friend has said, and I am sorry if I misrepresented him. I think he has the right point there. It picks up what I was going to say about the point made by the noble Lord, Lord Lansley, that contracting is often seen in terms of large contracts issued by central government to very large manufacturers, and of course it is not like that. The work of the BEIS department in setting up not only the industrial strategy itself but the way it will roll out to the smaller end of the market is a very important element of that. I am sure we all accept that there is a future there for a much broader engagement with big and small projects, but also for a wider range of activity where innovation, skills, flexibility of movement and the ability to adapt to new environments—such a hallmark of SMEs—are used and capitalised on for the benefit of our public good.
In a sense, it is good to hear from the Minister the progress in setting and achieving high standards in our procurement arrangements. The points that need to be brought forward are not just the range and need for these issues to be picked up in all our consideration of contracting; we must not be left behind if other countries are using the GPA, or indeed other measures, to achieve change in their environment and economies, and benefiting from it. We must not miss out on that; we need to have a strategy for it.
The points made about the SME end of the market, particularly in relation to making sure—
Lord Lansley
I am sorry for interrupting. It might be helpful to say that one thing it would be useful for the Government to look at is that, other things being equal, we want other countries not to put down exceptions or engage in any discriminatory behaviour and to be as open as we can possibly make them. We should therefore at least look at what a number of other countries seek to do by putting down their own exemptions—such as the US, in relation to the Small Business Act—and from that arrive at an understanding of what position we will be in relative to them. The GPA should be very much about reciprocal openness of markets, rather than discriminatory behaviour.
Lord Stevenson of Balmacara
I absolutely agree with that.
My final point is to pick up on the SMEs and the need to consider them not so much as one amorphous group but to try to find ways of reaching out to them in terms of how they operate. I think there is a feeling abroad—it may not be correct—that the Government have a one-size-fits-all approach. That will not work when you are trying to look for innovation, change and the other points I mentioned. So, picking up the points made by the noble Lord, Lord Livingston, we should be very careful about how they can contribute and what will make them engage more than they currently do. The noble Baroness, Lady Neville-Rolfe, said we should make sure we have material help that is actually useful to them, rather than them having to fill in thousands of forms and go through impenetrable websites—I think we are all quite aware that that happens; indeed, we have had examples in this House. I think the point made by the noble Lord, Lord Risby— that there is so much there that can be done—was also well taken. It is an effort we all have to be engaged in if we are going to do it. With that, I beg leave to withdraw the amendment.
Lord Purvis of Tweed
“( ) This section may not come into force until a Minister of the Crown has laid before each House of Parliament a statement on the ways in which the UK’s membership of the 1994 GPA would be affected if the House of Commons does not pass a resolution approving a withdrawal agreement and a framework for the future relationship for the purposes of section 13(1)(b) of the European Union (Withdrawal) Act 2018.”
Lord Purvis of Tweed
My Lords, first, I apologise to the Committee that this amendment was tabled on Friday, so colleagues did not have much notice. In many respects it was as a result of the Minister being open and meeting opposition parties and the discussion we had. No doubt we will find out in due course how persuasive I was on my amendment in that private meeting.
The purpose of the amendment is to probe and to seek information. As I mentioned earlier in Committee, the statement by the WTO on 27 November was very clear that there was agreement in principle for the UK’s final market access offer to take part in the GPA after exiting the European Union. The noble Baroness, Lady Neville-Rolfe, mentioned that Australia has announced that ratification of its GPA accession is under way. I think this is the last group of amendments on the GPA, so before we leave it I hope the Minister might be able to expand a little on the point that she made in response earlier, which, if I took it right—she or Hansard can correct me—was that Parliament could decide whether countries could join. What procedure do the Government think Parliament will have to bind the Government in a position on other countries acceding to the WTO GPA once we become a full member? If I got that wrong, no doubt she will correct me; those in the Box can try to assist also.
The agreement was made on the basis of the UK and the EU agreeing a withdrawal agreement and would come into effect after the end of the implementation period. As I mentioned earlier, the UK committed to update its proposed GPA schedule of commitments within three months of it coming into effect. The GPA regular meeting to clarify all those points is scheduled for the end of February this year. My desire is to seek from the Government the latest position. The very significant defeat of the withdrawal agreement in the other place suggests that there has been dialogue with the WTO on the impact on the 27 November decision. I cannot see any situation where there would not have been dialogue between our office in Geneva and our colleagues. It would be inconceivable if there had not been any follow-up discussions since the defeat in the House of Commons, so what are the implications for the UK of not entering into a withdrawal agreement? If there has been more recent discussion since 27 November or the position at the WTO has changed, I would be happy to receive that clarification and reassurance from the Minister, but if there is no deal, what are the implications for our membership? Also, what are the timings of the updated proposals for any schedules? Do they continue to be at all relevant?
The amendment is meant to be helpful, to allow the Government to give the Committee an update on the current position and clarify what our relationship with the GPA would be on the basis of there being no deal. On that basis, I hope that the Minister will be able to clarify and I beg to move.
Baroness Fairhead
My Lords, Clause 1 allows for the implementation of the UK’s independent accession to the GPA in domestic procurement legislation. The power is simple and is limited in its scope. I thank the noble Lord, Lord Purvis of Tweed, for the amendment and I understand that he seeks, through Amendment 4A, to receive a statement from a Minister on the impact of a no-deal exit from the EU on the GPA. I hope that I can offer some reassurances to the Committee on the progress made towards the UK’s accession to the GPA as an independent member
On 27 November, the UK’s independent market access offer to the GPA was approved in principle by the WTO GPA committee. We are glad that our international partners supported the UK’s continued participation in the GPA as we leave the EU and we look forward to finalising the UK’s continued participation shortly. This was the culmination of a great deal of work from officials and my ministerial colleagues both in my department and across Whitehall. The UK is now nearing the end of its process of accession to the GPA, which will ensure our independent membership and continuity of participation.
Every effort is being made across all parties to find a solution for a withdrawal agreement, and agreed implementation will mean that the GPA will take a similar approach to other international agreements and continue our participation during this time under the EU schedules. We are committed to working to provide continuity across all our existing trade agreements. In the unlikely event that no withdrawal agreement can be agreed, the UK’s accession to the GPA will continue to progress as we leave the EU.
I hope that I have reassured the noble Lord, Lord Purvis of Tweed, that continuity of market access for UK businesses is very much the Government’s priority, and that he will feel able to withdraw his amendment.
Lord Purvis of Tweed
The Minister said that if there is no withdrawal agreement our accession will “continue to progress”. That means that we would not be a member. Is that correct?
Baroness Fairhead
Perhaps it would be helpful if I gave the process for GPA accession. Schedules are laid down and there is an agreement in principle, which has been achieved. Then an invitation is issued to join as an independent member. That is what we are waiting for. The CRaG process will then begin. Then the Foreign Secretary, subject to CRaG going through, will sign an instrument of accession and 30 days after that our accession will be effective.
Lord Purvis of Tweed
I am grateful to the Minister. For my simple understanding, if there is no agreement, what is our status with the GPA on 30 March?
Baroness Fairhead
We will have to progress and become as quickly as possible an independent member of the GPA. That process will need to progress.
Lord Purvis of Tweed
So it is clear that we would not be a party to it. We would just be in the process of trying to progress our application. I am grateful for that clarification—or do I have the wrong end of the stick?
Baroness Fairhead
The process will continue and it will be our aim to be an independent member by the time we leave. That is our aim.
Lord Purvis of Tweed
Well, no doubt that is the aim. I was not asking what the aim was, but what the reality would be on 30 March. If we are currently a member because we are in the European Union and we leave the European Union without any agreement, we are mid-process. Even if we have received the invitation to join, we would not be a member.
Baroness Fairhead
Once we are given an invitation to join, our Foreign Secretary puts down an offer of accession, which has to go through the CRaG process in the normal way to make sure that that can take effect.
Lord Purvis of Tweed
I will not detain the Committee much longer but, from my understanding, it is clear that we will not be party to that agreement on the day after we leave if there is no deal. We would be in the process of seeking to join, and Parliament would have to approve that—and it may well happen. But, given the fact that the agreement is based on the principle that within three months of taking effect schedules would be updated, I am not entirely sure that that would be done immediately. That is of concern. If there is no deal, we would not be party to this very considerable agreement.
It is very important, if not today, for the Minister to give more information to the Committee about the implications of that for the many businesses who currently operate under the legal protection of that procurement agreement. In particular, what would that mean for agencies that are currently in mid-procurement or have signed procurement agreements with businesses? What is their status if we leave and we are not a party to the agreement? There are those with much greater legal knowledge than I have, but it is not reassuring in contract law to be outwith an international agreement despite the Government’s intention or aim to join it. That is simply not appropriate. If the Minister wishes to come back on that, I would be happy.
Baroness Fairhead
Plan A is to have a withdrawal agreement. There is then an implementation period and after that there is obviously more time to be able to effect this. In the very unlikely event of there being no deal—and the noble Lord will be aware of what is happening in the other place and the activity there—the Government are still confident that this will be in place and that we can become an independent member of the GPA by the time we leave. That is our intention and there is confidence that that can be achieved.
Lord Purvis of Tweed
We have to put that into the category of all of the other aims that Dr Liam Fox has had with regard to the other agreements we will come to later in Committee. I am grateful to the Minister, but she did not refer to what procedures Parliament would have to veto the accession of other countries once we were out—but perhaps she would wish to write to me and other members of the Committee on that.
Baroness Fairhead
I apologise. I should have addressed that question. The Government have to approve the accession of new members to the GPA. The accession member will be reviewed by the ITC, and Parliament has the right to scrutinise the implementing legislation.
Lord Purvis of Tweed
I am grateful for that clarification. I need to refer to Hansard, however, because I thought the Minister said that Parliament could decide. But this is a probing amendment and we now have more information. It has perhaps raised more questions in my mind than answered them, but on the basis of that, I beg leave to withdraw the amendment.
Lord Stevenson of Balmacara
My Lords, this group of amendments plays back themes that we have already discussed in the first and second groups, so I will not spend much time on them.
Amendment 6 suggests that additional consultation with relevant stakeholders would make it easier to understand what the process is in the clause. Amendment 7 tries to pick up the point which was made in a number of committees of your Lordships’ House and was raised in the other place when this issue was discussed. It replaces “appropriate” in line 16 on page 2 with “necessary”, because it implies that it is not a judgment on a passive basis of what may be considered appropriate, which may be a variable, and it has a particular purpose. I hope the Minister will respond to that.
Amendment 11 again came from the Constitution Committee’s comment, although it has not been picked up elsewhere, that it would be helpful to insert a refining phrase into the documentation related to whether legislation that is retained EU law might be better defined. We touched on this already. There was a concession that, although it was not thought to be strictly necessary in an earlier phase, it was appropriate that that phrasing could be adopted. I wonder whether that will also be the case here. I look forward to hearing the debate. I beg to move.
Lord Purvis of Tweed
My Lords, I support these amendments. They make eminent sense. I shall speak also to Amendment 101 in this group which, in essence, suggests that in moving forward on these agreements the CRaG process is not the most appropriate; and that there is a better way forward by ensuring a more appropriate role for Parliament, and for Parliament to have greater knowledge of why an agreement should be approved. In many respects, this is now becoming fairly standard procedure in other countries, where the Government give much greater information to Parliament about why agreements should be ratified and where each House of Parliament has a greater role on the basis of scrutiny by committees. I am convinced that when it comes to complex, deep and comprehensive agreements, the CRaG process will be shown not to be the appropriate route, and we will need to decide another. This Bill is a very good basis from which to start on a more transparent and open process.
As I mentioned earlier in the debate on whether the House resolve itself into Committee, our agreements amount to 60% of UK trade and are therefore highly significant. The complexity of trade agreements now—they go far beyond simply a discussion of tariffs and the financial element, and have wider impacts on domestic policy, as the noble Lord, Lord Kerr, mentioned—means they require a different form of engagement with Parliament. It starts with information and with greater understanding of the consequences of these agreements. It will no longer be acceptable that agreements such as these can be made under traditional prerogative power for Parliament simply to approve without there being a more meaningful process. That is the intent behind the amendment. It is meant in a positive manner. I believe it is framed in a better way than CRaG, and I hope it will gain support.
Baroness Fairhead
My Lords, as I repeated, the Government’s priority is to bring certainty to businesses and the public so that we will have continuity in our current trade and investment arrangements with non-EU markets after we have left the EU. Certainty is something for which we have heard widespread support in both Houses of Parliament, and not having the ability to implement our continuity agreements fully could jeopardise our ability to deliver it. Both the International Trade Select Committee and the Trade Bill Committee have heard from external witnesses that continuity is what businesses want. The report published by the International Trade Select Committee on 28 February 2018 clearly stated:
“Almost no one who contributed to our inquiry suggested that the Government’s policy objective of seeking continuity was the wrong one”.
Amendment 6, tabled by the noble Lord, Lord Stevenson of Balmacara, seeks to ensure that before we use the Clause 2 power to implement obligations of a continuity agreement, we have consulted appropriate stakeholders. While I believe I understand where the noble Lord is coming from, this amendment would have the practical impact of delaying our ability to use the Clause 2 power to implement obligations of any continuity agreement until we had satisfied this condition. This would be problematic to the delivery of our programme, as we are working at pace to ensure continuity in existing trade relationships. Once we have signed continuity agreements with our existing partners, we need to ensure that we have implemented all obligations of these agreements to guard against a cliff edge as we leave the EU. This needs to happen before we can bring these agreements into force, which is what will deliver continuity on the ground to businesses which are already benefitting from the terms of EU trade agreements.
We are seeking to balance the need to maintain pace with providing appropriate scrutiny and oversight. That is why, in the other place, we upgraded the operation of the Clause 2 power by requiring a report on each agreement to be laid before both Houses and an affirmative resolution to provide the additional scrutiny that colleagues in the other place were seeking. This means that Members of both Houses will already have the opportunity to consider each use of the power fully through the established affirmative resolution procedure. As I have already mentioned, the power is subject to constraint and will not be used to implement changes other than those necessary to secure continuity in our existing trade relationships.
Amendment 7, tabled by the noble Lord, Lord Stevenson of Balmacara, would mean that instead of using the Clause 2 power to implement “appropriate” changes to domestic regulation, it would be used to implement only “necessary” changes to domestic regulations. Again, I have sympathy with the noble Lord on this point. We are clear that we are going to use this power only to implement changes which are essential to deliver continuity. I understand where he is coming from with his suggested change to the Bill, but we have chosen to use the term “appropriate” following serious consideration of how best to reflect our policy in legislation. We have previously sought advice on this point, and the conclusion of that advice was that “appropriate” is the term which best fits the policy intention. This is because to use the term “necessary” would restrict the use of this power too much. As noble Lords know, our policy aim is to deliver continuity of effect of our agreements. To deliver this, we may need to have some tolerance for changes which may arguably not be strictly necessary but will nevertheless help us to deliver on our commitment of continuity and ensure legal certainty for UK businesses.
Limiting the power to only changes which were strictly necessary would set a very high bar and greatly increase the risk of legal challenge to the use of the power. It is one thing to justify a change as appropriate in all circumstances; it is quite another to demonstrate that that change was absolutely necessary. I am advised that this could provide a field day for lawyers and result in delays to continuity.
An example of a change that we will need to make through this power is ensuring continuity in our procurement arrangements in our free trade agreements. We will need to change the Public Contracts Regulations 2015, the Utilities Contracts Regulations 2016 and the Concession Contracts Regulations 2016 to refer to our UK agreements instead of the EU agreements that they are based on. If we were to amend the wording of this power to say that changes needed to be necessary, we could be drawn into court challenges on whether a change was strictly necessary, thus leading to delays in implementation, which would leave a gap in continuity.
Lord Stevenson of Balmacara
I thank the noble Baroness for giving way. We are in the territory of “may” and “must”, trying to decide whether we are drafting as we speak. I just want to ask her to calm down a bit, although that sounds a terrible thing to say. She has used the term “absolutely necessary”. I never said “absolutely”; the amendment just says “necessary”. Adding “absolutely necessary” would make things difficult. Therefore, it is not a case of changes being absolutely necessary—it is not essential that we do these things. I accept the point but will she accept that she is slightly overegging the case?
Baroness Fairhead
It was necessary for the noble Lord to ask about the word “absolutely”, but I object to being asked to calm down. I was trying to give your Lordships the clear advice that we have had because I thought that that was the advice and information they were seeking.
Given that any use of this Clause 2 power will already be subject to the affirmative resolution procedure, and given that we will lay the reports and our continuity free trade agreements will again be ratified by Parliament, Parliament will be fully appraised of the Government’s actions. I hope your Lordships will accept that that means that it will in fact already be fairly difficult for the Government to use the Clause 2 power without Parliament’s consent in one way or another.
I turn to Amendment 11. Clause 2 helps to facilitate a smooth transition by helping to implement the non-tariff obligations of continuity trade agreements. We realise that there are concerns about this power, so we have sought to constrain it as much as possible, and this has a number of parts. First, the power can be used to amend only UK primary legislation that is retained EU law and not any other UK legislation. Secondly, it is valid for only three years, and its lifetime can be extended only with agreement from both Houses of Parliament. We would seek to extend the powers only if it were considered necessary to ensure that our continuity agreements remained operable over time. Thirdly, the use of the power is subject to the affirmative resolution. Fourthly, the power will be used only in relation to continuity trade agreements, as we have made clear in the Explanatory Notes. Fifthly, to provide additional transparency for our programme as a whole, Clause 3 commits, in statute, the Government to providing reports on all continuity trade agreements, explaining our approach to delivering continuity in each case. In addition, I should make it clear to the Committee that regulations made under the Trade Bill will already comply with Section 7 of the European Union (Withdrawal) Act, so this part of the amendment is unnecessary.
On Amendment 101, tabled by the noble Lord, Lord Purvis of Tweed, I assure the Committee that our existing trade agreements have already been examined by Parliament as part of its regular scrutiny of EU business. Ratified free trade agreements have already been through the normal parliamentary scrutiny process for treaty ratification. Our continuity agreements will also go through the CRaG process. The noble Lord raised some concerns about that but it gives parliamentarians an opportunity to challenge them in the established manner. Any regulations made under the Clause 2 power will be introduced under the affirmative resolution, which will provide an opportunity for lengthy examination if we need to make a change to the law.
Lord Purvis of Tweed
No doubt this will be a point that we hear about again. That is obviously the case in relation to the existing agreements but those agreements have been through a democratic process in the European Parliament with British representation. British parliamentarians in the European Parliament were involved in setting the mandate and involved in the committees that scrutinised them in detail in advance of, and during, the negotiation process. The Government are proposing that, even starting with these continuity agreements, there will be no role at all and they are signalling that that is a satisfactory way forward. I do not think that it is satisfactory to have a process in the future involving less scrutiny of trade agreements than British MEPs have been involved in and for which this Parliament has subsequently been part of the ratification process.
Baroness Fairhead
It is important to separate the two. Essentially we are trying to replicate the existing trade agreements, which have already been subject to all the elements of scrutiny to which the noble Lord refers. However, the Bill does not cover future trade agreements, and we will have an opportunity to discuss the appropriate parliamentary scrutiny procedure for those. I have already said on the Floor of the House that I am happy to take all views. The ITC has made its suggestions and the Constitution Committee is looking at treaties. As the noble Baroness, Lady Young of Old Scone, mentioned earlier, their recommendations will be taken into account and we will come back with proposals. This is about replicating the effects of the existing continuity agreements from which our businesses already benefit.
Lord Purvis of Tweed
I am grateful for the Minister’s indulgence. I was also referring to existing agreements. For example, the only one so far that the Government have announced, with Switzerland, has accompanying it a free movement of people agreement, with Chapter 4 and Article 23 guaranteeing the right of movement of Swiss nationals for three months a year without any visa checks and so on. We would have no such ability. The proposal is at odds with the immigration White Paper—it is at odds with what the Government are saying. It raises questions about whether this simply is a straightforward replication. Under the free movement of people agreement, other elements have been discontinued in the existing arrangements and some elements are being continued. It is simply not good enough for the Government to state that these continuity agreements are a like-for-like cut and paste job, which is what the Government used to say. We now know that they are complex. We now know, for example—this was the case even with the Swiss agreement before December—that there are potential issues affecting other domestic law on immigration and migration which we would have no ability to scrutinise properly and separately if we used the CRaG process.
Baroness Fairhead
I simply say to the noble Lord that we are trying to ensure as much continuity as we possibly can. I hope that I did not say that these agreements would be easy; I said that some technical issues would need to be resolved. That is why the Government have committed to lay before the House detailed reports that talk about the changes and the impact of those changes. Both Houses of Parliament will have the ability to review them and they will be subject to the affirmative procedure. I do not stand before the Committee saying that this is all easy. It is complicated, but the Government have committed to laying these reports, with all the detail, before both Houses so that they have a chance to review the agreements.
Lord Kerr of Kinlochard
I have a degree of sympathy with the amendment proposed by the noble Lord, Lord Purvis of Tweed. I am grateful to the Minister for the meeting she had with me last week. I was encouraged by what she said then and by what she has said here today about an answer being given to the Constitution Committee—I think she said tomorrow. That seems to be good news.
The point made by the noble Lord, Lord Purvis of Tweed, relates to an aspect of a wider question; it is an important aspect, but the wider question will have to be addressed before we reach Report. It is an important element in the amendment to the Motion which was carried by the House. I look forward to hearing what has been said to the Constitution Committee; I imagine that it is fairly general and that, on points like the one we are discussing now, we would be looking for something more particular from the Government before Report.
Lord Lansley
I would like to say a brief word on this group of amendments. On the latter point made by the noble Lord, Lord Kerr, I entirely agree. He is quite right about the use of, as it were, the scrutiny reserve in negotiations. It is important to have it available. But in these negotiations, of course, one is negotiating to bring in what are effectively new provisions in new agreements. The question is: what is required in relation to existing agreements?
On Amendment 101, I am a bit confused because it refers specifically to free trade agreements and to those which come under Clause 2(3). It seems that we are talking not only about free trade agreements, but about international trade agreements arising under Clauses 2(2) and 2(3). The noble Lord, Lord Purvis of Tweed, might be looking for something slightly wider than what he has put down in his amendment. We will leave that to one side for a moment. The point is this: in the Explanatory Notes, Ministers are quite clear that the intention is to bring existing agreements into effect through the Bill; we are working on that basis. However, there are circumstances in which the substance of an existing agreement, when it is converted into UK law, has to be amended to make it compliant with, or to enter it into, UK law. Paragraph 56 of the Explanatory Notes, for example, says:
“Although the Government’s policy intention is to ensure continuity as far as possible in the effects of the UK’s current trading arrangements, the new UK-partner country agreements that are implemented using”—
if the small typo “of” is deleted—
“this power will be legally distinct from the original EU-partner country agreements on which they are based. It may also be necessary to substantively amend the text of the previous EU agreements … so that the new agreements can work in a UK legal context”.
The point of this paragraph is that trying to achieve the same effect does not necessarily mean that we will not have to amend the agreement; we may have to do that. We are getting ahead of ourselves. Surely the point is that what happens in those circumstances should be covered by Clause 3(3). A specific report must be laid before Parliament for that purpose.
I do not subscribe to the way in which the noble Lord, Lord Purvis, is proposing to go about this but, particularly when we come to talk about Clause 3, we might make sure that parliamentary scrutiny is applied to the differences between the provisions of the existing agreements and the agreement as it will be incorporated into UK law. That is the point we have to look at. Everything else, frankly, has been scrutinised in the way that the Minister made clear.
Baroness Fairhead
My Lords, my noble friend Lord Lansley has made a suggestion which I will definitely reflect on, as it is important that these reports give appropriate information. With respect to making the Clause 2 powers super-affirmative, I am concerned that the amendment would damage our ability to deliver the promise of continuity, particularly when time is of the essence. That increases the risk of a cliff-edge. We are trying to offer reassurance by providing these reports; as I said, I will reflect on my noble friend’s comments.
My response to the noble Lord, Lord Kerr of Kinlochard, is that I too am thankful for the conversation we have had. It is exactly the kind of conversation that helps because, given his experience, it aids an informed debate. I want to clarify my response about what we will report back to the Constitution Committee: this will be specifically on the Trade Bill, not on the future. However, I have said on the Floor of the House that we are open to views and we will be coming back with detailed proposals. The noble Lord commented on different ways that one can get negotiating leverage. We are always looking for negotiating leverage; sometimes it is really effective and sometimes not so much. But I take his point that we should be thinking about all the things we can do to add to that.
We have already shared some views with regard to future trade agreements. I am open to hearing views from all Members around the House about what our approach should be. Given all the elements of oversight and scrutiny that we have put in place for these trade continuity agreements, I hope that I can reassure the House and would therefore ask the noble Lord to withdraw the amendment.
Lord Stevenson of Balmacara
My Lords, it has been a very good debate. Most of the interchange has been on the latter part, on Amendment 101, but we have made some interesting discoveries, there is food for thought, and the main points are very clear. With that, I beg leave to withdraw the amendment.
Trade Bill
Wednesday 23rd January 2019
(5 years, 10 months ago)
Lords ChamberRead Full debate Trade Bill 2017-19 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 127-II(Rev)(a) Amendment for Committee, supplementary to the revised second marshalled list (PDF) - (23 Jan 2019)
“Regulations under section 2: state aid
(1) If regulations under section 2(1) make provision in relation to the issue of state aid for the purpose of implementing a free trade agreement, then a statutory instrument containing those regulations may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, each House of Parliament.(2) The Secretary of State may not lay a draft of the instrument containing regulations under this section until—(a) he or she has consulted—(i) each devolved authority,(ii) public bodies, businesses, consumer groups, trade unions and non-governmental organisations which, in the opinion of the Secretary of State, have a relevant interest, and(iii) the public, and(b) he or she has laid a report of the consultation under paragraph (a) before both Houses of Parliament.”
Lord Stevenson of Balmacara (Lab)
My Lords, Amendment 16 in my name deals with state aid and whether it will continue under any new arrangements brought forward by the Government. It is essentially a probing amendment. I welcome the Minister to the Dispatch Box for his first response on the Bill. I look forward to working with him on this and related topics.
The reason for proposing the amendment is because we have very little information about what the Government’s intentions are on state aid, which is arguably a key component of all trading activity and can materially affect how and in what ways individual companies can operate and be successful within the home market and abroad. It has been operating since we joined the Common Market in 1972 and is a very strict and well-observed rule. It relates primarily to whether goods can circulate freely in the EU area, or the EEA, although there are some quite interesting exceptions, mainly on a cultural level, where changes are made relating to support for indigenous and widely spread cultures. Indeed, this country has benefited considerably from support for the arts, particularly film, theatre and television. State aid has also extended to fringe areas such as horseracing. For example, in France, it has been ruled that the support of a horserace betting levy system not unlike our own is a cultural exception to single market rules. That rule has been applied for the last couple of years, and is now being followed within the United Kingdom. It is an interesting area.
It appears that the Government have already decided that the existing rules will continue. Why was that decision made and on what statutory basis? Is there any opportunity for parliamentary procedure and process to be involved? It has also been announced that the Competition and Markets Authority will be responsible for ensuring trade rules within the state aid area. This was decided without any debate, discussion or consideration of alternative bodies. Again I ask: what was the statutory basis for that and is there an opportunity for parliamentary scrutiny, now or at some future stage?
Viscount Trenchard (Con)
My Lords, this amendment is rather strange in the context of this Bill. It seems intended to restrict the Government’s ability to make changes to the state aid rules unless they have consulted a long list of bodies—and even the public. But as the noble Lord, Lord Stevenson, said, the Government do not intend to use this Bill to provide themselves with a device for making such changes. One of the benefits of Brexit is that we will be able to apply our own state aid rules, either based on an equitable free trade area with the EU or consistent with WTO principles. The present EU rules need to be much improved and made proportionate; on occasion, they discriminate against British business and have a negative effect on the economy and jobs.
The UK is, quite properly, a very restrained user of state aid compared with our continental neighbours, spending approximately €90 per capita against a range of €170 to €240 per capita in Germany, France and Belgium. The point is that in cases such as that of Sheffield Forgemasters, the UK Government should be free, with the agreement of another place and your Lordships’ House, to grant state aid under what will rightly be very narrow criteria. Another case in point might be the Horizon Nuclear Power plant, which has been suspended by Hitachi because of a failure to agree the financing structure. Does the Minister agree that Her Majesty’s Government should look again at the extent to which they might commit public funds to ensure the successful completion of a hugely important contributor to our future energy mix—especially against a background where the only other major new nuclear power station, Hinkley Point, is to be financed by the French state and the Chinese state? Does the Minister agree also that this amendment is in any event completely unnecessary, because the Government have no need or intention to implement state aid commitments in rolling over existing free trade agreements?
Lord Fox (LD)
My Lords, had we debated this amendment during the last session, the night before last, we would not have had the benefit of yesterday’s report from the IPPR think tank on the subject of state aid. It reinforces the point made by the noble Viscount, Lord Trenchard, that the United Kingdom is a restrained user of state aid when compared to other countries in the European Union. That gives the lie to some of those who believed that the European Union was restricting the UK Government’s decision on the scale of state aid in this country—and that message might be conveyed to some members of other parties in the other place who are alleged to believe that the European Union would continue to restrict industrial support activities.
I was surprised to hear the huge shopping list that the noble Viscount, Lord Trenchard, presented for further state aid—his is not a voice that I had imagined would be making that point. That highlights the need for a state aid strategy. If we have an industrial strategy—which we do, whether some Members opposite like it or not—the purpose of state aid is to find strategic ways of delivering it in the best possible way for the best possible good of this country and its trading environment with the rest of the world.
Whether we trade as an EU nation, through FTAs or, as some people dream of, on WTO terms—which would be a nightmare for the rest of the world—there will still, sensibly, be restrictions and rules affecting what aid we can give and what restraints we have to apply. In spirit, therefore, I support the amendment, and I am interested to hear the Minister’s response.
I have a query that will probably reveal my ignorance of the process of legislation. Paragraph 4(1) of Schedule 2 contains a more general injunction around statutory instruments and consultation. I wonder whether that part of the Bill may pick up, to a large extent, what the noble Lord, Lord Stevenson, seeks to achieve. I would be happy to be wrong about that, but it would be helpful if the Minister, either now or later, would fill us in on that.
Lord Lansley (Con)
My Lords, I understand the point the noble Lord is making and exploring on this issue, and when we explore that point, it is worth saying that much depends on our future relationship with the European Union, and how we incorporate state aid into that. If we were in the European Economic Area, we would apply EU state aid rules; that is what EEA members now do. If we were in a free trade agreement with the European Union—as Canada and South Korea, for example, are—we would do something different. State aid provisions are built into those agreements, but they are based not on EU state aid rules but on the WTO Agreement on Subsidies and Countervailing Measures. That will all entirely depend on what the future relationship looks like.
The point has correctly been made that we use state aid proportionately less—about half as much, as a proportion of GDP, as the French do, and a quarter as much as the Germans. So state aid rules themselves have not necessarily restrained us from doing things. The noble Lord will be aware of the report on competition and state aids by the committee of which I have the privilege to be a member—the Internal Market Sub-Committee of the European Union Committee. The Government’s approach is, essentially, that we will replicate EU state aid rules in UK law, but we will, of course, be repatriating them so that they are exercised by our authorities rather than by the European Commission. In that context, it will be the Competition and Markets Authority, rather than any other body, which does that in this country—and it will do so independently.
If I remember rightly from the evidence that we received—I stand to be corrected if not—the Government’s intention is for this to be done by the CMA on a UK-wide basis, and not to be disaggregated to individual nations or regions. Clearly, the state aid rules themselves may have geographical parameters, as ERDF and other EU funding has done in the past, but that is a different matter. The rules on the application of state aid would be applied in this country. So we will have something considerably beyond the WTO requirements. For example—this is probably the best example and the most important for businesses—EU state aid rules would require us to have processes of notification and prior approval whereas, where WTO rules are concerned, if the Government engage in subsidy then they do so at the risk of post-hoc challenge and complaint. That is quite a different structure.
I say all that simply because, while this is an interesting issue, I am not sure whether the amendment does the job. However, I put it to the noble Lord that he might suggest that if future trade agreements of this kind, which are generally with third-party countries, were to apply state aid rules in a UK and third-party country agreement which differentiated from the WTO subsidies and countervailing measures provisions, that should be the subject of consultation and approval in this House. I cannot see why we would want to approve an arrangement for a WTO agreement on subsidies, which would simply be applied in the normal course of events. I hope that those few remarks are helpful.
Lord Lea of Crondall (Lab)
My Lords, a couple of the points made in the short debate on this amendment have been very wide and not actually to do with the amendment as such. Perhaps I may add a corrective: we discussed the mergers of railway companies, nuclear power companies and so on earlier today. The fact is that we look at one Chinese company against not one European company but sometimes more than one. Regarding the comment about the EEA, I am sure that the EEA will evolve while recognising that we often need one European company. It could be dressed up as something to do with either the nature of policy on mergers, competition and monopolies or with state aid policy. I put down that cautionary note because, when people say that this amendment does not do those jobs, it is clearly not intended to. However, many such wider commercial questions will have to be faced up to in the future.
Baroness McIntosh of Pickering (Con)
My Lords, following the comments of the noble Lord, Lord Stevenson, in moving this amendment, I would like to put a specific question to the Minister. In doing so, I declare that I am a member of the all-party parliamentary group on racing and have enjoyed the occasional day at the races as a result.
For 18 years, I represented a number of racehorse owners, trainers and stable lads and lasses in North Yorkshire, where racing is extremely important. My specific question relates not just to Amendment 16 but to Amendment 48, and looks ahead to the tripartite agreement on the movement of horses. I know that my noble friend the Minister is keen to talk in terms of continuity so, in those terms, what is the specific status of the tripartite agreement as of 30 March? Will it be rolled over automatically if there is no deal, or will it become part of a separate free trade agreement?
On the comments made by the noble Lord, Lord Stevenson, state aid was deemed to be almost a barrier to the form of instrument used in replacing the racehorse levy which, as your Lordships will know, is the means by which most of racing is financed. The levy puts it on a sound financial footing, but it was prayed in aid that it would be deemed state aid. However, as the noble Lord said, that was specifically excluded for a similar levy that has been allowed in France, which is pertinent to the debate on this amendment. What is good for the goose has to be good for the gander, so if the French racing industry was allowed to be supported then we should be allowed to continue to support the British racing industry. This goes to the heart of the tripartite agreement, so what is the status of state aid, as raised by the noble Lord, Lord Stevenson? What is the position of the tripartite agreement going forward from 29 March this year?
Baroness Jones of Moulsecoomb (GP)
My Lords, I support Amendment 16, which is a crucial amendment to debate within the Trade Bill. The general principle of state aid rules, which is that the Government do not go around doling out money to big business in ways that are unfair or anti-competitive, is a good one. At the same time, there are concerns about state aid rules being used as a vehicle for predatory capitalism to dismantle the state and override democratic control of quite important parts of our economy. This is particularly important for Greens, because Greens are not as concerned with the electoral cycle as with the future of humanity and this planet. If we are going to listen to the IPCC report, which says we have 12 years before we have to face dramatic climate emergencies, then we need to transform our economy and make it fit for the future.
And that is the role of this House. The other place deals very much with the day-to-day—what happens on Monday or Thursday mornings. We here have a responsibility to the future. A green new deal is one of the answers. It would create 1 million well-paying climate jobs and set us on a sustainable footing for future generations. It would require active fiscal and monetary measures that would favour more sustainable production and consumption over more ecologically destructive options. Sometimes the state would have to pick winners and losers—that would be part of it—particularly in relation to natural monopolies such as railways and the energy system. Even the Government are recognising that the market is failing on some of these important issues, and that state intervention is required. Much of this could be called state aid, depending on what definition is used.
For these reasons, it is absolutely essential that our hands are not tied in any way which might interfere with our ability to tackle the climate emergency that we are facing, as well as all the other big issues facing our economy.
Lord Purvis of Tweed (LD)
My Lords, I seek some clarifications when the Minister responds, broadly in response to the constructive contribution from the noble Lord, Lord Lansley. With the withdrawal Bill, there was much debate in Committee and this House regarding how existing EU law will be migrated into UK law. There were 12 competences the UK Government believed were reserved and would therefore be fully within the competence of the UK Government, but that the devolved Administrations believed were either devolved or had a direct impact on devolved powers.
State aid was one of those areas where there was no agreement. That means that if there continues to be no agreement, then the amendment in the name of the noble Lord, Lord Stevenson, is absolutely critical. It means that for regulations brought for the continuity agreements, there needs to be far more enhanced consultation with Administrations that believe this is touching on their direct competences. If there has been agreement, then perhaps the amendment is less necessary for the continuity agreements; but as we come to further amendments, this sets the tone for what will be necessary for future agreements. When the Minister responds to this group, I hope he will be able to provide clarification on where the discussions are, regarding whether there is agreement on where state aid lies within this area of competences.
The Minister of State, Department for International Development (Lord Bates) (Con)
My Lords, I join others in thanking the noble Lord, Lord Stevenson, for moving this amendment. In response to my noble friends Lord Trenchard and Lord Lansley, I think that the noble Lord intended this as a probing amendment, as he said, to give the Government the opportunity to put some issues on the record. It has been very timely, not least because under the EU withdrawal Act, mentioned by the noble Lord, Lord Purvis, on Monday we laid the regulations on state aid before the House. That 77-page document will now make its way through the rigorous scrutiny of the Joint Committee on Statutory Instruments and then the Secondary Legislation Scrutiny Committee. Then, of course, it will be subject—because it is by the affirmative procedure—to scrutiny later in this House. For that reason some of the specific issues referred to by my noble friend Lord Lansley and the noble Lords, Lord Purvis and Lord Lea, might be usefully dealt with in that area.
Clause 2 is not about making changes to existing agreements, and the regulations cannot be used for future free trade agreements, as my noble friend Lord Lansley rightly identified. In answer to the noble Lord, Lord Stevenson, we also need to recall that the Competition and Markets Authority has been given this responsibility domestically, across the UK jurisdiction. When it comes to free trade agreements and the EU, the Trade Remedies Authority would undertake that responsibility.
To provide further reassurance that we do not expect to need to use these powers to set up a domestic state aid regime, I can inform the Committee that we have laid the instrument I referred to. This instrument, the State Aid (EU Exit) Regulations 2019, will be made under the European Union (Withdrawal) Act 2018 and establish a domestic state aid regime that will work for the whole of the UK at the point that this is required. No doubt Noble Lords will be offered an opportunity to scrutinise this in detail.
Subsection (2) of the proposed new clause requires the Government to consult relevant stakeholders prior to laying implementing regulations under Clause 2 which make provision on state aid. We have been clear that proportional consultation is of the utmost importance to us. We have engaged with a large number of stakeholders through our programme of trade continuity. The Government will always consult stakeholders as appropriate, so to set out specific provisions concerning consultation on state aid is not needed at this stage. The Bill already requires the Government to lay reports before Parliament in which we will provide detail of any real-world changes to free trade agreements. These will be laid before the agreement is ratified or regulations are laid under the Clause 2 power in relation to that agreement, whichever comes first.
Any significant differences in agreements that are relevant to state aid would be identified in these reports and Parliament would then be in a position to take an informed decision in relation to the making of the regulations or the conduct of the ratification process. I say again that we do not expect to need to make regulations under this power in order to implement state aid commitments in existing free trade agreements.
I turn to some of the specific points that were raised. My noble friend Lady McIntosh raised the horserace betting levy and the tripartite agreement. This is something we will come to in Amendment 48 in a later group, so perhaps I can leave it to the lead Minister, my noble friend Lady Fairhead, to respond, but the relevant provisions of the horserace betting levy were notified to the Commission and approved by the Commission under state aid rules. I confirm that the TRA—the Trade Remedies Authority—will not be responsible for state aid prioritisations in FTAs. It will be a matter for individual free trade agreements to establish a dispute mechanism.
Lord Stevenson of Balmacara
I was going to ask the Minister about the TRA—I am glad that he tried to clarify what he had said, because he did raise a doubt about what was arranged. Have I got it right? I would be grateful if he could confirm that we are proceeding on a continuity basis and using the withdrawal Act to ensure that, under the statutory instrument he mentioned, the existing set of rules that currently apply, because of EU directives and regulation, will be applied under UK law after exit day. Therefore, that process does not require any further discussion or debate, because of the reasons he has given, and he is not saying that in future trade agreements there will be a specific role for state aid rulings by the TRA—that will remain with the CMA—but there will be an opportunity to discuss that broadly when we get to the point at which we are, post continuity, talking about the real world and what is actually going to happen in trade. Is that right?
Lord Bates
That is correct. I am grateful to the noble Lord for setting that out. My noble friend Lord Trenchard mentioned the Government’s commitment to the state aid system. That point is contained in Command Paper 9593, The Future Relationship between the United Kingdom and the European Union, which says in section 1.6.1:
“The UK has long been a proponent of a rigorous state aid system—this is good for taxpayers and consumers, and ensures an efficient allocation of resources”.
Moreover, the political declaration which accompanies the withdrawal agreement points out in section XIV, paragraph 79:
“The future relationship must ensure open and fair competition. Provisions to ensure this should cover state aid, competition, social and employment standards”.
That will all be fleshed out as the future economic agreement is worked on. Again, I thank the noble Lord for the opportunity to clarify some points on the record.
Lord Purvis of Tweed
Will the Minister clarify that since the Sewel convention continues to apply, the UK would not legislate ordinarily on devolved matters if the Government have brought forward this regulation? Last year, during the withdrawal Bill process, the devolved Administrations believed that this touched on their competences with state aid. Has there been agreement with the devolved Administrations that this is a fully reserved issue?
Lord Bates
Perhaps I could write to the noble Lord on that to make sure that I get that absolutely correct. I will write to him. Does the noble Lord want to come back on that?
Lord Purvis of Tweed
I wonder if the Minister is able to write before we get to the next grouping because this is going to be relevant. Whenever the Minister can provide clarification, it will be welcome to the Committee.
Lord Bates
I have a sneaking feeling that some clarification may be coming via my noble friend Lord Younger by the time we reach the next grouping. I am sure the noble Lord will have an opportunity to respond to that. Failing that, I will be very happy to write before Report. I thank the noble Lord and ask him to consider withdrawing his amendment at this stage.
Lord Stevenson of Balmacara
I am grateful to all those who have contributed to this debate. It was indeed a probing amendment and an attempt to elicit a series of responses from the Minister. We have those on record and I am grateful to him. Having said that, we have raised one or two issues that need consideration in the non-continuity mode, if we ever get to that point, about exactly why we are doing what we are doing, how it might be modified in future, and what the appropriate regulation would be. The point made by the noble Lord, Lord Purvis, is absolutely right. We have to avoid getting ourselves into the wrong side of the argument that relates to engaging those who have trade responsibilities. There will be significant and important trade responsibilities when they eventually end up with Scotland, Wales and Northern Ireland, and they should not be excluded from proper consideration and debate. With that, I beg leave to withdraw the amendment.
“Regulations under section 2: Joint Ministerial Committee
(1) In making regulations under section 2, the appropriate authority must have regard to, and take into account, the views expressed by a Joint Ministerial Committee appointed by the Prime Minister.(2) The Prime Minister may, for the purposes of this Act, determine that the Joint Ministerial Committee shall consist of representatives of the governing authorities of the United Kingdom, Scotland, Wales and Northern Ireland.”
Lord Stevenson of Balmacara
My Lords, we are moving to a point that has already been raised and given a small trailer by the noble Lord, Lord Purvis. We need a system in place, although I am sure that the response from the Government at this stage will be that this is not necessary for continuity issues. However, we have already seen that there will be issues around trade and related matters for which we need to be sure that structures are in place that will allow for those resolutions.
Amendment 17 seeks to place a duty on the Government to consider a formal structure under the joint ministerial committee system that would allow debates on trade—particularly future trade arrangements, but I think other issues as well—to be dealt with in a systematic, transparent and trustworthy way. In that sense, I do not think that we differ from where the Government would like to be. What we lack is any understanding of where the Government are on this matter and what negotiations are coming forward. This is a probing amendment to try to make sure that we have some sense of that as we go forward.
In an attempt to help the Government, the noble Lord, Lord Purvis, and I have also put down Amendment 76 as a way of expressing in the Bill what the different agencies involved in this can and cannot do. Currently this is dealt with by a convention known commonly as the Sewel convention, although it has been overtaken by other legislative approaches. It attempts to set out, in this Bill at least—although it may apply to other areas—a set of rules allowing certainty on under what conditions and with what powers the UK, in operating its reserve powers, may or may not legislate on devolved matters where it is agreed that responsibility lies with the devolved areas.
I understand fully that the Minister will feel that many of these issues are subject to discussions elsewhere that are probably way above his pay grade. I do not seek to diminish him in any respect with that, but we want to flag up the importance of this matter to our trading relationships, not just because trade is important but because we are moving into an era where, irrespective of how and under what conditions we move from our current position with the EU, trading responsibilities will be applied in Scotland, Wales and Northern Ireland in a manner that has not been seen before. Issues that are specific and germane to those countries will be raised. We do not have a robust structure under which this can be resolved, and it is time for us to move forward on that. I beg to move.
Lord Purvis of Tweed
My Lords, I am grateful to the noble Lord, Lord Stevenson, for outlining the amendments so clearly. I want to add something in only a couple of areas. In doing so, I welcome the fact that the noble and learned Lord, Lord Mackay of Clashfern, is in his place. He and other colleagues will recall discussing—in debates on the withdrawal Bill—translating EU retained law into domestic law in a number of areas that either impinge on or link directly to what are currently devolved competences. At that stage, the Government made a number of concessions and changed their position so that the presumption was to devolve powers—and that was welcome.
Therefore, the sticking points, to some extent, were issues in what the Government termed the “framework agreements” with the devolved Administrations, where there had been no agreement with the devolved Administrations on what was in the reserved or devolved competences basket. In the previous group, state aid was one such major issue. Of the 157 areas, there was no issue with 49 of them; in 82 of them, the Government and the devolved Administrations agreed that the common framework would be needed; 24 areas required further discussion; and in 12 areas, the UK Government believed that the competences were reserved but the devolved Administrations believed them to be devolved. That is relevant to discussions about how the regulations for the continuity agreements will take place and will give an indicator for the future, as the noble Lord, Lord Stevenson, said. I seek further clarification on the other areas.
These issues are not esoteric. The 12 areas are: equal design and energy labelling, which is an important part of trade agreements now, as we discussed in Committee on Monday; product safety and standards relating to explosive atmospheres; elements of the network and information security directive; environmental quality in the timber trade, which is of considerable significance to the Scottish economy; data sharing; food geographical indications and protected food names, which are core parts of trading relationships; medical devices; migrant access to benefits; data protection; radioactive source notifications; state aid, as mentioned; and vehicle standards, including the various types of approvals and directives for roads.
Those 12 areas are part of existing trade agreements and will be key elements of future trade agreements, but in 2018 no agreement was reached with the devolved Administrations on them. It would be helpful if the Minister could update us on whether agreement has been reached on them, so that our concerns can be allayed, or whether discussions are continuing on them. This is important for both continuity and the future, because—as the International Trade Committee in the Commons has discussed and as the Scottish and Welsh Governments have published—there are proposals for how future trading arrangements would need to be put in place.
One of the options—as the Scottish Government have called for and as the UK Trade Policy Transparency and Scrutiny report called for—was a joint ministerial committee or intergovernmental trade committee to complement the advisory committee that the Government have established. The Commons committee made a very constructive set of proposals that it would be a mechanism through the devolved Administrations as part of the consultation process. There would be a formal advisory role through the mandate process and another formal advisory role throughout negotiations. No doubt there will be further discussions about any dispute resolution mechanisms and whether such measures have to be approved by the devolved legislatures in addition to consultation with the Administrations.
The noble and learned Lord, Lord Mackay, put forward very constructive suggestions about how intergovernmental relations could operate. These are both necessary for the continuity agreements and vital for any future agreements. I am grateful that the noble Lord, Lord Stevenson, highlighted this area, and I hope that the Government will be able to give clarification on where we are with the understanding of where these competences lie and the role of the necessary consultation.
Lord Hain (Lab)
My Lords, in speaking in support of both these amendments, in a way I am dealing with the points I raised with the noble Baroness, Lady Fairhead, which she did not respond to—inadvertently, I am sure. Maybe both she and the noble Viscount, Lord Younger, could consider writing to me about this. As I described at the last sitting, it gives rise to concern that we will see an action replay of the power grab that Whitehall tried to pull on the devolved Administrations in the course of the withdrawal process. There was an attempt by Whitehall to repatriate to London those policy areas—for example, the environment and many others—that were devolved but held at a European level because of our membership of the European Union. That caused great aggravation with the devolved authorities, particularly—in the absence of Northern Ireland’s Government—with Wales and Scotland, which in the case of Scotland is festering on. An agreement was belatedly reached with Wales.
In this process, particularly when making regulations, we will potentially see these same issues arising. There is therefore a strong argument for the proposal put forward by my noble friend Lord Stevenson in Amendment 17 for the joint ministerial committee or some equivalent body to be given the overall supervising authority here. Having been a member of the JMC at various times in government, I was never very impressed with it. It was a bit of a talking shop. Since 2010, under the coalition Government and now, I hear from successive First Ministers of Wales and individual Ministers for Wales, with whom I am in direct and regular contact, that nothing has changed.
Yet the issues over Brexit are even more serious and of even more constitutional and policy importance than prior to this whole sorry horror show unfolding. The Government need to consider putting in place, preferably in this Bill and in the form specified by these amendments or some equivalent form, procedures that are recognised and have to be abided by, before we run into the same kind of problems that arose earlier in this whole Brexit saga.
Viscount Trenchard
My Lords, surely it is not necessary to set up a joint ministerial committee for this purpose. Insofar as the novation of FTAs affects devolved powers, the Government will in any event be bound to consult. Surely a joint ministerial committee, such as the amendment proposes, would make the process of rolling over the EU’s FTAs much more cumbersome and time-consuming, especially if the EU persists in refusing to enter into a reasonable, equitable agreement without a backstop.
On Monday, in the debate on the GPA, the noble Lord, Lord Hain, referred to this matter, and has just spoken again in similar vein. He referred to a power grab by Westminster but actually, if the powers being returned to the UK from the EU relating to devolved matters were all to go immediately to the devolved Administrations, that would represent a power grab by the devolved Administrations. Surely the powers that were devolved relating to matters that are partly or wholly EU competencies preserve the need in many areas to maintain a UK-wide market; while we have been in the EU that has meant an EU-wide market. We are shortly to recover our sovereignty over our own UK market, I trust, but that in no way obviates the need to maintain the UK-wide market in many sectors. Furthermore, as the noble Lord, Lord Hain, also pointed out, the amendment requires membership of the joint ministerial committee by a representative of the Northern Ireland Executive, which suggests that they might not be operational for some time.
Lord Hain
May I clarify a number of points? First, the original Bill, over which there was the power-grab tussle, was actually amended by the Government in response to the Welsh and Scottish Governments’ complaints. They recognised that the original procedure, which the noble Viscount seems to want to wave through again, was the wrong procedure and that it was not right to set out on the course on which they originally set out. I hope that he will accept that point, because I was rather worried about the tone and the content of what he said.
Secondly, since the joint ministerial committee exists already, and its machinery is in place and operates already, the amendment is saying that these regulations under the umbrella of the Trade Bill would formally have to go through the JMC. It need not be a complete convening of a meeting which, I accept, is time-consuming and resource-consuming, but I recall well from my days in government that cabinet committees sometimes operated by a process of written consent and amendment between the different Whitehall departments. I am sure that the noble Lord, Lord Kerr, and many others will remember that operating in that way. It could operate in that way for the purposes of these regulations, but there would be a statutory obligation to process these regulations in that fashion. As I understand it, that is the point that my noble friend Lord Stevenson is seeking to get cemented in.
Viscount Trenchard
I thank the noble Lord for correcting my ignorance about the joint ministerial committee already being in existence, although there is obviously no Northern Irish representative on it at present. On the other matter, I still do not understand why it can be sensible in the case of powers that are EU competencies today but which are also devolved. If those powers are repatriated to the UK, it is still necessary to maintain a UK-wide market because, by virtue of being members of the EU market, we have had a UK-wide market within the EU. Therefore, if the entire powers are delegated to the devolved Administrations, we effectively break up our single UK market.
Lord Mackay of Clashfern (Con)
My Lords, this is redolent of what we discussed much earlier. The powers that the EU has in the United Kingdom are of different types. Where they go when they are brought back to the UK, as we hope will come to pass—on my present appreciation of what is going on, that is rather a hope—does not just depend on the subject matter. It does not just depend on whether it is agriculture or whatever; it depends on the nature of the power that is devolved. A power that operates only in Scotland would be devolved to Scotland because in the constitutional arrangements there are two restrictions. The reserved powers are one type of restriction, but the other is the geographical restriction. You cannot make laws in Scotland for the rest of the UK. Therefore, if common market policy for the whole of the UK is in question, and that is the power in question, it has to stay with the Parliament in Westminster. But if it is a power related to agriculture, which is restricted only to Scotland, or Northern Ireland or Wales, it is remitted to the legislatures operating there—if a legislator is operating there.
Lord Hain
I apologise for prolonging this discussion. I urge the Government to reflect on this: given the trouble that we have already run into in this process with the devolved Administrations, if there were a process where these regulations automatically had to come under the umbrella—as the noble and learned Lord, Lord Mackay of Clashfern, implies and which I agree with—that would impose a discipline on all the parties concerned to use that process to resolve any common issues that are outstanding. It is an established process, but it has not really been used. In the post-Brexit situation, which I think will be a nightmare, these procedures will be needed even more to ensure the constitutional stability, success and indeed viability, given what is going on in Scotland and Northern Ireland over Brexit, of the whole of the union.
Viscount Younger of Leckie (Con)
My Lords, the Committee will notice that we have another change of driver—or perhaps a navigator having temporary control of the wheel. If I read the noble Lords, Lord Stevenson and Lord Purvis, correctly, the intention behind the amendments is to ensure that the voices of the devolved Governments are heard in relation to trade agreements. That is something that the UK Government entirely support. Indeed, the Department for International Trade is in discussion with the devolved Administrations on their role in future trade agreements.
To give a little more information to the noble Lord, Lord Purvis, the UK Government are committed to working closely with the devolved Administrations to deliver a future trade policy that works for the whole of the UK. But it is important that we do this within the context of the current constitutional make-up of the UK, while acknowledging that international trade policy is a reserved matter. To go further, we are currently having detailed discussions with the devolved Administrations at official level on their role in future trade arrangements, with the aim of agreeing new working arrangements before EU exit. In fact, we are continuing this engagement later this week.
I am happy to provide assurance to the House that our clear intention is that there will be a formal and regular intergovernmental ministerial forum to consider future trade agreements. The devolved Administrations already participate in other ministerial forums, such as those for EU negotiations. Frequency and any terms of reference are subject to further discussions and agreement with the devolved Administrations. However, we expect the forum to include our Minister for Trade Policy and his or her counterparts in the devolved Administrations.
The noble Lord, Lord Purvis, asked some questions on this point. The UK Government view securing an agreement with all the devolved Administrations as the best possible scenario, and it is the one that we will continue to work towards. We are committed to securing LCMs for the Trade Bill and have worked closely with the devolved Administrations to understand and respond to their concerns. As a result, we have made amendments to the Bill that answer many of those concerns.
The requirement for Ministers of devolved Administrations to seek the consent of the UK Government when making regulations that come into effect before exit day, or that relate to quota arrangements, has changed to a requirement to consult, of which I suspect the noble Lord will be aware. We will continue to respect the devolution settlements as they relate to trade agreement continuity and future FTAs. We will not normally legislate in areas of devolved competence without the consent of the devolved Administrations, and certainly not without first consulting them.
The amendment, however, would apply to existing trade agreements only and is, in this context, not proportionate. Clause 2 will be used only to ensure the continuity of existing trade agreements that are already in force. It will not be used for future trade agreements. Therefore, Amendment 17 would add risk to the swift and timely rollover of existing trade agreements. Given that these agreements are or will be already in force and that the purpose is to ensure continuity, the amendment is, at best, disproportionate and could mean that we were unable to deliver crucial continuity for businesses and consumers throughout the United Kingdom. For that reason, the Government cannot support Amendment 17. I hope that I have provided sufficient assurances on our intentions for engagement with the devolved Administrations in trade agreements.
Lord Purvis of Tweed
On the first point, it is very helpful to hear about discussions taking place through ministerial forums. This would be, I think, outwith the memorandum of understanding process in the joint ministerial committees, which have now been well established for 20 years as the intergovernmental framework between the devolved Administrations and the UK Government. I am sure the Minister is always very careful and specific with his language: I heard him say “forum” but I did not hear him say “joint ministerial committee” or “intergovernmental committee”. A little more information about that would be helpful.
Viscount Younger of Leckie
I can help the noble Lord. I was very careful to use the word “forum”—but perhaps I should have used “fora”, which of course is the plural. The reason for that is that the process is designed to mirror what has worked with the EU up to now. We want to replicate the terms that are used for EU negotiations by not calling it a joint ministerial committee. But I understand the intention behind the noble Lord, Lord Stevenson, using that term.
Lord Stevenson of Balmacara
I am on the same page as the noble Lord, Lord Purvis. Why is it so complicated? The joint ministerial committee system has, as he said, worked well for more than 20 years. It provides an opportunity for those who are required to be present around the table to sit down, discuss and arrive at conclusions. In a debate on an earlier Bill, the noble and learned Lord, Lord Mackay of Clashfern, suggested a way of developing that into a formal structure within which there would be appointed chairs or elected chairs and rotating responsibilities. We seemed to be heading down that route, but now we are talking about this rather curious IGMF, which I had not heard of before. It is nice to know that it does indeed exist and may be working on EU matters. But I have always understood the relationship around EU matters as being—as the noble and learned Lord, Lord Mackay, picked up rather cleverly—around a settled set of responsibilities, where there is not the problem of geography meeting functionalism. That is the problem here, because as soon as we have a situation where the responsibility is devolved because it is not reserved, and there is a need to arbitrate and barter out the various competing interests across the nations of the United Kingdom, there has to be some formal structure. I do not think a forum provides that.
Viscount Younger of Leckie
We may be dealing with semantics here, but I will certainly write to the noble Lord, Lord Stevenson, and the noble Lord, Lord Purvis. My understanding is that there is a reason, but it is not a particularly big reason, which is that the difference between a joint ministerial committee—the expression that the noble Lord, Lord Stevenson, has just used—and a forum is that for a forum the devolved Administrations are seeking and are getting more regular and frequent conversations with us in the UK Government. I think a letter should clarify that.
Lord Purvis of Tweed
I am grateful that the Minister will be providing a letter. As the Commons committee and others have said, such a forum, which will include other groups, including representatives from the Administrations, should not be seen as an alternative to the mechanism of joint ministerial intergovernmental committees, which, as the noble Lord, Lord Stevenson, said, are more about the discussions that take place about legislative competences. As the noble and learned Lord, Lord Mackay of Clashfern, indicated, this is important now. The Minister said it is important that the continuity agreements are done swiftly. These continuity agreements may be in place for three years at the least, but they can be extended time and again. The agreements currently in place with the EU are permanent agreements, therefore we would be bringing into UK legislation what could well become permanent agreements. It is therefore important that if there are outstanding issues about where those competences lie, they are cleared through some form of intergovernmental process. If those points could be addressed in the Minister’s letter, I would be most grateful.
Viscount Younger of Leckie
I will certainly address the extra points that the noble Lord has made. The point I want to emphasise to the Committee today is that this forum is being regarded as particularly serious in the times that we are in. I have mentioned some names to be included as part of that forum, but this is work in progress.
On Amendment 76, the UK Government recognise the important role each devolved Administration will play in the implementation of the Trade Bill. The Government are also committed to ensuring that withdrawal from the EU is a successful and smooth process for the whole of the UK. The use of concurrent powers is in keeping with existing devolution arrangements. It allows for regulations to be made once for the whole of the UK where it makes practical sense to do so. The intention behind this is legislative efficiency.
The noble Lord, Lord Purvis of Tweed, asked about the implications for the Trade Bill of the freezing power in the EU withdrawal Act. We have been clear that the regulations to freeze competence to preserve our existing frameworks are not a mechanism for avoiding seeking legislative consent when creating our future frameworks. Without wishing to labour the point, I reiterate my earlier commitment that the UK Government will not normally use these powers to amend legislation in devolved areas without the consent of the relevant devolved Administrations and certainly not without first consulting them.
I acknowledge the mini-debate started by the noble Lord, Lord Hain. In essence, he asked whether the concurrent powers amount to a power grab—I think that is the expression he used. Under the Trade Bill, every decision that the devolved Administrations can make before exit they will be able to make after exit. The augmentation powers in the Trade Bill will be held by both the UK Government and the devolved Administrations. This approach will provide greater flexibility in how transition agreements are implemented, manage legal risks where competence boundaries are unclear, and allow for a reduced volume of legislation. The noble Lord invited me to write, and if he is not satisfied with that answer, I will certainly follow up with a letter should he wish.
Lord Stevenson of Balmacara
I am grateful to the Minister for that full reply. I am looking forward to the letters, which I will read very carefully.
It is sufficient to leave the position on Amendment 17 as it is at the moment. It is more complicated than can be dealt with within the confines of the Trade Bill. It needs a much wider conspectus of views and to be informed by other debates elsewhere. The principles that we have been articulating are important. I hope the Minister recognises how valuable they will be within what appears to be the Government’s view that rolling forward existing trade arrangements on the continuity model will be uncomplicated and not difficult. I have my doubts—“I hae ma doots”, as I would normally say. Hansard will not necessarily pick this up.
The key is: how does it work in practice? It is really important to use our words carefully, as the Minister has done, to assure ourselves that we are not getting into exactly the same position as we did on the withdrawal Bill. In effect, he said that the Government will not normally legislate in areas that are devolved. Of course, the key is: what does “normally”’ mean? How exceptional does it have to be before we see an extraordinarily difficult situation leading to contests between the two agencies? He went on to say that they would not do so without the consent of the devolved Administrations. Consent is a crucial word. The noble Viscount, Lord Trenchard, used the word “consult” as if that took both meanings, but it does not. Consult is one thing; consent is so different. We have to be sure exactly where we are. The discussion and debate around this would then result in an agreed position between both Parliaments as to how it would operate in practice. That is the Sewel convention.
If we accept everything that has been said in this debate—and we will get contributions on other Bills and issues of policy as they come forward—why do the Government not look very carefully at the wording of Amendment 76? It was provided to us by the Welsh Government as a proposal for reaching a point of unanimity on this issue. Why is it not appropriate to put it in this Bill, or, if not, in some future Bill very closely aligned to this? I think it will be required. My guess is that we will need it quite soon. It is not legally unenforceable. It is what we do. So let us get it right. I beg leave to withdraw the amendment.
Lord Purvis of Tweed
“Status of the United Kingdom
Before exit day, a Minister of the Crown must lay before Parliament a report specifying which countries and organisations must amend their own domestic legislation in order to ensure that the United Kingdom is treated by that country or organisation as if it were a member of the European Union for the purpose of free trade agreements or other international trade agreements during the period between 30 March 2019 and 31 December 2020.”
Lord Purvis of Tweed
My Lords, I will also speak to Amendment 19 in this group. At Second Reading of this Bill, the Minister, the noble Baroness, Lady Fairhead, said that this process was about transparency. Amendment 18, which is a probing amendment, and Amendment 19 seek some transparency in a rather opaque set of situations—I listened to the Secretary of State for International Trade this morning from Davos adding even more confusion to the current position on the continuity agreement discussions.
On Monday, I referenced the fact that, through our membership of the EU, the UK has a trading relationship in place with 35 countries; 47 are partly in place, and there are 22 pending country agreements. These represent 66% of UK trade. Some are extremely complex. Some have been split into trading arrangements and investor dispute mechanisms, and some are of critical importance to certain sectors of the British economy. It is incredibly important that, between now and 29 March, we have a much greater understanding not only about what they are and how they will be translated into British law but also about the relationships that we have with other countries.
One of the reasons that Dr Fox has given for why we have not been presented with the trade agreements to roll over into our legislation is the reluctance of other countries. He has given a number of reasons why they are reluctant, which I will come to later, but one of the areas that Amendment 18 seeks to clarify is our Government’s understanding of what our partner Governments need to do. On a visit last year to a country in north Africa, I met with its foreign affairs and trade representatives and MPs. A representative of the British Government who was present asked them explicitly whether they needed to change any of their domestic legislation purposes if they were then going to respond to what the EU was going to ask them to do, which was to consider the UK as a member of the EU for the purposes of international agreements during the implementation period—that is, on the basis that we have an agreement—and they were not able to answer. I suspected that this was now a routine set of requests from British government representatives of our partner countries.
My amendment asks for a report on what our understanding is of the domestic processes that those countries need to go through. If we know that, we are able to take Dr Fox’s statement at face value: they are simply not carrying the weight or working hard. Or, if we know that their own domestic processes are more complex than one may have thought, then we may have greater sympathy with the Government that this may be a more complex process than we had been led to believe.
In 2017 and 2018, we seemed to be living in a much easier world, because Dr Fox suggested at the Conservative Party conference, reportedly to cheers from activists, that it would be a breeze to get all the existing trade agreements in place before March. I remind colleagues that he said:
“believe me, we'll have up to 40 ready for one second after midnight in March 2019”.
He added:
“All these faint hearts saying we cannot do it—it’s absolute rubbish”.
That was endorsed on Twitter by the Minister’s predecessor, the noble Lord, Lord Price. When challenged on the basis that it might not be as easy as what Dr Fox had said, the noble Lord said on 24 October 2017, in response to someone saying that we would be out only on WTO rules:
“Ed we won’t only have WTO in event of no EU Trade deal. We will roll over the 60 odd other deals we are party to currently”.
Someone then responded that it would be difficult to do that. He then replied,
“All have agreed roll over”.
I just do not think that is correct. We now need absolute clarity because the clock is ticking.
When we debated this four months ago at Second Reading, I specifically asked the noble Lord, Lord Callanan, if the position of Dr Fox and the Government—that at the second after midnight next March they will all be ready—still stood. He replied:
“The Government’s position is exactly what the Secretary of State for International Trade said”.—[Official Report, 11/9/18; col. 2201.]
We need to know what the domestic processes are in those other countries and we need to know now very clearly, through a report, where we currently stand. That report should give the number, type, scope and extent of those agreements.
The agreements that we currently have in place are a mixture: free trade agreements; deep and comprehensive free trade agreements; economic partnership agreements; association agreements; stabilisation and association agreements; customs union arrangements—with Turkey and Andorra, which we will be discussing later on; interim economic partnerships; stepping-stone agreements; and modernisation agreements. We are also in the process, although they are not yet inked, of investor dispute mechanism agreements.
We have heard nothing at all from the Government about how we intend to roll over these different—in some respects, significantly different—types of agreements, and the consequences that that could potentially have on UK law. Dr Fox, in a slight moment of reality, said to the Commons committee that a simple rollover may not be as easy as previously stated. That is the only time—that I could find—where there was a degree of reality from the Government.
As I have said previously, the clock is now ticking. The Government still hold the position—if the noble Lord, Lord Callanan, is to be believed—that we are to transfer all of these agreements into UK law. They have not deviated from that position; indeed, Dr Fox did not even deviate from it this morning when he was asked, which is the latest information. So this report under Amendment 19 is necessary.
Because of the complexity of these arrangements and because some of them are very large—the totality represents 66% of UK trade—it is necessary, in subsection (2)(d) of the proposed new clause, for us to specify the consequences for the United Kingdom. In failing to replicate the terms of the existing agreements, it is necessary that we have a report which indicates the impact on the UK economy. Subsection (2)(a)(i) to (iii) in Amendment 19 means that there will be a much greater degree of clarity on what our partners need to do.
Finally, why is this even more important? At a lunchtime meeting that I had with colleagues in the House with a delegation from the Canadian Parliament, the Prime Minister’s trade envoy to Canada had a very interesting row with another Conservative MP. As a Liberal Democrat, the only good thing I could do was be an observer. The trade envoy said that one of the opportunities of rolling over the CETA agreement was to change it. That was immediately slapped down by the other Conservative MP who said, “No, we just need to get this through”. Our very close Canadian colleagues were bamboozled by this. They were also bamboozled when I asked them the same question that I am asking the Minister: what is necessary for Canada to implement this into their domestic legislation? So far, the Canadian Government have not indicated to their parliament that this is in the pipeline or that this is to be ready. Therefore, all I am asking is for the Government to tell us.
Now is the time for clarity—absolute clarity—not only for Parliament but also for businesses that rely on this trading relationship. I remind the Minister of the resolution of this House on Monday: that if this clarity is not provided then this Bill will not proceed.
Baroness Jones of Moulsecoomb
My Lords, when I first came to your Lordships’ House just over five years ago, I found some of the procedures absolutely incomprehensible. It has taken me a little time to find my feet. Quite honestly, a lot of those procedures lack common sense.
I do not understand why it was ever necessary to draft Amendment 19, let alone for it to be moved. It is common sense: of course we need this sort of information. It is asking for such basic information which, in any sensible universe, would be published as a matter of course. This is transparency which helps all of our businesses and our economy. We are now only weeks away from Brexit day, and we are still completely in the dark about all these things. There are many supply chains which depend on this sort of information. They depend on our existing trade arrangements. Businesses do not have the slightest clue whether they will be able to continue on existing terms in just two months’ time.
I would have thought that, if the Government had everything lined up ready to roll over these trade deals—which I very much doubt—then Ministers would be telling us about it and about what a great job they have done. The Minister would do a great service to the Committee, and to the country, by giving us a full account of where the Government are in these negotiations. It should not have to be an amendment to the Bill—it is so basic—but if the Government will not tell us then we have to compel them.
Lord Patten of Barnes (Con)
Could I just add to the points made by noble Lords? All this has been said before, when we discussed these matters a year ago. We were assured that everything was hunky-dory and that this process of rolling over existing trade agreements was going very smoothly. I recall one occasion when, after we had discussed it here, I was invited to a briefing by Trade and DExEU Ministers. They explained how easy it would be and took as an example one particular trade deal that I happened to know about because I had negotiated it as European Commissioner. I remembered how difficult the issues we had had to deal with were about rules of origin and surges in agricultural imports. Here I was being told that something that had taken us five or six years to negotiate would be negotiated, along with everything else, by the Department for International Trade.
Maybe between now and the end of March the department will get its socks on and go like the clappers, but somehow I do not think it will. I think that what will happen is it will redefine what the objective is, as Dr Fox was doing this morning. Dr Fox presumably knows the difference between a mutual recognition agreement and a free trade agreement, but this morning he was talking as though they were the same thing. I greatly sympathise with the Minister, because I do not think she will be able to enlighten us very much on the particular progress that has been made over recent weeks and months by our ubiquitous International Trade Secretary.
Baroness Hooper (Con)
My Lords, your Lordships’ House has the privilege of having as Members a number of former European Union Trade Commissioners. I am very happy that a least one of them is here and able to contribute from his specialised knowledge to our debate.
The Minister of State, Department for International Trade (Baroness Fairhead) (Con)
My Lords, I will address Amendment 18 first. I thank the noble Lord, Lord Purvis of Tweed, and all who have spoken in the debate. The themes from the noble Baroness, Lady Jones, the noble Lord, Lord Fox, and my noble friends Lord Patten and Lady Hooper are similar points. I will try to address them as much as I can. I also recognise the assertion from the noble Lord, Lord Purvis, that this is a probing amendment.
This is an important issue and I fully understand the need to provide some reassurance. I will try, as much as I can, to do so. I start by reiterating that we value and benefit from our international agreements, and we want to continue to co-operate with our global partners across a range of issues—not just trade but air services, climate change, international development and nuclear co-operation. As such, we are working with countries and multilateral organisations worldwide to put in place arrangements to ensure continuity of those international agreements.
We have agreed with the EU that it will notify treaty partners that, during the implementation period, the United Kingdom is to be treated as a member state for the purposes of these agreements. We think that this approach is the best platform for continuity during the implementation period across all agreements, but it would be for those individual third countries and multilateral bodies to determine whether any domestic action, including amendments to domestic legislation, is required. We do not expect that such actions will be required in every instance, but we understand that some parties, as the noble Lord, Lord Purvis, said, will choose and be required to take some internal steps where they think that to be necessary.
Baroness Kramer (LD)
My Lords, could I ask the Minister for clarification? Has she just said that she believes that, 10 weeks away from leaving, potentially under a no-deal scenario, the UK Government still do not absolutely know what steps are necessary in each of those countries with which we expect to roll over those continuity agreements, do not have them timetabled and are not tracking them in detail but have basically just stepped away and said, “We just hope, generally”? I would have hoped our diplomats were on the telephone daily to get these steps in place if they were necessary. But from listening to her, it sounds as though no such action, no such monitoring or pursuit, is taking place.
Baroness Fairhead
I thank the noble Baroness, Lady Kramer, for the further question, and will try to reassure her. The Government have been engaging actively with those third parties on that approach since it was outlined as part of the implementation period arrangements at the European Council of March 2018. But we must consider that a decision for those third parties, those countries themselves. Any action or internal measure taken is for them to consider based on their own domestic legislation and practice. Indeed—this is a critical point—some internal measures, given their very nature, may not even be public knowledge. For this reason, let me assure the noble Baroness that we agree it is right that we engage actively both with third parties and with multilateral organisations and encourage them to consider the steps needed for their own domestic legislation. This enables the continuity that, as the noble Lord, Lord Price, said, in principle they all fundamentally agree with, because it is in their mutual interest.
Moving into the future and the next 10 weeks, if we go to a new deal, this will have to be even more revved up, because we are hoping and planning for an implementation period. But as the noble Baroness will be aware, that would require an agreement, and therefore we must also have plans in place for no deal. We do not think it appropriate for the UK Government to essentially monitor a list of the actions over sovereign countries and hold them accountable. It would also be practically challenging for the reasons I have set out.
Lord Fox
I do not think anyone on these Benches has said that the UK Government should be holding the other Governments to account for these actions. We are asking whether you understand what the necessary actions are. Are you tracking them? Do we really know the critical path each agreement has to take in order to reach the golden point of Dr Fox’s magic moment when they all become reality? I think you are saying that you do not know what the path is, that you are not mapping that critical path and that therefore you cannot say how long it is going to take because you just do not know.
Baroness Fairhead
I say to the noble Lord that we are actively working and engaging with them. It is for them to decide. They have discussed with us what they currently believe. Some they are actively working through, some the third countries and bodies do not choose to make public—to us or anyone else. That is what I am trying to explain. I do not want this House to be in any doubt or to give the sense that we were just asking them and walking away. We are actively engaging with all the parties I referred to.
I now turn to Amendments 19 and 97. I will take those together, as they both—
Lord Hannay of Chiswick (CB)
Before the noble Baroness goes on to the next amendment, could she answer a question that I asked in the preliminary debate? In the event of us leaving without a deal, what tariff rates will the United Kingdom apply on 30 March to countries with which the European Union has a preferential trading agreement? That agreement will have lapsed as a result of our departure, so we will not be able to keep those tariffs at zero, as they are at now. The MFN rules of the World Trade Organization will say that we are not in a free trade area, a customs union or a preferential agreement with those countries. Have you told these countries what tariffs we are going to apply, and if so, could you tell us?
Baroness Fairhead
My Lords, I will try to do a little better than that. I can write to clarify, but my understanding is that in the Taxation (Cross-border Trade) Act arrangements were put in place for the GSP, the GSP+ and the Everything But Arms preference terms. As I keep saying, obviously our aim is to have an agreement and then an implementation period. Should there be no deal—which is not the desired outcome—the UK will need to determine what its policy is. That is not something that I am at liberty to discuss, as it has not been disclosed. Clearly it is not a place we want to go, but we will have to take that into account if we reach that point.
Baroness Kramer
I am sorry, but I must repeat a point that has been made by the noble Baroness, Lady Jones, and others. There are companies doing business that need to be signing contracts today, or fulfilling contracts on their books: they need to make financial provision, to put loans in place if suddenly they face unexpected costs, or to find alternative suppliers. There is a whole range of actions that those companies need to take. We cannot wait until we have gone over the precipice and then start to think about what we are going to do. We will have to have a regime in place at one second past Brexit. I do not understand the thinking behind all this. I do not know whether the Government have made a decision to keep this information from Parliament, for reasons that I do not understand but which may reflect some internal attitude towards secrecy and the way they want to handle Parliament, or whether they actually have not done the work and got any of the elements in place. Either is awful.
Baroness Fairhead
I believe that the noble Baroness has misinterpreted what I said. I did not say that we would wait until the end and that people would go into a chasm of not knowing. I said—I hope that I said it clearly—that our aim is to have an agreement and an implementation period. In the event of no deal, which clearly is not the preferred outcome, speed is of critical importance in trying to roll over the effects of the agreements that we have, to give that certainty and continuity to businesses.
The noble Baroness asked what would happen a second after midnight. We have published technical notices on the programme, we have attended multiple oral evidence sessions with the International Trade Committee, we have exchanged letters with that committee, which are in the Library, we have responded to all parliamentary Questions and we have made Statements in the House.
Lord McNicol of West Kilbride (Lab)
May I try asking the question asked by the noble Lord, Lord Fox, another way round? Are the Government concerned that any of the countries with which we want to roll over agreements cannot complete, or have concerns about completing, the rollover agreements, through their own Governments and Parliaments, within the next 10 weeks? If so, we should take the point made by the noble Baroness, Lady Kramer, about the businesses and industries working across and with those countries. They will be put in jeopardy if there is no agreement in place by one minute past midnight on 30 March.
Baroness Fairhead
My Lords, I can confirm that that is why we want to have an agreement with an implementation period. That is why it is definitely the Government’s plan A, while a no-deal scenario will bring real challenges. I hope that your Lordships would not accuse me of saying that there are not complications or that we do not need to go through many agreements. As I said in this House at Second Reading, it would be extraordinarily challenging to get everything done by 29 March—and I do not resile from what I said.
The noble Baroness referred to the future tariff policy and what happens if we get to no deal at one second past midnight. We are working to develop an independent tariff policy, but no decision has yet been taken on what the applied tariff rates will be post an EU exit, notably also in the case of no deal. We are looking at a full spectrum of options and will consider carefully all the evidence available before making a final decision in the interests of British industry and consumers.
Lord Purvis of Tweed
I wish to have one final go on Amendment 18. It is predicated on what the Government are working to, which is to have an agreement. That agreement will come with a request from the European Union to those third countries to treat us as a continuing member of the international trading agreements. The Minister has told the Committee that the Government know of countries where that poses no difficulty but also of countries which have said they do have difficulties. This means that, even in the event of leaving with a deal, some of our trading arrangements will not be in place after exit because those countries cannot put them in place. Which countries have indicated to the Government that that poses no difficulty and they will treat us as a continuing member of the international treaty, as the EU has asked? Which countries have said that it poses difficulties, and which have said that they do not wish to make it public?
Baroness Fairhead
My Lords, if I may address the point made by the noble Lord, Lord Purvis, if we leave with a deal there is an implementation period until the end of 2020. There is much greater confidence, as I believe this House would accept and appreciate, about getting all the arrangements fully continued and rolled over within that time period.
There are two issues here. The first is the notification by the EU that the UK is to be treated as part of the EU during the implementation period. The second is what third countries need to do to enter into continuity agreements. The first is a matter of third countries accepting that they will treat us in that way; on the second, we are engaged in detailed discussions with individual third countries to try to help them ensure that they are in a position to enter into the agreements on time. I stress, as noble Lords have highlighted, the difficulty of the timing if there were no deal.
Lord Purvis of Tweed
I apologise, but can the Minister then confirm whether my understanding is wrong? I understand that they will be asked to consider us as being in an agreement during the implementation period—to carry on treating us as if we were a continuing member of that organisation—but the Minister has said that the Government do not know whether all countries will do that. So, even if there is an agreement with the EU and an implementation period, there may be countries where the international relationships that we will have will not be in effect after exit day because the third country will not be in a position to treat us as a continuing member. The Minister has said that to the House. So all we want to know is which countries they are, because it is very significant if, even in the context of leaving with an agreement, those relationships might not carry on.
Baroness Fairhead
My Lords, what I can say is that all the countries we have spoken to have agreed with the principle of continuity. Therefore, one could expect that if they agree with the principle of continuity, they would see that that was a key part of making sure that their businesses and UK businesses—their people and our people—are protected.
Amendments 19 and 97 both concern the publication of a trade agreement progress register, so I will take them together. As agreed in the other place, the Government have already committed to lay reports in Parliament to explain any changes made to continuity agreements. These reports are intended to aid Members of both Houses to understand our continuity agreements. It is critical—as the previous discussion has just highlighted—that we do not delay the ratification of the agreements and unintentionally create a cliff edge for our businesses through a process addition. There will simply not be time, particularly with no deal, to create a detailed progress register in advance of bringing the majority of provisions in the Trade Bill into effect. That would be the effect of Amendment 97. As I stressed, we want to keep Parliament informed. Although we are committed to transparency and clarity in what I have laid out regarding our process reports, we are also mindful that we need to deliver the programme to time, and this additional reporting requirement risks delaying it.
Our Clause 3 reports are proportionate and will provide Parliament the transparency it requires. I take fully the comments made by the noble Lord, Lord Purvis, about the number of agreements—FTAs, EPAs, MRAs and association agreements. I have also laid out to the Committee some of the more technical aspects that we will cover, such as what happens with tariff rate quotas and rules of origin. I believe we will discuss those later today. Extensive work has been undertaken to ensure the continuity of our agreements for more than two years. We are engaged with our international partners to deliver this in the event of no deal. We have been working to deliver successor bilateral agreements with third countries and treaty partners, which in the event of no deal we would seek to bring into force from exit day or as soon as possible thereafter. Progress has been encouraging. Ministers and officials are engaging regularly with those partner countries to support and complete the work. As I said in the previous discussion, all have supported the principle of rolling over, because it is in their mutual interest.
I reiterate that we are aiming not to have any significant changes. As such, we believe there is little benefit in having a report analysing our continued participation in the EU FTAs. The vast majority of the elements are already being implemented, and our businesses are already benefiting.
The amendment in the name of the noble Lord, Lord Purvis, would require us to provide detailed progress on private Government-to-Government discussions. To provide such updates would create a considerable handling risk with our partner countries. As the noble Lord will appreciate, there are commercial sensitivities, and regulations and procedures in third countries, and we would not be able to commit to providing those updates without first seeking the agreement of the relevant partner countries. Again, this could end only in slowing down the negotiations. We believe these amendments are inappropriate and I ask the noble Lord to withdraw Amendment 18.
Lord Hannay of Chiswick
Is the Minister familiar with the practice in the European Parliament which currently applies? The committees of the European Parliament are briefed in detail about negotiations being conducted by the Commission. During the negotiations, how do you think they overcome these insuperable problems which the Government seem to see about doing that here? Nobody is saying that it has to be done on the Floor in a plenary session of this Parliament, but surely there has to be some way in which the Government account to a committee, as they go along, as to how negotiations are going. That is what happens in the European Parliament.
Baroness Fairhead
My Lords, I know the European process in outline; I cannot say that I understand it in the depth that the noble Lord, Lord Hannay, does, given his experience in that area. I want to differentiate between the continuity agreements and future trade agreements. Because we are talking about rolling over existing agreements, we expect to replicate the effects as closely as we can, so as not to disrupt trading patterns, so this is a different type of progress report. The noble Lord makes an important and valid point about the scrutiny of future trade agreements and we will discuss that later in the debate.
Lord Stevenson of Balmacara
I go back to an earlier question asked by the noble Lord, about whether or not the Government are in a position to notify those who are directly involved in this in a no-deal situation, which we all hope does not happen but in which we are out of the EU at 11.01 pm on 29 March, to be accurate. What conditions need to be satisfied before those who are directly involved in trade on that day and at that time get access to information about the proposed tariff arrangements? Absent that, we are talking about a very short period for those who have businesses to organise, decisions to make and loans to raise, as has been said. The other half of this is that if we are talking about continuity arrangements at that stage, when will we be in a position to know exactly how many countries are ready to do a deal with us at 11.01 pm on 29 March, how many are not and how many will take time to get their own arrangements sorted? Without that information we are not really in a position to judge whether or not the Government are making a good fist of this.
Baroness Fairhead
My Lords, on the 11.01 pm—or one minute past midnight—point, technical notices have already been sent out and no-deal planning has been ramped up, as the noble Lord will have seen in the Prime Minister’s announcement. Communications are planned for businesses and there are training programmes to make sure that the Civil Service and various departments are ready with information as required. Clearly, our primary focus is on achieving plan A and a deal, and therefore this is contingency planning, but that planning has been ramped up in the event—that we do not want—that there is no deal. I cannot say the exact moment that those notices will come out but I understand the noble Lord’s concern, and businesses’ concern, about what will happen in the following hour. Obviously, that will be taken into account.
As for third countries and where they are, I do not think I can add to what I said, which is that we are actively engaged and if there is a deal followed by an implementation period, we will be an awful lot more comfortable about the process.
Lord Purvis of Tweed
My Lords, I am grateful to the Minister and to noble Lords who have taken part. The Minister said that the Government will keep Parliament informed. Parliament has not been informed until now. We have no idea, because nothing has been presented to Parliament, about notification of the status of the potential agreements. We were not informed in advance about Switzerland, which is the only one so far; we have been asked simply to ratify it and to consider whether or not we accept what comes with it.
I tried to probe the Minister’s comments on Amendment 18. She told us that in discussions with third countries, if there is an agreement and the EU asks them to consider the UK as a continuing member of the European Union for the purposes of international treaties and trading agreements, the Government will not provide the information to Parliament on which countries that poses no difficulties for, which countries have indicated that that may require them to change domestic law, and which countries are refusing to make the discussions public.
Baroness Fairhead
My Lords, I have to rebut the statement made by the noble Lord that it would enhance relations with third countries if we reveal the status of the discussions and negotiations with them. It would be against the nature of most discussions with third countries. Many third countries have policies in which they do not permit disclosure of the discussions that are taking place. I just do not think that is a correct assertion. As for Switzerland and other—
Baroness Kramer
All these countries have negotiated deals with the EU. In the process of those negotiations, there was full transparency and exposure. It is not a case of reporting to the European Parliament; it can be read on the website. In relation to these exact trade deals, they are used to providing full disclosure every step of the way. They are not being asked to do something that is out of the norm. The secrecy is out of the norm, not disclosure.
Baroness Fairhead
Again, when countries are in the middle of negotiations, blow-by-blow accounts or reporting stages are highly irregular. I hear and understand this House’s concerns and I will see what more information can be given.
With Switzerland, it will not just be a case of ratification, then all done. As we committed to, parliamentary reports will be laid before the House so that it can see whether any changes have been made and, if so, what their impact is. Today, it was announced that a free trade agreement has been reached in principle with Israel. I say this not because two out of 40 is the vast majority but because I want to provide reassurance that progress is being made. As noble Lords will be aware, the agreement with Switzerland is one of our most important FTAs with the EU—in fact, it is the most important.
I hear the concerns and challenges from noble Lords across the House. We have provided information and I cannot say that there has not been transparency; we have been reporting to the ITC and through ministerial Statements. I will seek to find out what further information can be provided before or during Report.
Lord Purvis of Tweed
One element that concerns us is when Ministers move seamlessly from saying that this is merely a technical exercise to roll over existing agreements to, in the next sentence, saying that they are engaged in confidential negotiations—but what are they negotiating? If this is simply a technical legal exercise to ensure the translation of legal competences into UK law, what are the Government negotiating? As soon as Ministers say that confidential negotiation is needed, that should trigger the existing, proper processes of transparency. As the Government said, these agreements are existing agreements with the European Union. They could not have been made without regular updates to democratically elected bodies. That is what we are asking for; it is a modest request.
The Government’s response is concerning and has not provided the degree of clarity sought, especially since the public justification for why these agreements have not been brought forward to Parliament by the Secretary of State is to blame other countries. If we get to the next stage of the Bill, much more information must be provided by the Government because this issue is significant for our trading relationships. Until that point, we on these Benches will reserve our position. At this stage, I beg leave to withdraw the amendment.
Baroness Henig
“( ) A report under subsection (3) must be drawn up by an organisation independent of Her Majesty’s Government and must include an economic analysis of the impact of the changed agreement.”
Baroness Henig (Lab)
My Lords, I rise to move Amendment 20 and speak to Amendment 21. Both amendments touch on the important issue of transparency, which has already been raised.
According to subsections (7) and (8) of Clause 2, the powers to be taken by the Secretary of State to implement replacement UK trade agreements for existing ones covered by our EU membership may last for up to six years after exit day. At present, as we have heard, the Government are not obliged to provide any indication of progress on the implementation of trade agreements covered by Clause 2. Businesses great and small have rightly complained that they have been given insufficient information about which agreements will be in place on exit day and beyond. The Minister has told me that there has been consultation between the Department for International Trade, trade organisations and businesses, but I am not sure that it has been on a sufficient scale to allay businesses’ concerns.
I acknowledge that the Department for International Trade has been working hard to ensure that no agreements are lost on Brexit day, whether we leave with a deal or not. But the fact remains, as we have already heard at great length, that there has been a failure to provide this House and the other place with information on the progress of the rollover of trade agreements. Surely we should not have had to learn from the Financial Times that there is a possibility that many, if not most, existing trade agreements will not be carried over after 29 March in a no-deal scenario. The previous amendment, moved by the noble Lord, Lord Purvis, suggested the establishment of a one-off register of trade agreements to be covered by the Bill. Surely that would benefit us greatly in terms of both our scrutiny role and our ability to act on behalf of businesses seeking to know the state of play on trade negotiations.
However—again as we have heard—there can be no doubt that best practice requires the provision of regular progress reports. We heard on Monday, and have heard already this afternoon, about the information provided by the EU on its website, covering the progress of trade negotiations. For example, I have here a one-paragraph report on the 19th round of negotiations, held in October 2018, on an EU-China investment agreement, along with an expectation that the next round of talks will be held early in 2019. That is the sort of information being put out by the EU. I appreciate the issue of commercial confidentiality, but surely if the EU can provide such information on a regular basis, the United Kingdom should commit itself to doing the same, particularly given the concerns of businesses and the commercial sector, and the powers requested by the Department for International Trade in the Bill. That is the purpose of Amendment 21.
The second part of the amendment would ensure that the Government keep us up to date during each parliamentary Session by means of a fairly simple report. We are not talking about just this Session; this could go on for some years, so we are talking about every parliamentary Session. We should all be aware of plans and the likelihood of agreements being laid at particular times. We need early notice of issues that may prove controversial. I would have thought that any responsible Government would feel that this was a basic requirement for those who are tasked with scrutiny functions, such as this House, and for businesses wanting to know about progress.
The first part of the amendment is similarly based on the good practice we have seen in the European Commission. I am pleased that the Government propose to lay before us a report on the trade agreements they intend to implement, including the difference between existing and proposed agreements—but that does not go far enough in providing information to businesses and this House on the nature of the agreement. From what the Minister has told me I gather that, in the Department for International Trade, agreements will be scrutinised thoroughly by internal economic assessors. That is very good—but could the Government therefore be seen as marking their own homework? Might the Government not bring to our attention all matters of importance?
That brings me to Amendment 20. I would like to see the scrutiny also done externally. We should be provided with a full, independent report of the sort that would be typically be provided by, for example, the LSE or Sussex University, both of which have well-established trade policy expertise. That would detail the precise differences between existing and new treaties, if any, and—importantly—the expected economic impact of any changes. Without this information, it will be very difficult to judge whether an agreement is worth pursuing.
The Minister keeps saying that the treaties will be rolled over and will all be very similar, with no variation. I will give an example to illustrate my point. Let us say that a country covered by one of these agreements is prepared to sign a rollover only on the condition of a change in a regulation to allow a certain type of food to enter this country with reduced checks. This could have an impact on health, on United Kingdom domestic providers and, potentially, on other countries’ exports, including those of developing countries. In this situation, surely Parliament deserves to know the impact of the change and should be able to scrutinise its effects. The best way to do that, as far as I can see, is through the provision of an independent report.
Lord Stevenson of Balmacara
My Lords, my noble friend has done us a great service in introducing this amendment with considerable verve and in such detail that nobody feels it necessary to pick it up. I put on record that we support what she is saying. There must be an advantage in having a proper external scrutiny system. These things should be done with independence and a wider concern for the issues than can be done from internally within the department. My noble friend makes the point—others have made it before—that we have a long way to go if we are to emulate the EU in its current practices, let alone try to get best practice going. I hope the Government, if they cannot accept the wording here, will at least take the sentiment behind the amendment and think about how that can be brought forward, both in the narrow work required in the department and its relations with Parliament but also in trying to improve the way this information is made available to the wider world.
Also in this group, I have given notice of my intention to oppose Clause 3 stand part. The reason is not directly related to the amendment tabled by my noble friend Lady Henig, because the substance of what she proposes is very much in line with the work done in the Commons to try to improve the reporting requirements, and I do not dissent from that. My reason for giving notice of my intention to oppose Clause 3 stand part is that later in the Bill we will discuss the broader question of what happens when we are talking not about continuity but about free trade agreements more generally. At that stage I have Amendment 33, which gives in some detail a possible way of doing this. It is certainly not in any sense meant to be the prescriptive answer, but it does raise all the issues raised within the terms of the current procedures under Clause 3. When it comes to later amendments, I will also talk about Clauses 4 and 5.
Baroness Jones of Moulsecoomb
My Lords, I should have stood up earlier, but I was being polite. It seems the system set out in this Bill has been rendered obsolete by the passage of time and the sheer urgency with which the Government now have to act. The amendments from the noble Baroness, Lady Henig, do a good job of trying to plug some of the gaps, but I really think the Government have to go back to the drawing board on all of this. A government amendment is needed on Report that proposes a realistic set of procedures that can be used without undue delay while ensuring proper safeguards and accountability. This should not be a battle but something we can all work on together. This Bill has dragged on for so long that we all have the benefit of hindsight. A quite prescient question has emerged: where will the Government ever find time to use the procedure set out in Clause 3? I really think we need a lot more drafting on this Bill so that at some point we might get it on to the statute book.
Baroness Fairhead
My Lords, I begin by addressing Amendment 20, tabled by the noble Baroness, Lady Henig. The Government agreed in the other place to lay reports in Parliament to explain the changes made to continuity agreements in advance of any continuity agreement being ratified or in advance of the Clause 2 power being used. This amendment, which requires an independent body—albeit one with the stature the noble Baroness refers to—would place a considerable time constraint on the delivery of these reports, which would in turn have a really serious impact on our ability to bring those continuity agreements into force. The reporting requirement placed on the Government is intended to be an aid to Members of both Houses to understand the continuity agreements as the agreement text is also laid in Parliament for ratification.
The noble Baroness also raised the issue of standards and the potential to lower standards. We had a very long, detailed and comprehensive debate on standards on the first day in Committee on this Bill, and I want to reassure noble Lords again. EU standards come directly into UK law. We will remain party to international standards bodies under international law, as we are today. This Government have reiterated their commitment to high standards, which are both demanded by our consumers and the right policy for our country.
I turn to the idea of an independent report. Noble Lords with experience of trade matters will appreciate that these agreement texts are lengthy. The CETA text with Canada, including annexes, is about 1,600 pages long. The reality of the situation is that it is simply not feasible, in the time available, to generate independent reports before our agreement needs to be ratified. I again refer to what we have said: continuity is what businesses and our consumers are asking for. I appreciate the points that the noble Baroness, Lady Henig, makes. Our reports will provide relevant analysis on the impact of any changes made to those agreements. I hope these reports are helpful, both to the noble Baroness and to this House.
Lord Purvis of Tweed
I wonder if the Minister might just be able to clarify what may be my misreading of the legislation. The Minister said “any changes”. My reading of the legislation is that it is “any significant differences”. I wonder if the Minister might be able to say, because they are not the same.
Baroness Fairhead
My Lords, if the change is literally a cut and paste, I am not sure it would help your Lordships to have a report saying “‘EU’ changed to ‘UK’”. It would be changes seen to be of any significance. If there were any economic impact, that would be included in the report. The reports are designed not to take time in an exercise of proofing but to identify the significant changes and those of value for the House to be aware of. As the noble Lord correctly says, it does refer to “any significant differences” in “trade-related provisions”.
The continuity agreements will be subject to the procedure under the Constitutional Reform and Governance Act. This House will be able to use the contents of these reports to inform their engagement with that process.
I turn to Amendment 21, which requires the Government to provide updates to Parliament on the status of negotiations. I stress again that we do not expect significant changes. I have referred on many occasions to the technical changes on TRQs, rules of origin and other such changes that we will need to cover later. That, together with this very tight timetable—as I think we all agree—would mean that the level of reporting is unnecessary in relation to that programme.
The continuity programme is separate from our programme to develop a future trade policy. On that, there has been very active engagement with businesses and trade associations. We meet on a very regular basis because it is trade policy for them and therefore it is absolutely critical. For example, we launched four consultations on possible future trade agreements. The window for consultations has recently closed and we are currently considering stakeholders’ views, so there is active consultation both in person and through that. Any future trade agreements with new partners will follow a separate scrutiny procedure. It was set out in outline by the Secretary of State for International Trade on 16 July 2018, but I ask for the House’s indulgence because in group 19, later today, we will be discussing exactly the scrutiny of future trade agreements.
I understand that the Committee is keen to know what progress we are making on transitioning the continuity agreements. The noble Baroness, Lady Henig, referred to the ISDS update that was given by Europe. On the DIT website, we provide updates of the meetings that have taken place and of any working groups. I have a list here of all of the working groups and, where we can, we say what was discussed there. We are able to provide that level of transparency. I do not want to go back to the discussion that we just had about the private Government-to-Government discussions. I stand by the commitment that I made to the Committee on that last measure to say that I will look to see what further can be done. My understanding is that it could create a considerable handling risk for those countries.
I have listened with interest to the arguments and points raised by the noble Lord, Lord Stevenson, concerning Clause 3. As has been set out in great detail and discussed over the course of these debates, the Government are seeking to roll over the effects of the EU’s trade agreements as much as is practically possible. This is particularly important in relation to pre-ratification reporting requirements, as any potential delay could risk a cliff edge in those trading relationships. In supporting this process, we are producing reports which will explain any significant changes—as I said to the noble Lord, Lord Purvis—from the effects of our existing agreements to the new ones. We believe that this provides the transparency that Parliament has called for while also being proportionate. These reports will help Members of the House, businesses and the general public to better understand the impact of the programme.
I trust that the Committee will accept that this provides balance, but I repeat my commitment to see what further information we can give. Our amendment to produce these reports received support in the other place as a proportionate approach to providing transparency to Parliament. I hope that this reassures the Committee, and I ask the noble Baroness to withdraw her amendment. Additionally, I hope that noble Lords will agree that Clause 3 should stand part of the bill.
Baroness Henig
My Lords, I have listened very carefully to what the Minister has said. I take the point about speed, but at the same time the department is seeking powers for up to six years. Therefore, on the one hand we are talking about speed and on the other the Government are saying that they might need these powers for some years. That is my concern. If we are talking about longer than a few months, we need a proper communication strategy and a proper strategy for scrutiny. In a sense, the department cannot have it both ways: if it is seeking powers over a period of years, then it is only reasonable for us then to be able to say, “Well, what are the arrangements for scrutiny?” If we are talking weeks, that is fine, but since the Bill is seeking these powers for this length of time, I do not think it is unreasonable for us then to say, “So what are going to be the arrangements for scrutiny and discussion?”
On the matter of scrutiny, it is quite obvious from everything that has been said by a whole number of people, on both this and previous amendments, that so far the scrutiny arrangements are by no means adequate. They really are not: we have to look at this and return to this. I hope that the department itself will come up with something on Report. Clearly, it is something that we will have to look at.
On communication, I take the point about the website, but the fact is that if you talk to businesses outside this House, if you talk to people who are trying to prepare for 29 March, they do not feel well informed and do not know what is going on. Businesses do not feel confident; the Minister might want them to, but they do not. This is a very serious matter because all of these businesses, great and small—it is a particular problem for smaller businesses, of course—do not feel at the moment that they understand what they should be preparing for. It is undermining their profitability and we are causing huge problems with this. Therefore, I am really not happy with where we are at the moment.
I am not going to labour the points this afternoon, as we have already heard about them at great length before. We will have to return to this whole area on Report, but meanwhile I beg leave to withdraw the amendment.
Baroness Henig
Baroness Henig
My Lords, I will be extremely brief—I am sure that noble Lords will be happy about that—in moving Amendment 22 and speaking to Amendment 23. They are two very short probing amendments for the particular circumstances when Ministers do not feel the need to lay a report before the House. Once again, given the importance of trade agreements and the need for scrutiny, this is something that the Government need to consider carefully. Can it really be right for the Government to lay regulations before Parliament without informing us what they are and what impact they might have?
We can deal with the matter fairly straightforwardly. The Government will know in advance of the proposed changes to an agreement, not just at the point of laying it. There is therefore no reason whatever why we cannot be told what the change is at the time, as part of whatever reporting system there is. That is the purpose of Amendment 22.
In relation to Amendment 23, I say that the phrase “as soon as possible” is far too vague. I appreciate that the Government have many issues to consider and to juggle, but they should have the means to tell us what is being proposed. We need to know within a clear timeframe so that we can scrutinise the Government effectively. I have to hear a convincing reason from the Government as to why they need the wide-ranging powers under this clause. I therefore propose these amendments to seek further information from Ministers, and to signal the kind of openness and levels of scrutiny that I am sure Parliament will demand in terms of both these rollover agreements and the new trade agreements. I beg to move.
Lord Stevenson of Balmacara
My Lords, once again I support the amendments of my noble friend Lady Henig; I will also speak against Clauses 4 and 5 standing part of the Bill. Counterintuitively, I will deal with Clause 5 stand part first, simply because it follows exactly in the same vein as the reasons I gave for suggesting that Clause 3 should not stand part. Clause 5 deals with reports to be laid with regulations under Section 2(1). In an expanded, more amplified and better and more rounded policy dealing with both the continuity of free trade agreements and the new free trade agreements, we would have a completely different system sitting in place, so Clause 5 would be otiose, which is why I put this forward. I will not press this and I do not need much response from the Minister because we will return to this issue later in group 13.
However, I wonder about Clause 4. It seems at a superficial level to give the Government a “get out of jail free” card in relation to any reports that they might feel obliged to make, particularly if they are expanded in terms of my noble friend Lady Henig’s original proposal under Clause 3. Clause 3 states:
“Before the United Kingdom ratifies the proposed agreement, a Minister … must lay before Parliament a report which gives details of, and explains the reasons for, any significant differences between—
(a) the trade-related provisions of the proposed agreement, and
(b) the trade-related provisions of the existing free trade agreement”.
But Clause 4 states:
“Section 3 does not apply to a free trade agreement if a Minister of the Crown is of the opinion that, exceptionally, the agreement needs to be ratified without laying before Parliament a report which meets the requirements”.
I stress that phrase,
“a Minister of the Crown is of the opinion that”,
and the use of “exceptionally”, which is an interesting word. In other words, you do not have to do it if you have sufficient gravitas and the ability to convince Parliament that you are not of that opinion and that it is exceptional, so you can get away with it. That is not satisfactory drafting.
This is not a good clause to be in a Bill of this nature. It certainly does not meet the questions that we have been raising about proper transparency, accounting and independence of reporting. When the Minister comes to reply, I hope that she will consider taking this away. If she cannot bring herself to agree that this needs redrafting, perhaps she can write to me explaining why it does not.
Baroness Fairhead
My Lords, I too will try to give a short response to the amendments before us, and first on Amendment 22 tabled by the noble Baroness, Lady Henig. Clause 4 creates an exemption from the reporting requirement so that, in exceptional circumstances, the Government may seek to ratify an agreement without having first published the associated report on changes made to it. Let me categorically reassure noble Lords that we intend to draw on the reporting exemption provided for in the Bill only if we are in exceptional circumstances.
I am sure the Committee will agree that we may find ourselves in exceptional times. We cannot predict the speed with which continuity agreements will be ready for signature. Moreover, the exemption is narrow. It does not remove the requirement for a report to be laid. It simply provides a little leeway to enable a trade agreement to progress to avoid a cliff edge. The Government would still be required to lay a report as soon as possible following ratification. I hear the noble Lord, and will reflect on the drafting, but in a sense it was because of the uncertainty about the speed.
Amendment 23 would ensure that, if this exemption is invoked, the report would have to be laid no later than 10 days after ratification. Again, to be clear, we have drafted this exemption for use in only the most urgent of circumstances. If we were to need to rely on this, it would be necessary to ensure that we could continue to operate in the most uncertain of contexts, and avoid that cliff edge.
Clause 5 will ensure that the Government lay their report 10 days in advance of using the Clause 2 power to implement any obligations of a continuity agreement. That will ensure that Parliament is wholly informed about how we intend to deliver continuity for an agreement before it is required to consider implementing legislation. If we removed Clause 5, as the noble Lord, Lord Stevenson, suggested, the Government would not be bound in any way to report, so we should set that aside.
Before I conclude on this point, I would like to inform the Committee about an amendment that the Government will bring forward on Report. As the Committee is aware, the purpose of the Government’s trade continuity programme is to seek continuity of the effects of existing EU free trade agreements as far as possible as we leave the EU. The vast majority of these existing trade agreements, which we are part of as an EU member state, are already in operation and have been scrutinised by Parliament. Let me make it clear to the Committee that we do not expect to need to change existing domestic equalities legislation as part of this programme. In the unlikely event that we choose to make minor or consequential changes to this legislation, we will aim to ensure that this does not result in reduced protection against unlawful discrimination or diminution of equality rights.
However, to ensure suitable transparency and accountability on this particularly important issue, we intend to provide that a ministerial Statement is made alongside any draft statutory instrument laid under the Clause 2 power. The Statement would outline whether the statutory instrument repealed, revoked or amended any provision of the Equality Acts 2006 and 2010 or any subordinate legislation made under them. In addition, I am happy to confirm that the reports under Clause 3 will explain any changes that would be required to equalities legislation as a result of our shift from an EU to a UK agreement if, and I stress if, any changes are needed. My officials have agreed to work together with the Equality and Human Rights Commission—and I put on record our thanks for its efforts in helping us to design the process so far—on designing the content and templates for these reports.
I hope that that reassures the Committee and I ask the noble Baroness to withdraw her amendment. Additionally, I commend that Clauses 4 and 5 stand part of the Bill.
Baroness Henig
I thank the Minister for her response, and particularly for the additional information that she has just given us, which I am sure we welcome. As I said, they were probing amendments on my part and I was trying to get some more detailed information about the Government’s thinking, which I think we have had. On that basis, I am happy to withdraw my amendment.
“Customs union
It shall be the objective of Her Majesty’s Government to take all necessary steps to implement an international trade agreement which enables the United Kingdom to participate after exit day in a customs union with the European Union.”
Lord Stevenson of Balmacara
My Lords, this amendment, for which I am grateful for the support of the noble Lords, Lord Patten of Barnes, Lord Purvis of Tweed and Lord Kerr of Kinlochard, has a long and distinguished history in that it has been discussed over a number of years. In moving it today, I first apologise for the drafting. It was devised by committee, which of course is never the right way to go about these things; it was a very good and small committee, but nevertheless the drafting reflects some of the tinkering involved. It probably does not stand the test of time and, if we were to return to this at a later stage—and we might want to do that—slightly different wording might emerge. But in proposing it I am in no sense worried about the central principle. I hope to spend a little time introducing the amendment and will then listen to the debate that comes forward.
The question of whether the UK should remain in a customs union has become an issue around which many people can agree. It does not involve them all, but includes many MPs, businesses, trade unions and the wider public. The reason is not hard to find. It would provide the certainty that we need to protect UK jobs, secure opportunities for our industries and create prosperity at home. It would also give us a voice, front and centre, at the world’s most powerful trade negotiations and help to ensure that global goals on development, climate change and the natural environment are met and continue to be met. On Northern Ireland, Ministers are bending over backwards to explain how exactly the backstop they have agreed to and have been supporting will actually work in practice. But at a stroke, a customs union would properly guarantee the peaceful legacy of the Good Friday agreement. That alone must make it a most important issue.
At present, the Government are steadfastly ruling out a new customs union. However, the trade unions, the CBI and other business interests are highly supportive of the idea, saying that a new customs union will protect jobs. The Scottish and Welsh Governments are also on board, as are a growing number of members of the Cabinet. At a time of seemingly insurmountable division in our country, the opportunity to unite in common purpose should be grasped with both hands. I beg to move.
Lord Kerr of Kinlochard (CB)
My Lords, I can be very brief in supporting this amendment, which has my name on it. Saying that is a very ominous start; it usually means the exact opposite, like the phrase “with the greatest respect”. But I can indeed be very brief because, on 18 April, I proposed and the House approved, by a majority of 123, a very similar amendment on the European Union (Withdrawal) Bill. With the greatest respect, I have to say to the Government that we would not be in the present predicament if they had listened to what the House said on 18 April.
The economic case for a customs union if we leave the European Union is pretty well understood now. Business is explaining ever more volubly how damaging supply chain disruption would be. With the greatest respect for No. 10, I do not believe that the red line against a customs union would have been drawn in the 2016 party conference speech had there been any consultation with business, Parliament or the Cabinet beforehand. The political case for a customs union has become even more familiar as we think about the concept of a customs frontier across the island of Ireland and a backstop with a frontier down the Irish Sea. With great respect, I have to say that it was unfortunate that the 2016 announcement of the red line on a customs union, interpreted in Dublin as a declaration of intent to abrogate the Belfast treaty, was made without any advance consultation with or notification to the other parties to the treaty, and with no consultation with this Parliament or with the Northern Ireland Assembly, which at the time still existed.
Taken together, the economic and political case for a customs union, if we leave the European Union, looks pretty overwhelming—but I see no reason to labour the point now. I recognise that the Minister cannot accept the amendment, and we all know that much may have changed before the House considers this Bill again on Report. I simply urge the Minister, with the greatest respect, to ensure that her colleagues remember how this House voted on 18 April.
Lord Patten of Barnes
I am happy to support this amendment—although I realise that happiness is a relative concept. We find ourselves going round and round these arguments, again and again, banging our heads against the same walls of confusion and obfuscation, and barely managing to avoid Brexit derangement syndrome as we make this tiresome journey. As the noble Lord, Lord Kerr, said, we have of course been here before—several times. The most notable is the debate we had, as he said, in April last year, when all of us were younger. Indeed, one or two of my noble friends are no longer here—permanently—since that debate. On that occasion, we won the amendment to the withdrawal Bill by 123—not 230, the sort of figure that we are used to these days, but by a pretty comfortable margin. As the noble Lord said just now, if our advice on that occasion had been taken, we would not be in the shambles that we are in today. One reason for discussing this issue again is that it is quite possible that a customs union, among other things, will be part of a way out of the shambles that we are currently in.
In an article in the Times a couple of days ago, the admirable commentator Rachel Sylvester reminded us that Einstein defined insanity as continuing to make the same decision on the assumption that it will get the result you want and therefore continuing to be disappointed. I suppose that, by that definition, one of the steps you take towards insanity is that you start quoting your own speeches, and most of us have made these arguments again and again.
I want to make four very brief points in the hope that we do not have to spend the rest of our lives talking about customs unions. My first point is this. The argument that we have to do this because of the referendum result—that this is a red line that cannot be painted any other colour—is an assertion. As the noble Lord, Lord Kerr, said, it was an assertion made in a party conference speech, where it is not always the case that objective truth or consensus is looked for. The party conference speech then became an item of sacerdotal interest. It was put into the manifesto before the 2017 election—in which our party did not do conspicuously well. We are told that we have to implement a proposal to get rid of any customs union because of that party manifesto.
I had a great deal of pleasure rereading that manifesto. Right at the beginning is the sentence:
“People are rightly sceptical of politicians who claim to have easy answers to deeply complex problems”.
I would certainly settle for that. There were one or two notable items in the manifesto, and my noble friend Lord Lansley and I have written more manifestos than most people have had hot dinners. I seem to remember that pledges were made that were dropped even before the election, including a very good proposal, which I supported, about funding healthcare for the elderly—a subject in which I am sure I will soon be much more interested than I am now. The idea that this is a tablet of stone, engraved with the absolute commitment, whatever happens, to deny the country a way out using a customs union, is ridiculous and risible.
My second point is about the belief that, somehow, we can manage everything as we go forward without any deal, and certainly without being part of a customs union. It is part of the Catch-22 situation that we find ourselves in now. If you say that there are problems in leaving the EU and the customs union without a deal, you are told that there are no problems. If you do not say that there are problems, you are told that there are no problems. It is rather difficult for us to find a way through this Catch-22 situation. The notion that we can manage in the future simply on WTO terms is, of course, ridiculous. No developed country in the world manages solely on WTO terms. We talk about Europe’s agreements with America being on WTO terms; they are not. There are 100 sectoral agreements with the United States, which go well beyond WTO terms. The truth is that, in addition to the WTO terms, other things are necessary to secure the best possible advantages for your exports and for your industry. That is why, since the WTO was established, 243 different trade agreements—substantial ones—have been made by countries to secure their economic interests. Crashing out and pretending that we can manage simply on WTO terms is, again, a ridiculous proposition.
The third thing one should recognise is the difficulty of putting together a trade policy at the speed that we are trying to now. That became apparent in a debate we had earlier this afternoon. I say without, I hope, being remotely patronising to the Minister that she has the impossible job of marking Dr Fox’s homework. On the basis of what we know so far, the House would not have given him a pass: he would not even have got into the margin of error.
The issue is so difficult. From the European point of view, it involves a great deal of transparency. If the noble Lord, Lord Mandelson, was in his place, he would be able to confirm that. I used to do the political side of trade agreements. We would go back, again and again, to the European Parliament and to parliamentary committees to be quizzed about what exactly we were negotiating. Quite rightly, one of the most pressing invigilators every time was the British Minister: we were pressed on the details of the negotiations as we went along.
When we were told by Dr Fox, in between flights, that there would be 40 trade agreements ready for lift-off within seconds of leaving the European Union at the end of March this year, some of us were a little cautious in taking his word for gospel truth because we had seen what had happened with his previous prediction that negotiating with the European Union was going to be incredibly straightforward. Now, however, we know what the score is. It is not 40, not 39, not 29 and not 19 and a half—we have hardly made any agreements.
If we crash out of the European Union on 29 March, it will be extremely painful for British business and industry. There are all sorts of issues. The Minister said quite properly that these are very big agreements. She said that the Canada agreement is 1,600 pages long and the South Korea agreement is 1,400 pages long. As we have said before, you cannot simply go through them Snopaking “European Union” and inserting “United Kingdom”. All sorts of really complicated issues have to be dealt with and that will take a very long time.
If we look beyond just rolling over those trade agreements, what else are we talking about? We are talking about capturing a huge share of the big markets: China, India and the United States. At the moment, China is not the easiest place to do business. The indebtedness is now 300% of GPD, which may look even more difficult in the future, and there are, alas, increasing security and political issues that we have to cope with. Then there is India. If he was in his place, the noble Lord, Lord Bilimoria, would tell us, as he has done with great authority in the past, that what the Indians are interested in is visas, not concessional trade deals with the UK. Then we have the United States. If my noble friend Lord Deben was in his place he would give us a speech on American chickens that would make any sentient human being become vegan. He has done it two or three times, and it is a very moving piece of rhetoric, as one would expect from my noble friend. The idea that we can build a tower on the sand of President Trump’s meretricious and mercantilist policies is an absurdity. An independent trade policy was why we said we had to reject a customs union, so where is it? It remains an aspiration of our ubiquitous International Trade Secretary and one which, alas, we are not going to see consummated in the foreseeable future.
My final point is on Northern Ireland, which we have talked about again and again. Both previous speakers pointed out that the problems of the Northern Ireland border would not exist if we were in a customs union. In the referendum campaign, the Prime Minister, to her credit, made absolutely clear what she thought of the Northern Ireland border issue and how important it was for the future and integrity of the Good Friday agreement. She was right. The other day, my noble and learned friend Lord McKay explained with spectacular clarity why there would have to be a hard border between the Republic of Ireland and Northern Ireland. Guess what: if you have one set of trade and customs arrangements in one country and a different set in the country next door, you have a hard border. It is the case everywhere. Search parties have been sent out to find an example of where it is not true and to find a technological solution—and answer came there none.
The Lord Bishop of Chester
My Lords, it is always a pleasure to listen to the noble Lord, Lord Patten of Barnes, especially when religious imagery creeps into his speech with gospel truth and sacerdotal approaches. His opening remark reminded me of Trollope’s definition of hell: an eternity of listening to one’s own sermons. I do not know whether the noble Lord, Lord Patten of Barnes, has similar feelings about his speeches, but they are always wonderful to hear.
I wonder what this amendment really means. The noble Lord, Lord Patten of Barnes, said that happiness is a relative concept, but it seems to me that the term “customs union” can mean more than one thing. The very fact that the amendment refers not to “the customs union” but “a customs union” prompts me to ask what it means precisely. If one looks, as I just have, at the WTO website and how it defines a customs union, it is not a hard-and-fast term and allows for exceptions, up to a point, to be made in an agreement. It refers to “substantial agreement” on issues of trade.
When one comes to the political declaration, what is the real difference between the following aspiration in the political declaration and a customs union?
“The Parties will put in place ambitious customs arrangements, in pursuit of their overall objectives … making use of all available facilitative arrangements … ensure no tariffs, fees, charges or”,
so on in the trading arrangements. It seems to me that that is not far from describing what might be called a customs union. No doubt the devil will be in the detail as to precisely what is included or excluded, but it seems to me that the Government’s intentions, and the agreement’s intentions in the joint political declaration, are not far off what one might describe as a customs union.
Lord Purvis of Tweed
My Lords, I hope that the Government will listen to what the noble Lord, Lord Patten, said in his contribution. The difficulty is that, even those in Government who listen to such a sensible case, find themselves locked into a situation where even sensible ways of maintaining a relationship with the European Union outside the European Union have been defined by many as “not leaving”. So the scope for leaving the European Union has become narrower and narrower.
One of the slight advantages of the delay to this legislation and the opportunity to debate a customs union now is that many of the prior assertions have been utterly debunked. Many of the valid concerns raised about leaving the European Union and its customs union have now emerged in reality. The then proposed “max fac” solution has been laid bare as simply unworkable. The Chequers agreement would not pass any definition of a sensible way forward. The White Paper which was then published had major deficiencies, and we saw the result of the Commons vote on the agreement. So we are left with a number of differing perspectives on the future trading relationship and customs arrangements on which we will need to find some form of common ground.
In previous discussions, we have heard from the Government that all these concerns can be set aside because of our positive relations with our trading partners—Dr Fox said that on the radio today. Canada has often been cited as a country which finds it very straightforward to have a positive trading relationship with one of our closest possible allies, especially as CETA has already been agreed by this Parliament. No doubt, there will be good will on both sides in these discussions. This is beyond question. We will trade with our close allies. However, Canada has prevented our schedules application at the WTO from progressing. It has lodged an objection. It is looking after the interests of Canadian farmers and industry—the United Kingdom would do exactly the same.
If we leave without any agreement, and if Canada, New Zealand and Australia do not withdraw their objections to our goods schedules at the WTO, then not only will we leave the European Union without an agreement, we will leave without any certified WTO schedules. We will not only be trading on WTO rules, but we will not have certified rules with which to trade with the rest of the WTO. The same has happened this past week over our services schedule—services are two-thirds of the UK economy—because Taiwan has lodged an objection. So the dawning reality must be that a change of course is necessary.
It is of no surprise to anyone that Liberal Democrat policy continues to be, as it always has been, to retain membership of “the customs union”. It is Labour policy currently to negotiate “a customs union” with “the customs union”, such as Andorra and Turkey have. It is the Government’s policy, or at least the Prime Minister’s though not necessarily the whole Cabinet’s—it is difficult to determine, between the Chancellor and Dr Fox, who speaks for trade now; it is significant that, at Davos, in one week, you have two Cabinet Ministers from one Government saying two different things at a critical time in our country’s history—that we negotiate a deep and comprehensive free trade agreement with a customs arrangement as part of it.
We propose that, ultimately, the people will have to decide on our preferred option. Under Labour, Article 50 would need to be revoked and a new negotiating mandate would have to be agreed at EU level, as the Prime Minister’s letter activating Article 50 is not competent—it states that withdrawal would be supplemented by a free trade agreement, not a customs union. The Commission’s negotiating mandate has not been on that basis. The Government’s position was defeated by the biggest majority in Commons history.
The Government’s position is predicated on making agreements with all other countries with which the EU has a trading relationship but without them knowing what our trading and customs arrangements will be. Reflecting on the previous debate in Committee, perhaps the biggest reason why those agreements will not be brought forward before exit day is the very sensible position that third countries are taking. They will not enter into agreements with us, even if we say they are simply a rollover, because these could well become permanent without them knowing what our relationship with the European Union is. Who can blame them? Perhaps Dr Fox can, but who really can blame them?
We know that the withdrawal agreement and the political declaration state that the future relationship will be based on the Northern Ireland backstop, which means that we would not deviate from the EU in our trading. It seems that the Prime Minister’s course of action now, in order to get an agreement through, is to remove the very thing that would offer reassurance to countries with which we have a third-party trading arrangement. The backstop would clearly break the “taking back control” mantra, so to some extent it is not surprising that many on the government side, in the Conservative Party, have said that this is actually not leaving the European Union at all. So it is hard to see how they move forward now.
Labour’s position is based on Turkey, where agriculture is excluded and where the country is obliged to use EU rules and abide by the European court’s interpretation of them. To some extent, this also means having the European court’s remit over our future relationship. Turkey’s agreement with the European Union explicitly excludes Turkey deviating from the EU’s internal regulations; it is bound by them. If negotiating “a customs union” with the European Union were to have any preferential terms over participation in decision-making, the European Union would then be bound to offer them to Turkey and Andorra, which it will not do. This is one of the difficulties about which we have to be open.
Labour’s position of being aligned with the single market but not part of it means that with the movement of goods comes the movement of capital, which also means some form of people movement. It has not said this so far, but I think we now have to be in a period of openness and honesty. This is clearly within the scope of the European Court of Justice—which Jeremy Corbyn has ruled out. Many people also say that this is not leaving the European Union. It does not remove the need for border checks. Some of the longest delays in border checks in Europe have happened between Turkey and Bulgaria—two countries which are part of a customs union. So, if we want British representation in a customs union, with British oversight and decision-making, and a seamless trading relationship with 49% of our trading partners and a further 17% of other countries with which we have trading relationships without tariffs, we have to retain membership of the customs union.
If the impossible government position is termed “not leaving”, and if Labour’s position is termed “not leaving”, then I think not leaving would be better done after the people have agreed it. Now the reality that we are embarking on is clear. For the first time in history, a country is seeking a trading arrangement with new barriers, additional regulations and enhanced restrictions. It is the first arrangement ever knowingly entered into that would reduce prosperity. This is the Government’s course of action outside the EU’s customs union.
Lord Lea of Crondall
I have been listening to this brilliant speech, and I am just wondering whether I can believe my ears. We are talking about an amendment to a Trade Bill in the context that the Government are trying to put through a withdrawal agreement. Given the complexity of the question of “the customs union” and “a customs union”—there is an element of angels on the end of a pin—if we in Parliament are having difficulty in thinking through its various intricacies, how does he think it is going to be easier for the people to do so? Is that what he has just said?
Lord Purvis of Tweed
It is. Ultimately, I believe that the choice is going to be that we either stay in the customs union and the single market of the EU or we leave, either with no agreement at all, which I hope is ruled out in short order very quickly, or with some form of government agreement, which did not secure majority support in the other place, where one-third of those voting against it did not believe that it was leaving the EU at all. I think where the people will now be informed in the decision is as I started: many of the issues are now laid bare about the consequences of leaving.
I am very happy to be a co-signatory to this amendment. I am very pleased that we in this Chamber are debating what the consequences of the actions will be. We are also clear that we want to do the least damage to the British economy and to secure for the future all the relationships that we have at the moment without the extra burdens of regulatory addition.
My final point, which the OBR report in October made very clear, is that if we went down the Government’s course and left, then there would be at least five years of adjustment to a worse scenario for GDP, even on the basis of the agreement. I am seeking to avoid that. I hope there will be consensus, at least in the first instance, that a customs union is necessary. There is no doubt of our position on these Benches that the customs union is preferable to all of those. I hope that will ultimately be the future of our country, and I believe that that is up to the people, who ultimately will have to decide this.
Lord Lansley
My Lords, I do not want to go on at length about this issue, not least because I agree so wholeheartedly with what my noble friend Lord Patten of Barnes has already said. I am always loath to do it and I hope to make it a very rare event, but I voted for the amendment to the withdrawal Bill last April. To that extent, I think this House has made its view perfectly clear: it thinks, in the context of leaving the EU, that to retain membership of a customs union with the EU would substantially mitigate what would otherwise be the damaging economic effects of withdrawal.
I do not want to get into a debate about “the” customs union or “a” customs union but, on the face of it, if we are negotiating to leave but we are negotiating to have a customs union relationship with the EU, it behoves us to negotiate without necessarily subscribing to the customs union because the customs union is a product of the treaty. We would no longer be bound by the treaty, so we have the flexibility to think otherwise. That does not turn us into Turkey, because we might choose to do things quite differently. The EU has chosen not to have agriculture within the customs union with Turkey because it is in its own interests not to do so. We have very different interests and we might choose to pursue them differently. Indeed, as one can see from the structure of the backstop, we might choose to have an arrangement with the EU that was, as Ministers are fond of saying, a “bespoke arrangement” for the management of a customs union. And why not? If we could have such a thing under the backstop, surely we could have it without the backstop.
I do not want to go on at length. I hope that those in this House and beyond who are thinking next week about what is needed to make progress from the impasse that we appear to be in at present will read this short debate. While it exposes some of the difficulties in negotiating a future customs relationship with the EU, two things should become immediately apparent. First, many of the negative consequences of leaving the EU—most especially, leaving without a comprehensive agreement in place—will be dramatically mitigated by being in a customs union. When I talk to businesses, that is absolutely at the top of their wish list, and it is true for manufacturers as well. Secondly, I hope people will realise that this does not preclude us having a trade policy of our own. What are trade policies nowadays? They are generally called comprehensive economic partnership agreements because by and large they are not about tariffs; they are about broader relationships. Especially for the UK, given that we are predominantly a services economy, for the future those agreements should be about services. We should be negotiating trade agreements about services, the movement of capital and investment, and indeed we should have a negotiation with India that includes a discussion about the mobility of workers between India and other countries. That is happening in a very powerful way: the Indians are exporting skilled young people all over the world very successfully, and we should have that in mind as part of an economic partnership agreement with other major economies. If that is true and it also gets us out of having a hard border between the Republic of Ireland and Northern Ireland, but without creating a new border between Northern Ireland and Great Britain, why would we not want to do this? That is what everyone is trying to arrive at.
For the purposes of next week’s debate there are, therefore, essentially two questions. First: does offering to be party to a customs union with the European Union, as part of the future political declaration, enable us and the European Union to agree in a way that would—as they say in Brussels—have legal force? Would it enable us to put into the political declaration, and have agreed by the European Council, the kind of language and commitments that would allow it to be said that we will not enter into the backstop, if we go down that path in the future treaty? That is what it is all about: not going into the backstop in the first place. We need some reassurance that that will happen. That will automatically solve the essence of the problem associated with the backstop. If we do not have to go into it, we will have solved that issue. We will also have solved the question of unilateral withdrawal or otherwise. If we are in a customs union, we have a right to leave it. If we go into the backstop, we have no right to leave it—as it is currently constructed— and that is a very unhappy place for many who are against the withdrawal agreement at the moment.
The second question is: can we avoid the Turkey situation? It is a bit like when people talk about entering the Norway situation: we do not want to be in a position where we are simply rule-takers. With a customs union, at least we are not rule-takers on financial services and our service industry, but we are none the less rule-takers. We do not want to be in that position. Can we arrive at a customs union where we genuinely have a shared responsibility? I hope we can.
The trouble is, I entirely agree with my noble friend Lord Patten. Nearly a year ago, if only the Government had listened and put into the negotiation—at the time that led up to the White Paper and after it—a discussion about a customs union. Instead they put into the White Paper the suggestion that we could have a customs union, without calling it that, where the rules of origins are effectively waived so that anything that originates in the United Kingdom is treated as if it is European, and anything that originates in Europe is treated as if it is British. This, of course, is a nonsense; the European Union would never accept it. It would never accept that it would raise the money—
Baroness Kramer
I am trying to understand the noble Lord. Obviously, the definition of a customs union is quite difficult and I was trying to follow his definition. Does he intend only the narrow definition of a customs union, where it essentially just deals with issues such as tariffs and excise duties, or does he intend it to include the regulatory alignment, as it often does because the terminology gets stretched? If there is not regulatory alignment there still have to be checks, which means we are back to the border problem. Would he explain what he sees as the content of “a customs union” because, if we are not removing the border problem, I struggle to understand his point?
Lord Lansley
When I talk about a customs union, I mean—as the WTO would interpret it—where we share a customs territory and an external tariff arrangement, and our tariffs are the same as the European Union’s. A customs union, in my book, does not necessarily imply having the same rules, regulations and standards. If we are in a customs union with the European Union, it does not mean that we do not have a comprehensive partnership agreement with them. I hope we would do and that would embrace everything from data adequacy to having the same standards. Therefore, we would have to work on the basis that we start with and maintain standards at least as good as those inside the European Union, enabling the European Union and ourselves to operate on the basis of open borders. The most important part of that is the absence of a requirement to establish rules of origin, because one is in a single customs territory that allows goods to pass across borders in that way.
I will finish my point. I am losing quite where I was; I think I was just beyond talking about Turkey. We have got to know that we are going to be in a position to be able to negotiate a customs union, that we will be able to withdraw from it in future, and that it will obviate the need for us to have a hard border with the Republic of Ireland. That is a really important position. We need to know these things and we should have had months to negotiate them. As it is, we have to arrive at something in the political declaration in weeks rather than months.
Lord Hannay of Chiswick
My Lords, I will not go into the matter of the definite or the indefinite article, which I think is getting a little abstruse. The right reverend Prelate asked why there was a focus on the words “customs union”. It is because that is one of the two ways under Article 24 of the World Trade Organization’s rules—a free trade area, or a customs union covering substantially all the trade—which permits a member of the WTO in good standing to derogate from the most favoured nation provisions. It is as simple as that. All that waffle in the political declaration, which had to be put in because “customs union” would have frightened too many horses, is quite meaningless. “Customs union” is totally meaningful.
The Lord Bishop of Chester
Could I check with the noble Lord: is he agreeing with me that the political declaration actually describes what might equally be described as a customs union?
Lord Hannay of Chiswick
That question should perhaps be addressed to the Prime Minster, who might find some difficulty answering it because it would cause such ructions on the Back Benches of her own party. I do not think it is a question for me: I would have no problem putting “customs union” in. That is why I am standing here now, suggesting that this legislation should contain that phrase. If we leave the EU—if—on 29 March or at a later date, then the option of staying in a customs union is a compelling one, and it ought to figure in this legislation.
Why? First, because that option preserves, to the greatest extent possible, the frictionless trade—or something pretty close to it—which was originally the Government’s objective, but has not figured a great deal in government statements because it is not consistent with what the Government are now trying to do. There would be no rules of origin procedures, no VAT checks, no tariff or other problems which would arise. Investors in this country found this enormously attractive when they saw us as a gateway to the rest of Europe. I fear they will not see us as terribly attractive when we cease to be a gateway, with these friction-causing factors.
Secondly, I do not think that a customs union would solve the backstop, because the regulatory issues are extremely important there, but—as other noble Lords have said—it would make a substantial contribution towards resolving that problem even if it does not totally remove it. Thirdly, it would be likely to ensure us access to the EU’s already hugely substantial amount of preferential trade agreements—both free trade agreements and, in the case of Turkey, a customs union—in a way that would probably be much better than anything we could negotiate separately. The EU not only has this huge panoply of free trade agreements and a customs union with Turkey, but is negotiating now with Australia, New Zealand, Brazil, Argentina and Mercosur, and there are reasonably recent agreements with South Korea and Japan. The one with Japan has not yet been brought into force. The one with South Korea has, I think, brought a quadrupling of our exports to that market. We would get all these advantages if we were in a customs union, without having to do anything about it at all.
What is there not to like about joining a customs union? The noble Lord, Lord Patten of Barnes, quite rightly referred to the problems that might arise and the difficulties we would have negotiating new trade agreements with an independent trade policy. Those are very real, as those who have cited the size of these agreements have demonstrated rather clearly. But what do we have to show for all the rhetoric about the brilliant future that lies ahead of us from Dr Fox’s rather considerable travels, taking him this week to Davos, which is not noticeably a place for negotiating trade deals? Still, no doubt it is quite pleasant to be there. This idea that an independent trade policy is an instant answer to all our problems is simply a mirage that will float before our eyes for years ahead as we trudge through these extremely complex negotiations.
Who are the biggest fish in that pool? There is the United States. President Trump has already said that if we go ahead with the Prime Minister’s deal, which of course the House of Commons did not seem terribly inclined to do, he does not think that there would be much to negotiate with us about anyway. Do we really think China will be more interested in negotiating concessions to get access to our market than it would to get access to the much larger European Union market? India has been pointed out. That will put the whole issue of visas and access for people from India to this country on the table in the negotiations. That will drive another great coach and horses through that very odd immigration White Paper, which we will discuss in about half an hour’s time.
I really do not think that the objections to having a customs union stack up very well. The amendment should be given serious consideration and should figure in the Bill when we send it back to the Commons.
Baroness Neville-Rolfe (Con)
My Lords, I am not convinced of the merit of this amendment. Actually, I have taken comfort from the words of the noble Lord, Lord Purvis of Tweed, on the detailed arguments. I know from my experience of operating in Turkey—both with retail outlets and as a source of agricultural, clothing and electronic goods for shops in other member states and in the UK—that it is not an entirely happy situation to be in a customs union and not in the European Union or a single market.
Turkey was at the time keen to get into the European Union properly, partly because of the problems that the arrangements caused. It is very frustrating not to have influence over the tariffs and rules at the border of your country. Essentially, you are a rule-taker, as the noble Lord, Lord Purvis of Tweed, acknowledged. I also recall the lorry delays that he mentioned—so not very frictionless. My recollection is that the rules on the common external tariff also restricted Turkey’s ability to renegotiate independent trade agreements with third countries. That is something that the noble Lord, Lord Hannay, acknowledged. If we go down the road proposed in the amendment, we could be caught up in the EU system of protectionism—which, sadly, I expect to increase without the UK at the table.
On a brighter note, I was glad to see this afternoon that Dr Fox, the International Trade Secretary, had agreed in principle to a UK-Israel agreement—so he has been busy in Switzerland. Rather than going down the road of the amendment, I would prefer one last push to negotiate a good deal with the EU. There is more to do, but we should keep trying, especially on the backstop. Some parts of the Government have clearly not given up, as we heard in the EU Committee today from the Secretary of State, Steve Barclay, which is why, of course, I am afraid I missed some of today’s proceedings.
Viscount Ridley (Con)
My Lords, to be brief, as some others have put it, and with the greatest of respect, as the noble Lord, Lord Kerr, would put it, perhaps I might probe the Labour Party’s position on this. I used to hear members of the Labour Party, including many of those on the Front Bench in another place, make the argument that the problem with a customs union was that it hurt developing countries because of the external tariff. I would like to know what has happened to the argument and why we do not hear it from the Labour Party any more.
Lord Liddle (Lab)
My Lords, I will briefly express my support for the amendment. It is very important in the present political situation that we in the House of Lords demonstrate that, on a cross-party basis, there is some way forward out of the impasse we are in. For that reason alone, I support it.
The amendment obviously is not a complete solution to the Irish border problem. We would also have to have some arrangement of regulatory alignment. That, of course, is why the withdrawal agreement contains about 60 pages’ worth of EU rules that will apply in Northern Ireland but not in Great Britain, and why there would have to be some regulatory checks between Great Britain and Northern Ireland to make sure that rules on technical standards, health and safety, sanitation and that kind of thing would be adhered to. For there to be no border on the island of Ireland, that issue would have to be addressed, as well as the customs union. But the customs union is a large part, once you have made that step—and I do not think it is too far a step—of going on to deal with the regulatory questions.
On Labour’s position, it depends who you listen to. I am a great supporter of Keir Starmer, who talks about it in a very practical and common-sense way. But the truth is that sometimes people talk about a customs union as though it would be a relationship of equality between the United Kingdom and the EU 27 —which would, in effect, be trying to give the United Kingdom a veto over the Union’s autonomous trade policy. That will not work. It is not a runner. We could, as a big economy, negotiate very strong consultative arrangements, but I do not think that we would be granted a veto under any circumstances. Since we are in a position where we have to clarify these things in the next week—that is why have spoken frankly about this—it is important to acknowledge that that aspect is a non-starter.
So let us agree this amendment, refine it if we can on Report, and show that there is a spirit of co-operation in this House, which unfortunately there is not elsewhere.
Lord Bates
My Lords, this has been a fascinating debate. The noble Lord, Lord Stevenson, was very brief and succinct in introducing it. I will try to be pretty much the same in winding up. With the right reverend Prelate’s presence here and his questioning of a customs union, this is one of those debates where, after the past two years, I am not expecting to create many converts. Positions have been stated with great eloquence by my noble friends Lord Patten and Lord Lansley, and the noble Lords, Lord Kerr and Lord Hannay, but they are not ones that have differed, because of the veracity of the arguments and beliefs that they hold.
The noble Lord, Lord Liddle, came up with a great line which I scribbled down. I hope I have got it correct, because of course I do not have Hansard. He said that “on Labour’s position”—which of course my noble friend Lord Ridley asked about—“I suppose it depends who you are talking to”. I think I am right; I do not want to quote him incorrectly. It was an interesting point, because it would be fair to say that the Opposition’s position has differed between a customs union, a permanent customs union and a comprehensive customs union. It has oscillated between the crucial words “a” and “the”.
The noble Lord, Lord Purvis, applied a great deal of forensic scrutiny to this. His conclusion, and that of his party, is that they would be in favour of staying in the customs union, which makes it interesting that he has put his name to this amendment, which talks about “a” customs union. I cannot believe that there is now confusion even in the Liberal Democrats about what might be meant by this.
Lord Purvis of Tweed
The Government’s position, already stated, is that they intend the future customs arrangement to be based on those aspects of the Northern Ireland protocol which require agricultural and goods regulatory alignment with the European Union.
Lord Bates
We have been very clear about this; we want a deep and special facilitated trading arrangement with the European Union which allows all the benefits of free trade while allowing us to take advantage of the new opportunities which are emerging. According to the EU’s figures, 90% of growth over the next 10 to 15 years will be outside the EU—in India, China and the United States. That is what we need to tap into. That is what we need to be focusing on. We need to have the freedom to negotiate those independent trade agreements. If you go for a customs union, you are going to surrender that opportunity, and we are not prepared to do that. You would also surrender the right to shape the rules that you are going to have to implement.
Lord Kerr of Kinlochard
A brilliant description of the disadvantages of being stuck in a backstop.
Lord Liddle
Surely the best alternative way of benefiting from the growth outside the mature economies of western Europe—remember, this is catch-up growth; it is not a criticism of the European Union—is to be participants in the EU and its extensive trade deals with the emerging economies of the world. Why would we have a stronger negotiating position as 60 or 70 million than as an economy of 350 million or 400 million?
Lord Bates
Because 17.4 million people decided that they wanted to leave, and that is what the Government are committed to doing. I want to be careful not to be flippant about the subject we are dealing with; it is very serious, and the positions have been well argued. Nor do I want to be disrespectful to people for whom I have huge admiration, such as my noble friends Lord Patten and Lord Lansley, and the noble Lords, Lord Hannay and Lord Kerr, whose expertise I respect. But the position of Her Majesty’s Government is very clear. We have a deal. We should take advantage of that deal. A customs union would have all the disadvantages with few of the benefits. That is the reason we do not accept the amendment.
Lord Purvis of Tweed
Before the Minister sits down, I wonder whether he could advance this clarity. The noble Baroness, Lady Neville-Rolfe, states that we have now agreed with Israel to roll over our existing trading relationship with Israel. Israel does not have a free trade agreement with the European Union, or with us now. It has an association agreement, which has been in force since 2000. That is part of the pan-Euro-Mediterranean cumulation on rules of origin. This means that if we are replicating our existing relationship with Israel, we are replicating the rules of origin relationship that Israel has with the European Union. It also has common rules of origin procedures with Turkey, so if the Government’s position is that we are simply rolling over all of our current trading relationships through an association agreement with Israel, it means that we are now going to be bound by common rules of origin procedures with the western Balkans, the Faroe Islands and Turkey in the pan-Euro arrangement.
I am not sure why the Faroe Islands is part of that, but the reality is—and this is the point I was trying to make in my contribution—that we have to be open. If you want complete independence of trading relationships in the way the world trades now, that is impossible, so the Government have to have some limitations on it. If it is replicating the Israeli agreement, it is replicating exactly the same rules of origin alignment that we currently have with Turkey, and Turkey is part of a customs union with the European Union. That is quite simple, too.
Lord Bates
The Committee will come to rules of origin shortly, but on that point, that is the reason why, in the agreement that we are proposing—the deal that is on the table—we propose that to ensure that trading goods between the UK and the EU remains frictionless in the UK, there will be no routing requirements for rules of origin on trading goods between the UK and the EU. What we are talking about with Israel is consistent with that.
Lord Stevenson of Balmacara
My Lords, it is impossible to summarise what has been a very wide-ranging discussion. It certainly ended up in a rather more heated and fetid atmosphere than I expected when we set off. I have to say to the Minister, for whom I have the greatest respect, that it is fine to listen to what he is saying about what we ought to be doing and how we should do it, but he should point behind him when he is talking, because we do not get the arguments in the same way.
We started off with a description of hell, and what it might be to be listening to the same debates and discussions. I think we have justified the argument that we have moved on. The interesting thing that I took from this debate was how positions are being nuanced and changed as we move forward. There is an attempt from all sides to try to find common ground, and I wish that had reached all of our speakers. We are in a place that might be redolent of hell, with the colours that surround us and the flames leaping around, but I actually quite enjoyed being here. I am bound to go to hell anyway because of my previous life, so if this is what it is like, I quite like the prospect. But not yet—not yet. I call on the aid of the right reverent Prelate at this moment.
So what have we got out of this? We have got a sense around the Committee that there is something here that needs to be pushed to the next stage, and the Government should take away from this that this is a matter that will not go away, irrespective of what happens next week. By the time we get to Report, I am sure this will still be bumping around. I hope that by that stage we will have picked up on some of the points made by the noble Lord, Lord Lansley. We are getting hung up on what we mean by “customs union”, when we should be thinking behind the name—thinking about the process. It may be that we are likely to be close to, if not necessarily aligned with, EU current practice—and we ought to be, because, as my noble friend Lord Liddle said, size matters in these negotiations. Size matters, and always will, in any trading arrangement.
We are not really talking about tariffs. Tariffs are probably the 20th-century problem. The 21st-century problem is the regulatory barriers, and working on services to try to ensure that there is proper and fair trading, and that the issues at the heart of negotiations are rights and responsibilities, and the opportunities for providing benefits all round—a sort of development agenda meets trade, and coming together for the benefit of both.
The short, sharp intervention by the noble Viscount, Lord Ridley, was the most difficult to answer. I hope that, if he has the time, he will come back for the next group, when we will talk about some of these issues in more detail, and I will be able to give him a response. However, the truth is that I am quite happy with where the EU has got to with some of these trade deals. They are very good, and they would not be achieved by any smaller country on its own. We must not lose them, whatever arrangement we finally come to.
Viscount Ridley
The noble Lord has mentioned size twice. Can he explain why Chile, which is a smaller country than the European Union, has more trade deals with bigger countries than the European Union has?
Lord Stevenson of Balmacara
Maybe Dr Fox has an analogue that we do not know about, hopping around. “I do not know” is the answer.
Lord Patten of Barnes
Perhaps I can help the noble Lord. One reason why Chile has such good agreements around the world is that the agreement between it and the European Union—which is a very good agreement—was negotiated by your humble servant, as well as by others.
Lord Stevenson of Balmacara
In a spirit of mutual congratulation, I think it best to say that on this occasion we will withdraw the amendment—but we will probably want to look at the debate carefully and think about the wording of a future amendment. The subject will come back.
Trade Bill
Wednesday 23rd January 2019
(5 years, 10 months ago)
Lords ChamberRead Full debate Trade Bill 2017-19 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 127-II(Rev)(a) Amendment for Committee, supplementary to the revised second marshalled list (PDF) - (23 Jan 2019)
“UK participation in EU’s Generalised Scheme of Preferences
It shall be the objective of an appropriate authority to take all necessary steps to implement international trade agreements which enable the United Kingdom, after exit day, to fully participate in, or replicate the objectives of, the European Union’s Generalised Scheme of Preferences (GSP) for low-income and lower-middle-income countries.”
Lord Stevenson of Balmacara (Lab)
My Lords, I sense there has been a bit of a change in the composition of the House—I cannot imagine why, because we have reached some of the more interesting elements of the Bill. Had the noble Viscount, Lord Ridley, who is absent, been present, he might have learned quite a lot. That will help me avoid the more sharply put questions.
Amendment 27 is a probing amendment in the sense that it is there to invite the Government to set out their plans, should they be necessary, in relation to GSP, the EU’s generalised scheme of preference. It is open to a wider range of issues, and in his dual capacity as Minister responsible for development, the noble Lord, Lord Bates, might well have a view that will add to our overall understanding of where we are. The noble Lord, Lord Lansley, has a similar amendment, although it is much more detailed and sharply drafted than mine is, and I look forward to hearing his comments.
It can be said in very few words that one of the things that one gets by being part of the EU is participation in schemes of the type that is being discussed here, which is an attempt to try to bring some sort of structure and order to the way in which trading relationships can sometimes impact on development activity and vice versa, by recognising that very often a good trading opportunity in a developing country is perhaps going to do more than any amount of aid, however well delivered and whatever focus it has. On the other hand, the impact of either favourable tariffs, reduced costs or support for various aspects of work on the trading side of that relationship can have quite a devastating effect.
It is to the credit of the EU—and I am sure that Ministers have been heavily involved in the shaping of the way this goes—that the GSP arrangement is being set up so that it is constantly monitored. We have recently seen the interim relationship of that. In short, the results are broadly supportive of the way the EU has taken forward this programme, with some reservations in the sense that it is probably too soon to say quite what some of the outcomes will be. It is recognising that there are longer-term benefits that will not be picked up by short-term measuring techniques, and of course there are dangers that come in relation to trying to focus too narrowly on some of the econometric figures without thinking about some of the wider social issues.
The GSP relationship, combined with Everything But Arms arrangements, is a way of seeing development happen in a constructive and progressive way, which is something that we support. In moving this amendment, I invite the Government to respond to the thoughts behind it. I beg to move.
Lord Lansley (Con)
My Lords, in following the noble Lord, Lord Stevenson, I am grateful for his kind remarks about my amendment. I was not required to produce any amendments and I produce relatively few but, by virtue of his responsibilities, he has to produce quite a lot of them so I think we will forgive him for the sighting shot that, in a sense, many of these amendments are at this stage.
The generalised scheme of preferences, for those who are reading our debate afterwards—I am sure that many will do so—is about giving preferential tariff reductions to developing countries to stimulate their economies and their exports to the European Union, as one of the world’s largest potential markets. It can be fairly said that it is something that we subscribe to and that we encourage. For that reason, in the Taxation (Cross-border Trade) Act 2018, the Government and Parliament have already legislated for a preference scheme in the future. Therefore, that is not the issue, which is why my amendment is structured in the way that it is. The issue is: how do we go about this? That is the point of Amendment 27. How far should the United Kingdom’s preference scheme—that is, the unilateral preferential tariff rates that we offer to developing countries—be structured in such a way as to correspond directly to what is presently the generalised scheme of preferences as reflected in EU regulations?
The starting point for this is that the EU regulations will last until the end of 2023. For the purposes of this debate, I am going to assume that we are not in a customs union with the European Union, because if we were that would automatically solve this problem. Therefore, we are outside the customs union and we have to make our own decisions about to whom we give a preferential tariff rate and when we vary from it. We did not have a debate here on the Taxation (Cross-border Trade) Act because it attracted financial privilege, so we are getting the benefit of that now. Quite a lot of the debate on the relationship with developing countries focuses on tariff reduction. That is important but, for the least developing countries, the objective is nil tariffs on—as it is expressed—everything but arms and ammunition. That is reflected in Schedule 3 to the Taxation (Cross-border Trade) Act. For the other developing countries—the eligible developing countries, as they are known—there is an objective to try to reduce tariffs to the fullest extent possible. That is already in there.
But of course the issue then is: under what circumstances do we depart from that? The fact that the GSP says nil tariffs does not mean that in all circumstances that is maintained. The European Union has not done this, but the regulation would permit the European Union to suspend the nil tariff, or indeed to withdraw the preferential rate, in respect of transgressions on the part of other states. That is a possibility where a country has flagrantly been abusing human rights. If a country chose to produce large numbers of goods for export to other countries on the basis of a flagrant disregard for child labour laws, for example, should one continue to offer a preferential rate? Many of us would say that we should not necessarily do that. We should then suspend the preferential rate in some circumstances where human rights abuses and the rule of law have ceased. The European Union has not permitted countries to be in the Everything But Arms GSP, so we have to make those judgments under those circumstances.
The point of my Amendment 65 is to say, as we proceed, that we should start with a scheme that conforms to the structure of the EU regulation, because everything is starting from the position of continuity—that happy word—but we would have the ability to move on. We may make our own judgments about the circumstances in which we would suspend or withdraw the preferential rate. It might apply in the circumstances I described. It might equally apply if we had to safeguard the industry of the United Kingdom. The same would be true in the EU, but we might choose to do it in different circumstances. For example, last week the EU applied a safeguard measure in relation to imports of rice from Cambodia and Myanmar. That may not be something that we in the United Kingdom would choose to do because we do not take the same view about rice production in this country as, for example, they do in southern European states. There will be differences and we will have industries to protect, but we do not necessarily have to follow the same approach as the European Union.
As a way of proceeding, my amendment would insert into the Taxation (Cross-border Trade) Act, under those circumstances, that the Government should come forward to Parliament, make a report and seek views before proceeding down the path of suspending or withdrawing this preferential rate, because we should be participants in that discussion.
There should also be an intention before January 2024—when the EU regulation expires—to look independently from the European Union at what our future structure on preferential rates should be. In my amendment I suggest that the Government should report to Parliament by the end of 2022 on their proposals, with a view to legislation being passed by the end of 2023 for introduction from 1 January 2024. Of course, EU competence has dominated this area of policy, but the time will come for Parliament to think about what our trade policy looks like in terms of unilateral preference rates for developing countries.
It is quite difficult even to work out the relationship between our structure of preferential rates and the EU’s. Simply to say continuity is probably misleading because I cannot actually find absolute correspondence between the benefiting countries under the EU’s standard generalised scheme of preferences, or what it calls its GSP+, which is for eight vulnerable countries. I cannot even find that we can correspond between that and what is set out in Schedule 3 to the Act. For Everything But Arms, the list is the same, so we know where we are with that. I think I found 28 EU countries that benefited from the standard GSP or the GSP+, but 43 countries that are intended to benefit from what is referred to in Schedule 3 to the Act as “other eligible developing countries”. The difference is obvious: the EU does not include formally the GSP countries which, by virtue of other agreements, have access to tariff reductions that are at least as good as would be available under the GSP—for example, it has association agreements with Egypt, Tunisia, Morocco and so on.
For us to replicate the EU’s GSP would mean significantly fewer countries having access to the GSP and to those preferential rates than would be the case in the European Union. I just say gently to the noble Lord, Lord Stevenson, that that is another reason why he and I will have to go away and think about our amendments again. It is not about reproducing the GSP regulation or the EU’s list. It is about ourselves arriving at a full list of the developing countries, particularly those which are not the least developing but countries eligible for the GSP that should get preferential rates but at the moment get them through other EU agreements. Those are not necessarily free trade agreements that will get rolled over. I am not aware that this is necessarily the case for all these association agreements; it may be for some, but not necessarily for all of them.
Therefore, I commend Amendment 65 to the extent that it raises the issue of having our own scheme, consulting on it and asking Parliament when we have to change the preferential rates. I do not commend it to the extent that I think it can be adopted at this stage, but I think we should come back to it. I hope Ministers will be willing to look at that and how they would go about managing the preferential scheme in the future.
Lord Fox (LD)
My Lords, I thank the noble Lords, Lord Stevenson and Lord Lansley, for bringing this issue to your Lordships’ House. We support greatly the spirit on these Benches. The noble Lord, Lord Lansley, used a contemporary example of rice. In another life a long time ago, I worked in the sugar industry for seven years. Of course, sugar is wrapped into this so deep that it is still embedded in there. On his point about the transition from us being part of a European scheme to going into a wholly United Kingdom scheme, I know that the pressure on that commodity alone would be huge, given the past relationships and previous problems that some sugar-producing countries have had within the European regime. That is just one commodity. His point is clear: that this is not a simple issue but one that requires a great deal of thought, but that thought must be had and is worth having. We support this process and will involve ourselves if necessary in how this gets taken forward. Clearly, we want to be part of a future regime that has these objectives, but the means with which to produce that are not necessarily as simple as they might look on first appearance.
Baroness Neville-Rolfe (Con)
With the GSP, the key thing is who benefits. In the past, some quite surprising people have benefited who perhaps do not benefit any longer, such as Mexico, Chile, South Korea and so on, which are now very rich countries. India was in there for a long time. It is important who is on the list.
I have some sympathy with the points made by my noble friend Lord Lansley. If we leave the EU, I believe that we should have more choice in which countries we help with tariff preferences. We should be able to take a more independent view, with an eye to our own history—for example, of the Commonwealth—and not necessarily just copy out the EU list. Obviously it depends on where we finally end up in our relationship with the EU, and I do not want to go into that, but if we end up having a certain amount of independence, that should apply to GSPs. I am not sure that this amendment should be in the Bill, but it is very good that we are taking this opportunity to talk about this useful vehicle for helpful the poorest developing countries that we all want to see develop.
The Minister of State, Department for International Development (Lord Bates) (Con)
My Lords, it is welcome to move from the group of amendments that caused maximum divergence to the group of amendments after dinner where there is maximum convergence. I think we all side with the way that the noble Lord, Lord Stevenson, led this debate by pointing to the immense benefits in achieving sustainable development goal 1, the eradication of extreme poverty by 2030. We are not going to do that by aid—aid is around £1.5 billion a year. It requires significant trade flows and therefore this is crucial.
I will make some very brief general remarks. Around £20 billion of goods a year are shipped to the UK from developing countries, accounting for around one-third of our clothing, one quarter of our coffee and other everyday goods such as cocoa, bananas and roses. This trade also creates jobs, helping people to work their way out of poverty. Consequently, I am pleased to confirm to the Committee that this has already been legislated for in the Taxation (Cross-border Trade) Act. My noble friend Lord Lansley might still have been on vacation when on 4 September I took that Bill through this House. Although the debate on it was brief, it was very good. I shall come back to that point later.
The trade White Paper confirmed the Government’s intention to provide, as a minimum, the same level of import duty reductions to all current beneficiaries of the EU’s GSP scheme as we leave the EU. I am also pleased to assure the Committee that Section 10 of the Taxation (Cross-border Trade) Act enshrines in UK law the obligation to provide duty-free and quota-free trade access for least developed countries. The Government will lay secondary legislation to set out these details of the scheme before we leave the EU if needed by March 2019, or at the end of the implementation period. In the future, we will look to improve the UK’s trade preference scheme by making it even more generous, simpler to attain and capable of working better for the poorest people around the world. Alongside this, our aid spending will continue to provide support and expert advice to help break down barriers to trade and to promote investment so that developing countries can take better advantage of these arrangements.
As the noble Lord, Lord Stevenson, mentioned, I also have the privilege of being the Minister with responsibility for economic development in the Department for International Development. It may be of interest to my noble friends Lord Lansley and Lady Neville-Rolfe and the noble Lord, Lord Fox, that in that context I am undertaking a review of how we might approach the opportunities to look at more beneficial trade and tariff-reduction packages and economic partnership agreements in future as we leave the EU. I would be delighted to take this conversation into the Department for International Development, for those who are interested, to meet officials so that we can delve more into some of the great expertise and ideas that we have heard today.
Lord Purvis of Tweed (LD)
The Minister’s commitment is very welcome. We know that we can take him at his word on that because he is very open and a very responsive Minister who is respected across the House. I will follow up a point made by the noble Lord, Lord Lansley. With regard to the 49 countries under the EU Everything But Arms policy and, according to the OBR, the 27 other low-income countries that the EU has defined, if on exit we are going to replicate the EU system we would also have to replicate the rules of origin system that comes with GSP+. GSP+ has distinct EU rules of origin requirements for those countries that are part of it. Is the Government’s intention to replicate the rules of origin criteria that the EU currently operates for them?
Lord Bates
I am grateful for the noble Lord’s question. His precise point is that we are aiming to replicate what currently exists, so we would take across the current applicable rules of origin into what we would be laying in secondary legislation before we leave the European Union. Once we have left—without a deal or, we hope, after an implementation period—we could devise our own scheme during that implementation period and be aware of the EU’s thinking. I know from serving on the Foreign Affairs Council that it has done some tremendous development work, particular with the post-Cotonou negotiations, as to how we fit. The current plan is that what is presently the case will initially also be the case for these countries.
Baroness Neville-Rolfe
Before my noble friend sits down, could he give me some reassurance about the wealthier countries on the list? Have they actually come off the list or is it our plan to make sure that the benefit of tariff-free trade is given to those who are worse off?
Lord Bates
Yes, and my noble friend Lord Lansley touched on this point. He talked about the treatment of different countries. We work from a World Bank list and an OECD DAC list of the least developed countries. As countries graduate—which is a normal procedure—they need to move to other agreements as well.
Lord Stevenson of Balmacara
My Lords, I am grateful to the Minister for his full response. We would welcome the opportunity to meet up with him.
We are converging on this point, though the noble Baroness, Lady Neville-Rolfe, is coming from a slightly different direction. She is hoping to see some quite quick change towards—I cannot think of the right word—a family relationship, involving Commonwealth and other markers which are not a feature of the other lists we have been talking about. It might make sense to try to work out where this is going.
We are among friends, so I can confess that I tried to do exactly what the noble Lord, Lord Lansley, did, which was to go back to the Taxation (Cross-border Trade) Act 2018 and try to work out where we were. I gave up, but he did not. I could not make out the list markers. The confusion comes because we are working from two different directions, as the Minister said. One is from a World Bank list of economic measures and the other is from a trading and development list which gives a different feel. Clearly, you get a different group of countries if you look at different indicators—not just poverty but the potential to export, the development status of their industrial arrangements and their other markets. We would have to think hard about all these. This does not vitiate the main point that it may not be necessary to put an amendment into this Bill, but it would be quite useful to have something where we, on all sides of the House, roughly understand the basis on which the Government are progressing. The Minister did say rather remarkably—but I hope it is true—that, whatever the timing, even if it were 29 March, they would be ready to make sure and clarify full details of what would be available to all the countries in scope on the GSP and on the Taxation (Cross-border Trade) Act approach. If that is true, he is obviously ready for the meeting and we are too. I beg leave to withdraw the amendment.
Lord Grantchester
“UK support towards an Environmental Goods Agreement
It shall be the objective of an appropriate authority to take all necessary steps to enable the United Kingdom, after exit day, to fully participate in and fully support negotiations towards an Environmental Goods Agreement at the World Trade Organisation.”
Lord Grantchester (Lab)
My Lords, I rise to move Amendment 28 in the name of my noble friend Lord Stevenson of Balmacara. I declare my interests, as noted in the register, on this amendment and on Amendment 30.
Amendment 28, which proposes a new clause, is a probing amendment to better understand the Government’s intentions in transposing or rolling over current EU trade agreements into UK law. Behind EU directives are policies and aspirations. Following on from the previous amendment, how far do these necessarily transfer over with this legislation? I point to the intentions specified under Clause 5(2) and Clause 3(3) that these trade agreements will mirror the existing EU agreements and that, where differences may occur, they will be specified. The relevant words are “any significant differences”, on page 4, line 26, and page 3, line 37. I ask the Minister to give the Committee a definition of “significant differences” and how we should interpret this. It is pertinent to many businesses and regions within the UK, as I shall draw attention to when we discuss Amendment 30 on geographical indicators. The Government may have a different interpretation that a trade agreement could affect existing and future trade.
One such issue relates to an environmental goods agreement, one of the ethical themes drawn attention to in our debate on Monday on Amendment 8 concerning international obligations. If the UK is to begin an independent trade policy, it is vital that sustainability is at the forefront of our intentions and agreements, including through a renewed commitment to the environmental goods agreement. It is important at this stage that everyone is familiar with the concept of environmental goods. They are not any particular product as such but more like a public benefit, in the same terms as the concept in the Agriculture Bill of “public goods”—not necessarily a profit-and-loss item to be bargained with. It is important that such environmental goods, as a policy background already in EU thinking to be transferred over on exit, do not get squeezed out of trade talks. At the very least it should be recognised that the EU has been a very good international forum for initiating these developments.
Although talks are currently on hold, the EU and 17 other participants of the WTO have indicated a willingness to negotiate an agreement to abolish tariffs on items used to achieve environmental and climate-protection goals. The idea, which unfortunately has lain dormant since 2016, has great potential and, despite the reluctance of some of the world’s key players to take the ambition seriously, there is hope yet that the agreement can be revitalised. Even in recent months we have seen positive signs that talks can return. In July last year, a white paper from the Chinese Government used previous talks on the issue as evidence of their commitment to sustainability. If talks are eventually going to be successful, and there is good reason to believe that they will be, an agreement would reduce and remove tariffs on environmental goods, including those aiding and abetting efforts to control air pollution, generate clean and renewable energy, improve resource efficiency, and manage and treat water waste and waste of all kinds. Such components aid our efforts at home to be more sustainable but will also help us to meet targets, ranging from the UN sustainable development goals to the Paris climate change accord.
Talks relating to the environmental goods agreement have stumbled, in part due to the lack of enthusiasm from some of our allies, but the core principle is one that the UK should get behind and re-energise. The UK should present itself as a champion of the negotiations, using our influence on the world stage to persuade those who seem reluctant to re-engage in negotiation. As the UK evolves into a separate entity from the EU, we should focus efforts on playing a central role in future negotiations with the vision to fully participate. I hope the Minister will agree and will assure the Committee that this is within the Government’s intentions. More specifically, I ask the Minister to tell us how the Government interpret “significant differences” and to assure us that the transposition of EU law will include the approach initiated at EU level towards trade agreements. I beg to move.
Baroness Young of Old Scone (Lab)
My Lords, I support my noble friend Lord Stevenson’s Amendment 28. The main objective of reducing tariffs on environmental goods in an accelerated manner is environmental, particularly the need to address climate change and the sustainable development goals, but an EGA also makes good economic sense. Among the benefits are reduced consumer prices for environmental goods. EGA tariff elimination can spur the uptake of energy-efficient goods, resulting in energy savings. I am sure the Minister will tell us that the EGA regulations at the WTO are not currently in a great place—or, indeed, in any place at all. We are told by those who espouse Brexit that we can and will show global leadership as a stand-alone nation. We would have been among those nations which support an EGA as part of the EU. Surely if we leave the EU, this is a good cause on which to start to show this global leadership role.
Viscount Younger of Leckie (Con)
My Lords, the UK Government support an ambitious environmental goods agreement. We believe that a high-standard environmental goods agreement would have three effects. First, it would enhance global access to clean technologies. Secondly, it would advance environmental protection. Thirdly, and not least, it would benefit UK workers, businesses and consumers.
Negotiations on the environmental goods agreement began in 2014 but stalled in 2016 due to disagreements over the scope of products to be liberalised and increasing global trade tensions. While the UK supports the objective of having an environmental goods agreement—and we have been a particularly active supporter in the WTO negotiations—I understand why the noble Lords, Lord Stevenson of Balmacara and Lord Grantchester, have proposed this amendment. I took note of what the noble Lord, Lord Grantchester, said. However, there is a reason we are not able to take this forward: it is already the objective of the UK to continue to support and participate in the negotiations on this agreement. That position will not change. It is not clear what “all necessary steps” in the amendment are, who would decide what those steps are, or what benchmark would be used to decide whether these legal conditions had been met.
I will attempt to answer the noble Lord’s question about significant differences. In our reports under Clause 3, we will be giving details and explaining reasons for all differences that have an effect on trade. There is no official definition, in fact. The noble Lord said that he is talking about the differences—let us be clear about this—in rolling over continuity agreements set out in reports which are prepared under Clause 3. If that does not satisfy the noble Lord, I am very willing to write a letter with the necessary legal ins and outs on this particular matter, but I hope with that explanation the noble Lord will be prepared to withdraw his amendment.
Lord Grantchester
I thank the Minister for his suggestions. It might be very useful to have a look at those, so that they are more widely known. I do not know how far they are already known or not, but I was unaware of them, so if he could write on that detail it would be significant. I thank him. I am pleased to have it confirmed that the intention and ambitions of the Government include the very point we wished to make with this amendment. With that, I am happy to withdraw the amendment.
“Involvement of judicial systems in trade disputes
(1) A trade agreement is not eligible for signature or ratification by the United Kingdom unless the agreement includes the provision in subsection (2).(2) Legal proceedings brought against the United Kingdom under investment protection provisions included in a trade agreement will be heard by the courts and tribunals system of the United Kingdom.”
Lord Stevenson of Balmacara
My Lords, in speaking to Amendment 29 in my name I will also speak briefly to the amendment with which it has been grouped: Amendment 56 from the noble Baroness, Lady Kramer.
At the forefront of my amendment is whether we should retain the rather disputed separate mechanism for resolving investor settlement disputes—this applies to rollover and new FTAs. The concept of ISDS is not new; it certainly predates us joining the EU in 1972. Over the years, we have had a very large number of trade agreements—some several hundred—which Members of the House will be aware of, and many of these contain clauses under which the ISDS was created. In the early days, it was done with some justification in some countries to try to ensure that investment from third parties—particularly private investment, which was obviously necessary to unlock the activity that was the focus of the trade agreement—could be protected in situations where political issues or other issues intervened. Given that the legal systems in some countries will not be regarded as being as well-developed as in other countries such as ours, it is not unreasonable to therefore concede that some sort of special protection was required. That is really where it came from.
I do not think that there is very much more to say about it, except that our argument is that these ISDS schemes are of a bygone age. They relate to a situation in the world that does not really exist anymore. It certainly does not apply to many of the countries with which we will be creating free trade agreements or rolling over existing arrangements. In so far as they have legal systems that we can respect, there should be no question that we should work with our own legal system and with theirs to reflect any requirement for the need to ensure that parties to the agreement can pursue the establishment of a tribunal and appellate mechanism for the resolution of investment disputes.
I should wait for the noble Baroness, Lady Kramer, to introduce her amendment, but in case she has any doubt at all, I do not support where she is coming from. I want to make it very clear that I am not alone in this: the most numerous of the very large number of submissions we received on the Bill were on ISDS. I am sure the Ministers are aware of that. It is worth thinking about the role that civil society more generally will play, but if just about everybody is saying that the Government should move away from these as a model and should think, as the EU is doing, about moving to a system that relies on existing tried and tested systems in the countries, this is something we should bear in mind. I beg to move.
Baroness Kramer (LD)
My Lords, I share one point with the noble Lord, Lord Stevenson, on this issue: many of the various systems for investor and trade dispute resolution are broken. A search is on for new, more effective mechanisms to deliver much more satisfactory resolution, particularly as trade arrangements become far more complex and encompassing, and disputes have much greater significance for the global economy.
The Committee will be aware that the WTO’s arbitration system is on the verge of collapse. It relies on a panel that includes a minimum of three judges and a maximum of seven. The panel, through death and retirement, is now down to three. The United States has made it clear that one further death or retirement will mean the end of the WTO’s arbitration mechanism—it will not agree to replace any retired or dying judges. That mechanism is now effectively teetering on the verge.
Many will also have been involved in the debates around TTIP when that was active in this House and will understand that the resolution methods contemplated under it created a great deal of concern that private companies—specifically American companies—would be able to use the mechanism to wade in and counter local law and local decisions. The structure under TTIP relied on arbitration panels chosen specially for the purpose, against which there was no appeal. They were not part of a traditional judicial system.
We do, however, have an example of a system that works exceptionally well for trade resolution: the European Court of Justice, working for the currently 28 members of the European Union. As Trade Minister, when I talked with the Chinese, the Japanese and a number of other countries with which we were trying to build trade relationships, it was very often in the casual relationships that the issue of dispute resolution would come up. They all spoke, with sad envy, of the system we had in the European Union, known to be incorruptible, fair and efficient, and to have judging panels of real intelligence that were then supported by the collective Governments. They kept wistfully saying what a pity it was that, on a global level, there is nothing that mirrors that.
This is why I differ from the noble Lord, Lord Stevens, who is basically saying that a British company with a complaint will go to the British courts, an American company will go to the American courts and a Japanese company will go to the Japanese courts. It would be hard to persuade anybody that they would be justly treated under those circumstances and that there would not be national bias. I can see this becoming an inhibitor to trade. I also believe that on trade issues generally we need to look to international co-operation and shared sovereignty solutions. We need to recognise that, frankly, the best example we have of trade resolution is the ECJ, and see what lessons and mechanisms we can pick out of that. This is relevant in discussing the continuity agreements as well as future agreements. As this House and the Minister will know, the European Union is now making dramatic changes to the way it structures dispute resolution, recognising the problems and criticisms around the existing system.
The noble Lord, Lord Stevenson, referred to the investor-state dispute settlement system. That is largely an ad hoc arbitration system, but it is in many of the EU’s various trade agreements. He will know, or certainly the Minister will know, that the EU is now migrating from that. In CETA, we have an example of the first new version of the European system: the investment court system. It is a permanent standing court with a panel of judges; it is not ad hoc; and it is two-tier, so there is an appeal mechanism. Interestingly, under CETA, the EU and Canada will collectively appoint 15 judges—five from the EU, five from Canada and five third-country nationals—who will hear cases on a rotational basis. It is therefore bringing in a much more multilateral dispute resolution system with a great deal of independence and the opportunity to create a much more broad template. There is an intention to migrate many of the existing EU trade agreements on to this system over the coming years, which is why the continuity arrangements pose real questions that have to be answered. In the continuity arrangements, are we copying over the rather unsatisfactory investor-state dispute settlement system? Are we going to try to migrate? It is going to be difficult. Look at the EU and Canada. You can see that the capacity to create a panel of 15 judges might be a little tricky if you were trying to do it simply between the UK and Canada. I do not know what sort of system the UK is looking at as it tries to establish a continuity agreement with CETA, but we need some answers on all this.
Lord Taylor of Goss Moor (LD)
If my noble friend will allow me to intervene, there is a really important point here. Many Members of both Houses have assumed that the WTO can be relied on as a backstop arrangement. But the Americans’ unwillingness to appoint new judges means that the WTO mechanisms are effectively being brought to an end, and that no reliance can be placed on the WTO as an alternative to the European Union mechanisms that she is describing.
Baroness Kramer
My noble friend is absolutely right. One of the frustrations when people talk so blatantly about WTO rules is that the United States is working very hard to undermine the entire structure of the WTO and is threatening to leave. Talk about timing: they hold up and pray in aid a system that is on the verge of crumbling. It is hard to see how the WTO rules will have ongoing force and substance when there is no dispute resolution mechanism available. It could happen any day; with elderly judges, all it takes is one death or retirement. This issue will not stretch out into the future; it is a current and immediate problem that has to be dealt with. In this House we often try to explain that the WTO has severe limitations and real risks, but apparently Brexiteers’ ears are closed to those concerns. I very much agree with my noble friend.
The Minister of State, Department for International Trade (Baroness Fairhead) (Con)
My Lords, first, I reassure your Lordships that the powers in the Bill will not be used to implement investment protection provisions, because such provisions in trade agreements do not require domestic legislation. I am grateful to the noble Lord, Lord Stevenson, for his explanation of the rationale behind Amendment 29, in his name. However, it would mean that no future free trade agreement could be signed or ratified unless any claims brought by foreign investors against the UK were heard by UK courts or tribunals.
The amendment overlooks the fact that foreign investors already have significant rights to legal redress in the UK—for example, through domestic law and normal procedures such as judicial reviews or commercial arbitration. As I think noble Lords would agree, UK courts are regarded internationally as reliable and independent. The amendment would preclude the possibility of disputes being resolved through ad hoc international arbitration tribunals, which is the internationally and currently accepted means of investor-state dispute settlements—ISDSs—in any future free trade agreement. So requiring investment disputes to be heard by UK courts or tribunals in all instances could undermine a framework that has successfully supported UK investors in many countries worldwide for, as the noble Lord said, a long time. In fact it has done so for the past 40 years.
The ISDS system does not allow other countries’ courts to have jurisdiction over matters that UK courts could determine themselves. Instead, it is independent of both states’ legal systems. It is important for foreign investors to have an independent means of redress, as they may be more susceptible to certain risks such as discrimination, as the noble Lord, Lord Stevenson, said. ISDSs allow claims to be brought for potential breaches of obligations of the type that the noble Baroness referred to—expropriation and discriminatory practice, et cetera.
The UK expects other countries to treat British businesses operating abroad as we treat investors in the UK. Although I do not believe that this was intended, it is likely that if this amendment were adopted, any future partners would insist on reciprocal provisions, meaning that any disputes brought by UK investors against a host state might also be required to be heard in that host nation’s courts.
I turn to Amendment 56, tabled by the noble Baroness, Lady Kramer. Accepting this amendment would mean that for any future trade agreements to be signed and ratified, they would have to contain an agreement on the parties pursuing a multilateral investment tribunal system and an appellate mechanism for the settlement of investor-state disputes. Before I go on, there is an issue with the WTO appellate court; I think that the members of the WTO are trying to resolve it. It is not directly relevant to the ISDS as it is a different system, so in the interests of time I will stick to ISDS.
Not all trade agreements cover investor protection and dispute settlements. We therefore do not think it appropriate to require all trade agreements to include a commitment to pursue a multilateral investment tribunal system. In fact, to introduce such a requirement might hinder the development of our trade policy. As I mentioned, ISDSs have provided UK investors overseas with a means of redress which is independent of and outside the host state’s national courts. The UK has over 90 bilateral investment treaties which include these provisions.
The noble Baroness, Lady Kramer, is absolutely right that reform of ISDS is under scrutiny. It has taken centre stage in recent years, frankly, with many international fora taking a keen interest. The UK supports the reform agendas which, as she said, focus on ensuring: fair, efficient and cost-effective outcomes of claims; high ethical standards for arbitrators; and increased transparency of hearings. We in the UK have supported the EU’s mandate to open negotiations to establish a multilateral investment court, or MIC, which would be a permanent body created to hear investment disputes. The CETA with Canada is currently the only EU FTA containing that investment court system. We are working with our Canadian partners on its provisions as part of the broader work on trade agreement continuity. This includes the question of our future approach to investor-state dispute settlements.
Lord Purvis of Tweed
The Minister mentioned Canada and it was interesting to hear that. May I seek clarification? I raised this issue on Monday in Committee with regard to Singapore. As a consequence of the court of justice judgment in May 2017, the Singapore agreement was made into two: a stand-alone free-trade agreement and a separate investment protection agreement. These draft trade and investment agreements were signed on 19 October last year. What is our position in the UK on seeking to roll them over? I think the Government have stated clearly that they will roll over the free trade agreement. Do they intend to roll over the investment protection agreement also, which is quite distinct?
Baroness Fairhead
My understanding is that it does not require any further domestic legislation. I will write to the noble Lord if that is in error, but I understand that it is already in domestic legislation. If that is incorrect, I will write to him and put a letter on file in the Library.
Baroness Kramer
I understand what the Minister is saying, but as she addresses that issue, would it be possible to understand what will happen with the other continuity agreements? Singapore is just the beginning. We will be seeing others moving over to this split—a free trade agreement here, a dispute resolution system there—and it is unclear whether we will have negotiated to follow that pattern and to mirror that split of the new structure, or whether we will remain tied into the old structure while the EU moves on to the new one. There must have been an internal decision somewhere in government on how we deal with this.
Baroness Fairhead
I am happy to meet the noble Baroness and the noble Lord with officials to go through the detail of this, and then we will prepare a letter for the Committee if required. The discussions on whether the UN Commission on International Trade Law—UNCITRAL—should seek to establish a multilateral investment court are in their preliminary stages; there are no firm proposals on the structure, governance or cost. We are actively engaged. However, discussions on that possible reform are at an early stage. We should not prejudge the outcome of that process, because to do so could preclude the UK from making a later judgment when proposals are more advanced. We look forward to working with international partners. In addition to the discussion I offered, I welcome discussing this topic further. There are a range of views on this question. At this stage, should the UK require a universal commitment to pursue a multilateral investment court in all future agreements, that could result in the loss of our negotiating space.
In respect of the true aims of this Bill and the resolution systems that are already in place, and given our commitments to discuss MICs, I ask the noble Lord to withdraw his amendment.
Lord Stevenson of Balmacara
I am grateful to the Minister for her full discussion of these issues. As she started I was thinking that we could have got a better result if we had drafted Amendment 29 in the positive rather than negative tone—to make it optional in, rather than to restrict out, which was the main complaint she had about it. As the argument has extended, I can see there is a lot more going on here than we were aware of at the time we drafted it. I am sure that I share with the noble Baroness, Lady Kramer, the idea that if we can have a discussion about all the various things going forward, we might be able to have a better understanding of where, if at all, there is any need to move on that.
Having said that, the Minister mentioned that there was a lot of interest in it. I stress again that this is the one single issue that I have had the most correspondence about. Just about every group involved in trade and development has picked this as its number one issue. It is good that work is being done on it, in the sense that one is not trying to constrain good and effective systems that arrive at having a fair, efficient and highly regarded court that will have all the details and be able to deal with the various aspects of it. Clearly, we do not want to disadvantage other countries in relation to anything we might be doing. These are the pieces in play, as it were, and it is a question of trying to get confidence from Ministers and officials that things are moving forward.
In some ways—although this may be the wrong line to follow—it is quite like the discussions on the Unified Patent Court. There is a person not too far away from the noble Baroness who has quite a lot of detailed experience of that. That is an ad hominem—I do not know what the Latin is—but it relates to a particular issue: patentem. It has a link into but is not part of the European Court of Justice, which would play back to the noble Baroness, Lady Kramer. It might be too elegant a solution, but I wonder if that might be something we might also pick up, because there is something in there that might square all the circles. With that, I beg leave to withdraw the amendment.
Lord Grantchester
“Geographical Indications
It shall be an objective of an appropriate authority to take all necessary steps to implement an international trade agreement which ensures mutual recognition of Geographical Indications in the United Kingdom and the European Union.”
Lord Grantchester
Amendment 30 is a probing amendment. It may not be of great intent but it is of wide importance to rural areas and the food chain in general. Following on from my earlier amendment which sought to understand the rollover nature of EU trade agreements into UK law, this involves the protection of geographical names designating agricultural products that have been in existence for more than 100 years. This is where the Minister’s definition of “significant differences” will be most helpful.
At present, as an EU member state, the UK falls under three specific geographical product designations. The first is the protected designation of origin—PDO—such as that for Stilton cheese, of which I know the Minister is well aware, which is designated to cheese-making dairies in three east Midlands counties. Secondly, there is the protected geographical indication framework, such as for West Country beef and lamb. Thirdly and lastly, there is the traditional specialities guaranteed framework, such as for traditionally farmed Gloucestershire Old Spot pork. These co-ordinated efforts have given some of the UK’s most well-respected and internationally renowned produce the legal protection it deserves. From each corner of the UK, British produce of world-class quality with links to a certain area or using certain traditional methods has had its reputation enshrined, preventing outside manufacturers reproducing or passing off the product and selling it as a regional one. There is great concern that these protections will be lost post Brexit.
I ask the Minister: what is the status of the recent EU-Canada trade agreement that has been mentioned throughout our proceedings? The noble Lord, Lord Purvis, brought up this issue under Amendment 18, and the noble Baroness, Lady Jones, did so under other amendments. Under the Comprehensive Economic and Trade Agreement—CETA—no UK geographical indicator was given protection and only two European indications were included. What was the role of the UK Government in negotiating this EU agreement? Will it be included in the rollover of EU agreements, or will it be challenged or disagreed to by Canada as a counterparty in any rollover? The ink is barely dry on this new agreement. What the Minister has said so far needs to be clarified further in this respect.
With the UK leaving the EU, the position of the food chain, including retailers, in rollovers, and the relative importance given to the issue by the UK Government, these matters will impact on the ability of UK products to be designated foodstuffs under the GI schemes. I understand that the Government wish to set up a UK register of designations after exit. Will these be exclusively British? Will it include the register under the EU scheme, including those products registered by non-EU producers who also use the scheme as a marketing tool, aiding their promotion within the EU? How comprehensive will this register be? It is important to recognise the high percentage of UK trade that goes to the EU. Will the UK Government seek to enable products designated on the UK register to be considered for inclusion on an EU register? Will the Minister confirm that reciprocal arrangements will be maintained without any sunsetting? She will recognise the importance of Welsh lamb exports to the economy of north Wales and the whole of Wales.
If I may, I have some further issues about which I would be happy for the Minister to write to me. First, there will be various transitional costs, such as branding and labelling. As changing labels is a resource-heavy activity, can she give reassurances that changes will be considered together in future regulations? Secondly, can she say what will be the resolution scheme or body that hears disputes? Will the future TRA adjudicate immediately on these PDO issues or will there be a role for the First-tier Tribunal, which presently presides over branding issues? These and other issues are not important for the proceedings tonight, but I merely flag up how essential it is to businesses, especially SMEs, to be aware and informed of the changes happening, even on transition.
The Minister will be aware of the wide benefits that these designations bring to the food chain—the reduction of food waste, the provenance and security for consumers, and the quality of the product—and export markets across the world, as well as the obvious financial and employment benefits. I would welcome confirmation that this amendment is among the objectives of the Bill and future trade arrangements, taking at face value the task of the Bill merely to transfer existing EU agreements into UK law. I beg to move.
Lord Tyler (LD)
My Lords, I am a signatory to this new clause and I am delighted to endorse everything that the noble Lord, Lord Grantchester, has already said. By way of background, I was responsible for my party’s policy when some of these issues were addressed in the other place when I was responsible for agriculture, food and drink. I also represented a Cornish constituency and I shall come back to that in a moment.
It is very dear to my heart, as I know it is to the Government’s Chief Whip, that we should recognise the particular contribution of the agriculture industry in this country and that we should recognise that it is going to go through some very difficult times in the near future if what is projected comes to pass. In those circumstances, it is extremely important to address the issues to which the noble Lord has already referred.
Protected geographical status was introduced throughout the EU in 1993, when I had that responsibility in the Commons. I was especially delighted when the schemes were updated under Regulation 1151/2012 during the coalition Government. This has been a great success by Ministers of all three major parties—we should recognise that. It is instructive to see how influential UK Ministers have been on an issue such as this when they have played a full part in the EU. It has also been a very interesting example of how the EU has provided essential trading encouragement and protection for uniquely significant food and drinks products from all parts of the United Kingdom.
This is not nostalgic parochialism, as I think the noble Lord has emphasised. It has real economic marketing benefits, as well as protecting our producers from cut-price and inferior competitors. The UK could never have achieved anything like this benefit without the support of our European partners.
There are 65 products with protected status under this scheme in the UK. They are designated to protect the reputation of regional products, to promote traditional and agricultural activity and to eliminate non-genuine products of inferior or different character that may mislead consumers—I will come back to that point. Obviously, I will not go through all 65 products at this time of night, but I will take one or two examples: the traditionally farmed Gloucester Old Spot pork, which I know extremely well because I have neighbours who produce just that, introduced by the coalition in 2010, West Country lamb and beef, Dorset Blue cheese, Single Gloucestershire cheese and Export Jersey Blue. There were very significant improvements to the marketing opportunities for those products, but also, much more generally, for West Country farmhouse cheddar, Cornish sardines—again, dear to my heart—and Fal oysters in 2013.
However, we have to be very careful about the use of these descriptions. As the noble Lord said, one of the particular characters is protected geographical indication. It happens that in my constituency we had one of the best vineyards in the whole of the United Kingdom, the Camel Valley vineyard. That is not in England, it is in Cornwall—and as all Members will know, Cornwall is not part of England, it is not an English county. I have a particular attraction to the wines from that vineyard, not just because it was local to my constituency but because one of the partners of that extremely enterprising vineyard was Annie Lindo, who stood for the Labour Party against me in a general election. She did not win, but the Guardian said that the wake would be one of the best in the country—and it certainly was. The vineyard now produces an excellent rosé as well as sparkling wine.
Cornish clotted cream was another big issue—and I will come to another very important dish in a moment. I remind the House that the difference between Cornish and Devon clotted cream is that Cornish clotted cream is so good that you must have it on top of the jam, while in Devon you can put the jam on top—otherwise, you do not get enough.
Cornish pasties were another big issue. My noble friend the then honourable Member for Truro will recall that it was on St Piran’s Day, I think, that one of our coalition colleague Ministers announced that the Cornish pasty was to be protected. That is a classic example, because of course the recipe for a Cornish pasty is quite precise. It is not permitted to add carrots or peas, let alone minced beef or lamb; it must be skirt of beef. I have had pasties in different parts of the world. Indeed, a part of Lithuania produces its own pasty, originating in the Middle East—but it is not a Cornish pasty. This is a serious issue. I ask noble Lords to recognise that this can be of huge importance to not just small enterprises but substantial ones, too.
Lord Taylor of Goss Moor
I think that Stilton is wonderful, but the Cornish pasty is much more important. The issue is that these protected designations are often extraordinarily important to some of the poorest rural economies in the country, as they are in other parts of Europe. At a time of enormous uncertainty for such economies over how Brexit will progress, whatever one may think about it, I think my noble friend would agree that it is extraordinarily important that we ensure that the protections for these specific local and regional products, which underpin those regional and very poor economies, are maintained. That is at the heart of this proposal.
Lord Tyler
My noble friend is absolutely right. The important point is simply this: here is a truly successful scheme where UK Ministers have taken the initiative and grabbed the opportunities in the EU. We cannot allow it to disappear. The threat to a large number of enterprises would be disastrous. It would set such a bad example to the agricultural and food industry if we allowed the scheme to be diluted or dissolved in any way.
As we know, the Bill and the proposed new clause are caught up in the rather absurd contingency planning for the crash-out, no-deal scenario that the Government now insist Parliament must play with, despite the dire warnings about how awful such a result would be. If we are not careful, not carrying forward this very good scheme would be disastrous. Indeed, it would be tragic if this excellent scheme, in which successive Governments have invested so much energy, initiative and political capital and on which so many UK producers rely, were lost in the wash. The threat is there.
Of course, the ideal solution would be for it to continue exactly as it is now, with full UK membership of the EU—but I suppose we have to admit the possibility that the ideal will have to give way to the best available replication: hence the proposed new clause. In the words of the 20th century’s most authoritative actuary, Frank Redington, we are faced at the moment with an “expanding funnel of doubt”. We cannot afford for there to be any doubt about the success of this scheme and the necessity of its continuation. The best we can do is to insist, through the amendment, that we do not throw out this precious baby with the bathwater.
Baroness Kramer
My Lords, my son lives in Kent. I enjoy giving sparkling English wine from an excellent local vineyard as a present to various people, so I am slightly put out to understand that some local campaigners for Brexit have been urging vineyard owners to look forward to the day in late March when they will be able to call their product “champagne”—apparently with the Government’s backing, they have been assured. It is important that we understand the reciprocal nature of an arrangement like this. Therefore, to feed the expectation that we will keep our designation but remove it from other people is highly dangerous, and I suspect that the Minister sitting on the opposite Bench will have heard some very similar language.
Baroness Fairhead
My Lords, the Government see GIs as extremely important, and we are working to ensure that existing UK GIs will continue to be protected in future. I note the comments of the noble Lords, Lord Tyler and Lord Taylor, about the importance to specific rural economies. I could not agree more. They play a really important role in some very remote economies. For example, lest Scotland be forgotten, I know that the Scottish salmon industry directly supports 8,800 people, mainly in coastal locations. I hope my words today will offer noble Lords significant reassurance on a number of the points raised.
Baroness Kramer
I will be asked this question by the sparkling wine producer. Will Champagne, for example, need to apply to the UK for protection of its name, or will this carry over?
Baroness Fairhead
I was just coming on to that point: the future protection of UK GIs in the EU and then the reciprocal. We have heard loud and clear the desire of UK GI producers, and I can assure noble Lords that we are seeking to make this happen. At the time of this amendment being tabled, I believe there was no public statement from the EU on the future of existing GIs after exit. Since then, the European Commission has publicly stated, in November 2018, that:
“EU-approved geographical indications bearing names of UK origin … remain unaffected within the EU and therefore continue to be protected in the EU”.
This is consistent with what has always been the UK’s understanding. We expected that existing UK GIs would enjoy continued protection even after exit, because the current legislation means that the protection is indefinite unless specific grounds for cancellation are met. These grounds do not include removal from the EU. UK GIs will therefore continue to have the same level of protection as other third-country GIs protected in the EU. They are protected by virtue of being on the register, having earned that right by successfully passing the EU scrutiny processes. That protection will remain unless the relevant entries can justifiably be removed.
Lord Tyler
The Minister has been very kind in giving us so much detail. Do I understand that the EU has guaranteed that the reciprocal arrangement will continue if by any chance there is no agreement? What happens if one of the other countries challenges that designation—that protected status—and we are no longer a member?
Baroness Fairhead
As I stated, the protection is indefinite unless there is a justifiable challenge, which would take an enormous amount of time—and that does not include leaving the EU.
The EU needs to comply with the TRIPS agreement in relation to how it handles GIs, and the EU member states are also bound by the European Convention on Human Rights. In terms of future protection of the GIs in the rest of the world, we are currently working with global trading partners to transition those EU FT agreements, which also include obligations on the protection of GIs.
Regarding the protection of EU GIs in the UK—I think the noble Lord was talking about reciprocal arrangements—should we reach a withdrawal agreement with the EU, existing EU GIs will be provided with the same level of protection as now until the future economic relationship agreement between the UK and the EU comes into force or becomes applicable and supersedes. The potential long-term protection of EU GIs in the UK would therefore be determined as part of the negotiations under the future economic partnership. It is key for the Government to retain different options to give the flexibility needed successfully to conclude these negotiations.
Baroness Kramer
I did not understand this: so if there is no deal, the EU has given a guarantee that it will protect UK GIs—and its system would require it to do so—but the UK has given no guarantee that it will protect EU GIs or those of any other country. Is that correct, unless it goes forward into the continuity agreement?
Baroness Fairhead
The departure from the EU is just between the EU 27 and the UK. It is true that, legally, UK GIs are protected under EU law indefinitely and in the UK the matter is subject to negotiation under the FEP.
I have assured your Lordships that we understand the desires of UK GI producers for continuity. We will continue the protection in the UK, and the public statements of the European Commission give us assurance. If this amendment passes, it would remove the flexibility necessary for the UK’s negotiating position to successfully build new trade relationships with the EU. I believe that a number of my answers addressed the questions raised by the noble Lord, Lord Grantchester. If he feels that they have not, I am happy to write to him, but I ask him to withdraw his amendment.
Lord Grantchester
Following up on the assiduous questioning by the Liberal Democrat Benches, I entirely understand what the Minister is saying about the EU and the UK and that the position will be maintained indefinitely going forward. However, can she clarify the situation of the two registers and how reciprocal they will be? Will it involve two applications from a UK producer, one to the UK register and one to the EU register, or will reciprocity maintain throughout, such that when they appear on the UK one, they will necessarily appear on the EU one at the same time? Will there be one system with two applications, as it were, both inside the EU when the UK is within it and outside the EU when the UK leaves? I hope I have made myself clear on that point.
Could the Minister say anything at all about the appeal process—the dispute mechanism—or will that be included in her letter to me on the more erudite questions I have asked her?
Baroness Fairhead
My answer on the application procedure is that there will be a very similar procedure of application when the UK leaves the EU. There will be two processes that are very similar, but equally the UK will have to comply with TRIPS and with the European Court of Human Rights.
I just wanted to add a word about the CETA agreement without taking too much time. There are no UK GIs recognised in the CETA agreement. That was because Scotch whisky already had protection in Canada. The final decision on which GI products were submitted in the trade deal negotiations was made by the EU in an agreement negotiated with all parties. On leaving the EU, the UK will be able to take back that decision-making, but I am happy to confirm that and I will write to the noble Lord on that subsequent point. On that, I invite him to withdraw the amendment.
Lord Grantchester
I thank the Minister for all her clarifications. They have been very helpful. I also thank the noble Lord, Lord Tyler, and his colleagues on the Liberal Democrat Benches. I realise that Cornwall is a very long way away from Merseyside and Cheshire, but I will have to check my passport arrangements. I do know that Cornish people are always very eloquent, and I thank him for all his comments. Having said all that, and understanding the utmost importance and gravity in which this subject is held dear to the Government’s heart, I beg leave to withdraw the amendment.
Trade Bill
Wednesday 30th January 2019
(5 years, 9 months ago)
Lords ChamberRead Full debate Trade Bill 2017-19 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 127-III Third marshalled list for Committee (PDF) - (28 Jan 2019)
“Rules of origin
It shall be the objective of an appropriate authority to negotiate as a term of all international trade agreements implemented under section 2 that goods subject to the agreement which have originated in the European Union shall be treated as if they had originated in the United Kingdom.”
Lord McNicol of West Kilbride (Lab)
My Lords, Amendment 31 is a short amendment but an important one. This is my first Bill and first amendment from the Opposition Front Benches in your Lordships’ House, so please forgive any mistakes from the outset.
Nowhere, as far as I can see, are rules of origin mentioned or dealt with in the Bill. This is worrying for a number of reasons. Most importantly, rules of origin will have a huge impact on the UK’s efforts to replicate our current EU trade agreements with other countries. Rules of origin are about how we define where a product or products really come from, and what “Made in Britain” actually means. It is important to the Bill because, if we are to take the Government at their word, this is just a Bill to allow the rollover of existing trade agreements—agreements that we currently have because of our membership of the EU and customs union. Without changes, rules of origin locally should be expressed in exactly the same way as they currently are. My concern is that they will not be. Post Brexit the EU will no longer be classified as “local”. The UK will be the new “local”. So a new definition will need to be written into these rollover trade deals, where “local”—which until leaving the EU meant inside the whole of the EU—will now mean not just the UK but the UK and the rest of the EU.
The issue of rules of origin is inextricably linked with our membership of the customs union. The big advantage now of being inside the customs union is that no tariffs or taxes are placed on imports or exports of goods traded between member states. Fulfilling the country-of-origin principle ensures that products can enjoy zero tariffs as part of free trade deals if they meet the requirement: conversely, if they do not, they will not. To give a practical example, trade deals in the car industry usually require about 55% of the components of a car to be considered as local. But most cars made in the UK have just 40% of UK-only content. If we then look at the fact that many of the subcontractors source many of their parts from abroad, a UK-made car could be less than 30% made in the UK. This is improved and passes a 55% threshold due to the fact that other manufactured parts of the car come from EU countries, currently classified as local. I ask the Minister: when we leave, how will this be addressed in each of the possible exit scenarios, as this is pertinent to the rollover of existing trade agreements? I also ask the Minister to clarify, if amendments need to be made to the text of existing trade agreements, how parliamentary scrutiny of those changes will be handled. I beg to move.
Lord Purvis of Tweed (LD)
My Lords, I congratulate the noble Lord on moving his first amendment to a Bill. It does not get any easier—I do not wish to offer any false reassurance—but I happily concur with his remarks in moving the amendment. I have little to add except to reinforce the point that, for the UK in particular, the majority of our imports from our biggest market and an even larger majority of our exports are intermediary. They include components that are from a number of different countries and not from here.
This issue was raised briefly with the Minister on the cross-border taxation Bill. It is the complexity not just of the components but what is necessary to ensure that many UK exported goods and our imported consumer goods have a seamless transaction process. It is less about the tariffs applied and much more about the regulatory aspects and checks that will be necessary, which I shall turn to in a moment. Therefore, for our key sectors—the noble Lord mentioned automotive, but for wider engineering and overall production and for our exporters— this issue is critical.
I will cite one example from HMRC’s advice to businesses that is close to my heart, living in an area that has a rich tradition of manufacturing in textiles. It shows some of the complexity when rules of origin have to be applied. Each business has in effect to do its own certification. The advice states:
“For example, yarn spun from non-originating man-made fibres in France”,
would not be considered as originating within the EU for preferential purposes when considering whether rules of origin apply.
“However, cloth woven from that yarn in the UK would be an EU originating product, just as if the weaving had been done in France or Germany”.
That is one tiny example of where, if we do not have a customs union with our biggest market, we will have difficulty with rules of origin with our largest market and then, as we move to trade with other countries outside the customs union, we will have difficulty in deciding which are applicable for other preferential or other trade policies.
That is part of the complexity that leads to Amendment 51 in my name, which is in the view of these Benches necessary to align with our biggest market in order for us to exploit trade with other markets. We need to triangulate as little as possible, which seems to be what the Government seek. The best way to do that is through these arrangements. I understand that there is tacit agreement from the Government on this point, because the announcement last week of an in-principle agreement with Israel to roll over our agreement means that it seems that the United Kingdom is in principle considering what is in effect a rules of origin regime with the EU, the EEA, Switzerland, the Faroe Islands, Morocco, Tunisia, Egypt, Jordan, Israel, Montenegro, Bosnia-Herzegovina, Serbia and Turkey—all countries that have in effect a rules of origin regime.
It would be helpful if the Minister could clarify the Government’s intention for rules of origin in the existing rollover agreements and how they consider the future. However, even if we operated under such a regime, necessary checks and certification still have to be done electronically; each exporting company has to apply its four-digit tariff heading and carry out its own checks on whether rules of origin are being complied with. If we are to have a separate anti-dumping and corrective measures system—which, incidentally, the Government promised us for consideration before the final stages of the Bill—and if we are to have a preferential rules of origin system for developing countries, we will have to have some form of check system to ensure that those countries comply with it. It is one thing to say that we will have an electronic system for our closest trading partner—but how will we know that it is not being abused by other countries that wish to circumvent it?
Up to the Lords stage, the Government said that the language as set out in these amendments would necessarily tie their hands and weaken their negotiating flexibility by having them take all necessary steps—but this is no longer the Government’s position because we see that language in Clause 6. This is now government language, where it relates it to the European medicines regulatory network. The Government seemingly do not intend to bring forward any amendments to delete that from the legislation, so if they do not then that is the government language. That means that the Government should not have any problem with accepting this language.
Secondly, the Government said, prior to yesterday, that it would be inappropriate for Parliament to set a mandate for how the Government should take forward negotiations. That is clearly no longer the case because, as the Secretary of State for Exiting the European Union and the Prime Minister herself have said, Parliament has set the Government a mandate with regards to the Northern Ireland protocol. So there is no barrier to the Government accepting the language of these amendments. As to the necessity of them, it is very clear that this is what most of the industrial sectors of this country are seeking.
Lord Lansley (Con)
My Lords, if I may add something to this group of amendments, first, I say well done to the noble Lord, Lord McNicol. He passed the first test: one of the Opposition’s central jobs is to know which subjects should be raised in Committee and make sure that they are raised. He has done us a service by doing exactly that.
Turning to these two amendments, neither is practical as drafted, but we can probably leave that to one side and focus on what we want to achieve on rules of origin. The first reason it is not mentioned in detail in this Bill is that Section 17 of the Taxation (Cross-border Trade) Act effectively puts the rules of origin requirements into law. They are the same, as far as I can see, as would apply generically to rules of origin under the revised Kyoto convention. The country of origin must be identified as that country or territory in which the last substantial process took place. But that does not really answer the point.
This is where we come to the existing international trade agreements that we might roll over. They will have been constructed on the basis that any processing that took place in the United Kingdom was processing within the European Union. We cannot assume that, when these international agreements are rolled over—whenever that will be, but a couple of years from now, I hope—products originating in the United Kingdom will be defined as including processing inside the European Union. We will have become a third-party country. That is unless, in the form that they rolled over, the countries with which these agreements have been made, and with which we enter into our future agreement, accept that origination should be cumulated between us and the European Union.
If I am asking a question of my noble friend the Minister it is: can we look to cumulation between the United Kingdom and the European Union as being a feature of the rollover agreements, such that, from the business point of view, what they have understood to be the situation prior to exit day becomes the situation after exit day? That is essentially what we are looking for.
Declaring an interest, 28 years ago I was deputy director-general of the British Chambers of Commerce. That movement was and is responsible for the issuing of certificates of origin, so it understands this rather well. Of course, that applies outside the European Union at the moment. If we are in a customs union, all those problems go away, but we had that debate on day two of Committee.
If we must deal with this issue, I say to my noble friend that I hope the Government’s discussions with the British Chambers of Commerce have been productive. I know that two years ago, the movement said that, given the nature of international supply chains, ensuring that a “Made in Britain” badge can continue to be displayed proudly on products originating in this country will require us to re-enter some complex definitions of the relationship between international supply chains and origination in the United Kingdom. It also said that it was happy to work with government to look at how that might be achieved in future. I hope that this will come forward in our discussions on Report to demonstrate that the Government have an idea of what future trade agreements might say about origination to ensure that the “Made in Britain” scheme is not frustrated in circumstances where we think of a product as British.
Baroness McIntosh of Pickering (Con)
My Lords, I add my congratulations to the noble Lord, Lord McNicol, on taking his place and on his performance today. Given his history, I am sure that negotiating procedures in your Lordships’ House will be less turbulent than in other places where he has worked. I thank both him and the noble Lord, Lord Purvis, for giving us the opportunity to, in my case, put questions to the Minister and probe the issue.
In particular, what will be the position in the interim period of our leaving the European Union? My noble friend the Minister pointed out in our debate— on Monday, I think—that there would be a period for these agreements, having been initialled, to be signed and approved by the relevant Parliaments. My understanding is that if we leave under World Trade Organization rules, agreements in this interim period will be on the basis of non-discrimination. So, if we, as a third country—my noble friend Lord Lansley correctly identified that we would be—chose to extend agreements to current European Union members and said, as many noble Lords have suggested, that we wished to impose zero tariffs, those agreements would have to be extended on a reciprocal, non-discriminatory basis. Is my understanding correct? In an interim period of what might be one or two years before such agreements are rolled over, whatever our preference, whatever we offered to our existing European partners would have to be offered to every other country with which we wished to trade, on the basis of non-discrimination. I do not think we have grasped that point. Obviously, it would be helpful to understand the implications for our trading arrangements.
There is deep concern among the farming community that tariffs imposed could be as high as 40% for certain products and 60% for lamb, at a time when we are exporting more meat than we ever have, historically. That would hit our producers particularly hard. It is causing real hardship in the hills because many of our farmers do not know whether to produce lamb; the supply of lamb to the home market could dry up. We would therefore import more lamb, beef and pork at a time when we should be increasing our exports there. I simply want to take this opportunity to seek answers to those queries from my noble friend.
Baroness Kramer (LD)
My Lords, I have questions that arise from the previous speeches which I hope the Minister will be able to help me with. Perhaps I may say to the noble Baroness, Lady McIntosh, that I am sure she recognises that, while in a no-deal scenario, for example, we could make the decision that we would reduce our tariffs to zero, she is absolutely right that we could not make them zero only for the European Union; that would also have to be done for everyone else under WTO rules, but there is no requirement for us to be treated in a reciprocal way. In fact, we would be very unlikely to be treated in a reciprocal way, because if the European Union was to look at us and say, “We will be reciprocal and offer zero tariffs to the UK”, it would then be required under its various trade agreements to offer a whole raft of countries across the globe zero tariffs, thus convoluting its entire trading system. There is an imbalance in that argument which sometimes does not quite get heard.
I cannot think of a worse situation for our farmers than finding that they have high tariffs on their exports but no tariffs to protect them from imports flowing in. Some people have said that that is ideal because it means that food costs would fall, but they would do so at the cost of wrecking, frankly, a swathe of one of our much-loved industries.
I want to pick up on rules of origin in a slightly different way, and I will refer to the point that the noble Lord, Lord Lansley, has been making. When the Minister was kind enough to invite us around the table to ask questions ahead of Second Reading, I did try to press on some issues around rules of origin. As I understand it, for these rollover agreements, the UK would turn to the country with which it wishes to keep the trade agreement and say, “We would like you to treat goods made in the European Union as British content in the way you do now, in order for us to have zero tariffs when we export the goods”. I shall take a simple example, “When we export this car, we would like you to treat the European content in it basically as local content for the purposes of a zero tariff”. The officials were quite clear that the UK could do that unilaterally and that we would not need the permission of the European Union.
I then raised this with a number of people outside this environment who said, “You must be joking. Which country is going to infuriate the European Union by allowing its goods to be treated as local content for the UK unless there is some form of balancing agreement with the European Union on this issue?” In other words, the thought that you can cut the European Union out of this discussion and simply do it on a bilateral basis is incredibly fanciful. For most countries, keeping a good trading relationship with the European Union is, frankly, far more significant than having a trading relationship and rolling over the existing deals with the UK. The European Union is going to have to be engaged in some way or allow itself tacitly to be used in this way.
The Government are currently negotiating these deals, and we understand that they are currently in the process of establishing the rollover agreements. Can they tell us whether they have an understanding with the European Union that will indeed permit EU content to be treated as local content for the purposes of these trade deals, or will they be having some stern discussions with the various countries with whom we wish to have these ongoing continuity bilateral arrangements? It would be very interesting to know.
My understanding is that when South Korea was first approached about treating EU content as local content for goods whose final point of export is the UK, its answer was, “That is interesting and we think that it would be a fair thing to do, but of course we would expect goods originating in China and forming part of the content of South Korean goods to be given the same kind of benefit. We think that there is an opportunity to make sure that there is an equal playing field in this area, because negotiating with the UK is not the same as negotiating with the EU. We are now in different circumstances”. I wonder how many countries aside from South Korea which are involved in these rollover agreements have come back to the UK—I can see that Israel would not because it is not particularly in that situation—saying that they wish to have the new flexibility that we are requesting reflected in a change in the flexibility that they are being offered. It would be helpful if the Government could let us know if that is happening.
Lord Davies of Stamford (Lab)
My Lords, the fact that, if the Government have their way, in two months’ time we shall be dragged out of the single market is a tragedy of great proportions which will affect everyone in this country with not the slightest doubt. That is particularly sad and ironic because of the great efforts that were put into the creation of the single market, particularly by this country. There is no question that the major movers were not Lord Cockfield and Margaret Thatcher. What is more, the single market has been an inspiration around the world. As others seek to imitate the achievement and derive the great benefits that we have had, the British Government can think of nothing better than to take us out of the original single market.
This raises many practical problems, as we have seen. We have heard three extraordinarily well-briefed, considered and well-informed speeches on this subject by the noble Lord, Lord Lansley, and by the noble Baronesses, Lady McIntosh and Lady Kramer. The noble Lord spoke particularly about the difficulties which will arise in connection with the definition or redefinition of rules of origin; and the noble Baronesses spoke extremely well about the threats and complexities we shall face because of the rules of the WTO and the possibility that we will suffer considerable perverse costs as a result of leaving the single market. These have never been properly considered in this country by the Government and, therefore, private individuals, trade associations and businesses up and the down the country have also not had enough time or opportunity to consider and reach a conclusion as to what the concrete impact will be in all probability on their own businesses.
That is the point of my intervention. It is not reasonable to ask tens of thousands of businesses which may well be affected by the changes that the Government are trying to enforce on the country in this regard to pick through all the volumes of Hansard in the House of Commons and the House of Lords where these matters have been debated, even supposing—which was not the case on the last occasion we debated this matter—that the Government give informative answers to the questions that have been raised.
My question to the Minister today is: does she propose, or has she already perhaps set in motion, an effort to inform businesses directly about these matters; to set out for the benefit of British business in different sectors the potential threats—or indeed the opportunities, if there are any—from the policies that the Government are pursuing in this area; and to answer definitively the questions that have been raised today about rules of origin, the impact of the WTO non-discrimination rule and principle, which has been set out so well, and any other WTO rules which may have an impact on the trading conditions for British companies which are trading with either the European single market after the end of March this year or with countries which currently have trade agreements with the Union?
In that latter context—my final remark today—can we please have some absolute clarity about what is happening to those countries which currently have free trade agreements with the European Union and where we have the ambition to roll over those free trade agreements? How many countries have accepted in principle to roll over the agreement as it currently exists without any substantive change? How many countries have expressed the willingness in principle to roll over an agreement but are asking for substantive changes?
Most people, I suspect, will ask for a particular concession of interest to them. They will take the opportunity to get something if they can. At the very least, this will result in many months of discussion and negotiation. In some cases, it may require us to make concessions that will be expensive for British industry or business. We need to know exactly where we stand here. I hope the Government themselves know the answers to these questions—I sometimes get the feeling that they do not. If the Minister thinks that that is unfair she has the opportunity this afternoon to make the position absolutely clear to the House and the whole country.
Lord Lilley (Con)
My Lords, I congratulate the Minister on introducing this debate and focusing on rules of origin, which is the main complexity that will arise with trading goods. I suggest that this should not be exaggerated. It is the big difference between free trade areas and customs unions but I note that the Swiss, who have a free trade agreement with the EU—not a customs union—do not seem to be too upset about that. They do not seem to be calling for a customs union. They seem to be coping with all the problems that noble Lords have told this House are insurmountable; the Norwegians likewise.
The Canadians have a free trade agreement with America but are not calling for a customs union. Even our Canadian Governor of the Bank of England, when he returns to Canada and joins in the political process there, is not going to call for Canada to have a customs union with the United States to overcome all these supposedly insurmountable difficulties. They are not insurmountable and they are going to get somewhat simpler.
The EU is bringing in the REX system for self-declaration of rules of origin—you will have to do the calculations but you will not have to buy a certificate; you will just declare the origin of the goods. Of course, you will have to get it right; as with any self-declaration, you will be open to investigation and checks if there is any reason to suppose you are cheating, but it will simplify the process greatly.
Can the Minister confirm that we will be able to join the pan-Euro-Med convention on rules of origin if we have a free trade agreement with any member of that convention—for example, Israel? I believe that when you belong to it you can begin to assess diagonally, as they say, the components of your goods when you export among them. If that is open to us, it will ease things as far as we are concerned for a large group of countries.
Lord Purvis of Tweed
It is less a point of the inability to trade with countries on WTO rules of origin principles—they have been established for many years and will continue, and the EU uses them with non-EU countries. The difference the noble Lord is alluding to is a mutual recognition of the rules of origin principles that we have agreed through the EU with, for example, Norway and Switzerland. This means that, as far as cumulation is concerned—and given that the majority of British imports and exports are cumulated products with our biggest market—the critical factor is the non-burden that comes with other checks that we would not have if we were a non-member of either a customs union or, indeed, a grouping that meant that all other regulations were aligned, as those countries have opted to do, and I think his position is that we should not do.
Lord Lilley
I am not sure that I said any of the things that I think the noble Lord is both telling me I said and that are not true. I suspect what he said is true but it is not what I said. Forgive me if I do not really respond to his point, which I do not fully understand.
My point was that there is the pan-Euro-Med convention which has the same rules of origin among all the countries. Cumulation is allowed between them. You can join the convention when you have a free trade agreement with one member of it—at least, that is what I am asking the Minister to confirm is the case and will be the case when we have a free trade agreement with Israel, to start with.
The noble Baroness, Lady Kramer, talked about the costs. I do not know if she is familiar with the study of the costs—which I think is the most recent and the most authoritative—carried out by the World Customs Organization. It searched through all the previous studies and found them to be deficient. The level of cost is actually much lower than had previously been thought. That must be true if the Swiss assessment of the total cost of their trade across the borders is correct, because they believe that it is only 0.1% of the value of their trade, including the cost of complying with rules of origin.
I advise the Committee as a whole to read that report. I am sorry that I cannot give the reference but I can give the reference to a document in which the reference is given—namely, a document that I myself wrote called Fact—NOT Friction. I urge noble Lords to read it, as they will find the appropriate reference.
Baroness Kramer
The noble Lord, Lord Lilley, is right that I have not read the document. I have just taken my information from fairly extensive conversations with companies. Perhaps they do not know what they are doing.
Lord Lilley
Perhaps the World Customs Organization knows nothing about customs, but we have to reach the judgments that we can, and certainly under the REX system the fees that the noble Baroness referred to will not have to be paid, as I understand it. However, again, I ask the Minister to confirm that.
Finally, the noble Lord, Lord Davies, waxed eloquent about the single market. I take that as personal praise, as I had to introduce the whole single market legislation back in the early 1990s and spoke eloquently about how it was going to boost our trade. How sad we, and he, must be that in the ensuing 25 years our exports to fellow members of the single market have risen by just 18%. It did not have quite the big and wonderful impact that I hoped it would have and which he in retrospect believes occurred. Our trade with the rest of the world rose by 72%, so let us get these things into perspective.
Lord Davies of Stamford
The noble Lord is, once again, moving into the dangerous business of making elementary errors in the interpretation of statistics. Quite clearly, where we had a relationship with mature markets, as we did when we joined the single market, we were not going to have the same rate of growth in trade as we had with countries that were still very poor and were maybe just beginning to embark on international trade. A mature economy is not going to have the same rate of growth in trade as a newly emerging economy. It is an absolute falsehood to try to compare the two and draw the conclusions that he has drawn.
Lord Lilley
It is always a pleasure to be patronised by the noble Lord, Lord Davies. As someone who passed only parts 1, 2 and 3 of the Institute of Statisticians exams, I suppose that I must give way to him if he passed part 4. I fully know the difference. If he looks, for example, at a group of countries which are at a similar level of development to ours and which trade with the EU single market, he will see that their exports rose significantly more than ours did over that 25-year period. I do not know quite why that is but it is clear that trading within the single market has not had such a big impact on our exports to the rest of the EU as I certainly expected it to have at the time and as he believes in retrospect it has had.
Lord Davies of Stamford
I am sorry to interrupt the noble Lord again, but I will just correct him on this matter. If he looks at the figures, he will see that France and Germany have increased their trade at a much faster rate than we have while being in the single market. The reason is that, sadly—we know that it is a big handicap for us all—productivity in this country has risen much less fast than that of Germany, France and other members of the EU.
Lord Lilley
It is quite true that other countries within the single market have increased their exports to each other more than we have—but that is not purely because of differences in productivity. Indeed, our GDP over most of that period has grown rather more rapidly than that of many other members of the single market. I do not know what the factors are but I would not just assume that it is all due to the wonders of the single market that somehow have not yet reached us.
The Minister of State, Department for International Trade (Baroness Fairhead) (Con)
My Lords, before addressing the amendment directly, I too warmly welcome the noble Lord, Lord McNicol of West Kilbride, who is making his first contribution at the Dispatch Box today. I share the view of the noble Lord, Lord Purvis, that it probably will not get any easier, but I very much look forward to our debates.
I am grateful to the noble Lords, Lord McNicol and Lord Purvis, for tabling Amendment 31. As the noble Lord, Lord McNicol, said, it is a short amendment, but it covers an important area. I confirm that the Government share the objective of the amendment. We are committed to ensuring that the rules of origin used in our continuity agreements enable businesses to continue to operate, as much as possible, through their established value and supply chains. That is particularly important where integration with EU supply chains is significant.
I wish to reassure noble Lords about the concerns that may have prompted the amendment. As I have stated, there are technical issues in continuity agreements that cannot be simply cut and pasted. Rules of origin are among those. We are continuing to work with third countries to deal with the issues involved, with the objective of ensuring continuity for businesses and consumers when the UK leaves the EU.
The noble Baroness, Lady Kramer, asked about negotiations with partners without involving the EU. Just to clarify, the ROOs for each agreement are negotiated bilaterally between the parties. The sequence of such agreements is such that we need to negotiate bilaterally with partners before negotiations open with the EU. EU producers and exporters will benefit from EU content being treated as UK content in our continuity trade agreements, as their business arrangements will not be disrupted. I can confirm that the UK does not need to ask the EU for permission to do this.
Our approach includes using standard rules of origin mechanisms to remain as closely aligned with the status quo as we possibly can. Importantly, as Amendment 31 advocates, this approach includes seeking to ensure that UK and third-country exporters can continue to make use of EU content in their exports to one another. As my noble friend Lord Lansley correctly said, this is referred to as cumulation.
As with many other aspects of international relations, our partners understandably view our negotiations and discussions as sensitive, so we are unable to give precise details on progress at this time. Nevertheless I will reassure the Committee that discussions on rules of origin are progressing constructively. As my noble friend Lord Lilley pointed out, because there is mutual benefit there is a willingness to engage.
Lord Purvis of Tweed
The Minister is clear that it is the Government’s intention unilaterally to say to all third countries that components from the EU would be considered part of UK goods. What comes with that is certification, and showing the evidence from the European Union suppliers. Currently, the European Union has its set of certifying conditions as to where products originated. Is the Government’s position that we are unilaterally saying that those component parts should be considered as from the UK? Will we be using in perpetuity all the European certification and proof of origin processes?
Baroness Fairhead
Let me clarify for the noble Lord. As he will be aware, rules of origin determine the origin of goods. Regulations then implement those rules of origin in domestic legislation, under the Taxation (Cross-border Trade) Act 2018. The certification and verification of the ROOs of each good will be consistent with current practices under the EU’s trade agreements. Exporters will need to certify the origin of their goods, as they do currently.
Lord Purvis of Tweed
May I press that point a little further? Currently, a British exporter will require a movement certificate—EUR1, or EUR-MED if it applies to the pan-European Mediterranean cumulation that we have already discussed under this group of amendments —or a declaration of an invoice or commercial document, such as a packing list or consignment note. These are European Union certificates, which are recognised solely by the European Union. If we are no longer in the EU, how will our certificating process match the EU process, given that it would concern exactly the same component part?
Baroness Fairhead
I hoped and believed that I had addressed that question. The answer is yes: that certification would continue as it currently does. That is the information I have but if the situation is any different, I will write to the noble Lord.
Lord Lansley
I hope my noble friend will forgive me for interrupting. Just so that we are absolutely clear on which question we are having answered, it is about reciprocity. If, in relation to these agreements, we in this country are treating EU content as UK content and having it accepted as such, the question that we are looking to have answered is: will the EU’s continuing agreement with that same third-party country mean that UK content is treated as EU content for the purposes of its origination?
Baroness Fairhead
I believe my noble friend is posing a slightly different question. I will come on to the EU negotiations. The response was about third countries and the certification required.
Baroness Kramer
The point made by the noble Lord, Lord Lansley, is crucial, because otherwise there is a huge incentive for anyone in the EU to find an alternative supplier. Finding alternative suppliers in the UK for a product produced in Poland, Spain or wherever else is quite difficult because frequently we do not produce those particular goods. However, across the whole of the 27 it is likely that there would be a number of alternative suppliers. Our companies need to know if they are in jeopardy, which is why the question matters.
Baroness Fairhead
It is of course for the EU to determine what they recognise. Our priority for the EU/UK trading relationship is for it to be as frictionless as possible. What the UK has proposed is no tariffs, no quotas, no routine requirements for rules of origin for goods traded between the UK and the EU, and cumulation provisions with trading partners. Clearly the final outcome will be for negotiation between the UK and the EU.
Lord Liddle (Lab)
I am sorry to intervene. I was not here for the opening speech, which is very bad of me. As I understand it, at the moment, on the assumption that we are going to reach an agreement with the EU, the EU is being very co-operative in saying that British goods should be treated as EU goods for the purposes of our agreements with other countries. There is of course a problem if we have no deal, particularly if we have an acrimonious no deal. What would the situation be then? I cannot believe that the EU would exercise the degree of co-operation on this question that it is presently demonstrating the willingness to do.
Baroness Fairhead
That is exactly why the Government are clear that the preference is for a deal. That is what we are trying to achieve, because it is in the best interests of the UK.
Amendment 31 also aims to tie Ministers’ hands and compromise their ability to reach agreements that are in the best interests of the UK. As the Committee will be aware, it is neither beneficial nor appropriate for this House to fetter the Government’s capability in that regard. Therefore, as it is already an objective of the Government to seek continuity through cumulation or any other technical process, it is neither necessary nor appropriate to place a legal obligation of this kind in the Bill.
Lord Purvis of Tweed
The Minister might be able to help me. Clause 6(1), as introduced into this House, states:
“It shall be the objective of an appropriate authority to take all necessary steps to implement an international trade agreement, which enables the UK to fully participate after exit day in the European medicines regulatory network partnership”.
Why does that not bind the Government’s hands and restrict their freedom, when the Minister says that exactly the same language used in this amendment seems to bind the hands of the Government? Either the Government will seek to change the language in Clause 6 or they should have no problem with the language in these amendments.
Baroness Fairhead
As the noble Lord, Lord Purvis, will be aware, that was an opposition amendment, with which the Government did not agree. The Government are reflecting on those words and I do not think he can assume that they will necessarily accept that.
My noble friend Lady McIntosh raised the issue of what would happen in a no-deal scenario and asked whether non-discrimination would apply. The noble Baroness, Lady Kramer, is correct; there is no reciprocal obligation if we set our tariffs at zero. That is why the Government have been clear that a deal is the best thing and we are doing all we possibly can to achieve that.
Amendment 51, tabled by the noble Lord, Lord Purvis, seeks to secure a binding commitment from the EU on the EU’s own future trade agreements. As I said, our priority for the UK-EU relationship is for it to be as frictionless as possible. Regarding the objective of this amendment, we believe it is inappropriate for one sovereign state to seek such a commitment from another sovereign country or territory. Moreover, the EU would not offer the UK such a binding commitment because the EU’s own trade agreements are a matter for negotiation between the EU and its third countries. For this reason, the objective of this amendment would be an empty one for the Government. Furthermore, if the EU chose to recognise the UK content, it would be for the EU to choose how to implement that with its trading partners.
I come again to the point from the noble Baroness, Lady Kramer, on the cost of certifications and certification of origin. The certificates of origin used to export to each partner country will be the same as they are now. Businesses will use those certificates as they currently do. For UK-EU trade, the UK is proposing no routine rules of origin, so no additional burden will be placed on business. That of course will be for negotiation with the EU. I am grateful to my noble friend Lord Lilley, first, for his expertise on this matter, but also for pointing out the report—which I confess I had not read either—on the costs of compliance.
Baroness Kramer
May I ask something? I do not know the answer to this question. We are talking about a no-deal scenario here, obviously. Under WTO rules, if the UK says that it will import from the EU without any requirement for rules of origin, is it required to extend that same preferential treatment—not just a tariff preference but preferential treatment—to other countries outside the EU? I thought that was embedded in the WTO regime, but I could be wrong.
Baroness Fairhead
My understanding is that, because it would be part of an overall agreement with the EU, it would therefore be a trade agreement under WTO terms and the same rules that apply to any other FTA would apply. Therefore, that would be accepted as one of the terms.
Baroness Kramer
I am sorry, but I was asking about a no-deal scenario, because that is what this legislation is about—preparation for no deal.
Baroness Fairhead
I stress one more time that this legislation is not about no deal. It is about making sure that we have the capability and powers to implement, whatever happens. Plan A is for a deal and the clauses in the Bill aim to achieve the powers and make sure that we can put them into effect. We have to be prepared for no deal. I reiterate that it is not the desired outcome, but we have to make sure that the Bill has the ability to cover both.
I hope that the statement I have made, and my answers to questions, have provided clarification and some reassurance to the Committee, and I therefore respectfully ask the noble Lord to withdraw—
Lord Lansley
If my noble friend will permit me, I wanted to ask one question. I know we are not debating future agreements but the manner in which rules of origin are to be established in UK legislation in future. We should work with the chamber of commerce movement to try to make that work with the business community as well.
My noble friend might also like to note that Clause 6, which was new Clause 17 on Report in the other place, was an amendment tabled by Dr Phillip Lee, the Conservative Member for Bracknell.
Baroness Fairhead
I thank my noble friend for that clarification. I should have said that it was not a government amendment. But I take the point.
I meant to respond to that question. We are trying to do whatever we can to provide help to SMEs and other organisations to help trade. That includes working with them on procedures and practices which will reduce the cost of, and barriers to, trade. I confirm that we are actively engaging with the chambers. If it is not on this particular point, I will take that back to the department and make sure that we include this too.
Lord Stevenson of Balmacara (Lab)
My Lords, what is now Clause 6 was an amendment introduced by a Conservative Back-Bencher in the other place. Did I hear the Minister correctly when she said that it was still the Government’s contemplation that this might be amendable? I point out to her, in case she is in any doubt, that this would require a government amendment, which I have not seen on the Marshalled List so far. Is she saying that this is something they are actively considering for Report?
Baroness Fairhead
The Government do not endorse the wording of the amendment, and consider that the wording has legal and technical difficulties, so we are reflecting on what should be done.
Lord McNicol of West Kilbride
I thank the Minister for her response, and the noble Lords, Lord Purvis of Tweed and Lord Lansley, and the noble Baroness, Lady McIntosh of Pickering, for their contributions and kind words. This is an important amendment, as it looks to protect the current benefits of rules of origin classification. As the noble Baroness, Lady Kramer, said, there are benefits for both the UK and our EU partner countries, through cumulation and clarification of local goods.
A lot has been said, so I will read Hansard with interest. I beg leave to withdraw Amendment 31.
“Trade agreement impact assessments
(1) Before the end of the initial five year period after an international trade agreement has been implemented under section 2 of this Act, the Secretary of State shall lay before both Houses of Parliament—(a) an assessment of the qualitative and quantitative impact of the agreement on—(i) the economy, broken down by the different parts of the United Kingdom and different regions of England,(ii) the environment,(iii) human rights standards,(iv) labour standards, and(v) individuals with protected characteristics under section 4 of the Equalities Act 2010,in the United Kingdom; and(b) an assessment of the qualitative and quantitative impact of the proposed trade agreement on—(i) the economy,(ii) the environment,(iii) human rights standards,(iv) labour standards, and(v) individuals with protected characteristics under section 4 of the Equalities Act 2010,in any other state which is a proposed signatory to the agreement.(2) Before the end of the initial five year period after an international trade agreement has been implemented under section 2 of this Act, the Secretary of State shall lay before both Houses of Parliament an assessment of the extent to which the provisions of the agreement conflict with, or are consistent with—(a) the provisions of international treaties ratified by the United Kingdom;(b) the provisions of the Sustainable Development Goals adopted by the United Nations General Assembly on 25 September 2015;(c) the provisions of the United Nations Guiding Principles on Business and Human Rights;(d) domestic human rights law;(e) international human rights law and international humanitarian law, including but not limited to—(i) the International Convention on the Elimination of All Forms of Racial Discrimination,(ii) the International Covenant on Civil and Political Rights,(iii) the International Covenant on Economic, Social and Cultural Rights,(iv) the Convention on the Elimination of All Forms of Discrimination against Women,(v) the Convention against Torture and Other Cruel, Inhuman or Degrading Treatment or Punishment, (vi) the International Convention on the Protection of the Rights of All Migrant Workers and Members of Their Families,(vii) the International Convention for the Protection of All Persons from Enforced Disappearance,(viii) the Convention on the Rights of Persons with Disabilities, and (ix) the Convention on the Rights of the Child;(f) the United Kingdom’s obligations on workers’ rights and labour standards as established by the United Kingdom’s commitments under the International Labour Organisation’s fundamental conventions, including but not limited to the Declaration on Fundamental Rights at Work;(g) obligations relating to animal sentience by which the United Kingdom is bound, or any principles relating to animal sentience to which the United Kingdom adheres, and any provision in domestic law (including retained EU law) relating to animal welfare standards and the welfare of animals in the production of food;(h) the principle of eliminating poverty;(i) the United Kingdom’s environmental obligations in international law and as established by, but not limited to—(i) the Paris Agreement adopted under the United Nations Framework Convention on Climate Change,(ii) the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES), and(iii) the Convention on Biological Diversity, including the Cartagena Protocol on Biosafety;(j) offences under section 1 of the Modern Slavery Act 2015 (slavery, servitude and forced or compulsory labour);(k) the sovereignty of Parliament;(l) the legal authority of UK courts;(m) the rule of law; and(n) the principle of equality before the law.(3) The Secretary of State must make arrangements for the assessment to be laid before the Scottish Parliament, the National Assembly for Wales and the Northern Ireland Assembly.(4) In preparing the assessment under subsection (1), the Secretary of State shall consult—(a) the Scottish Ministers, the First Minister or the Lord Advocate,(b) the Welsh Ministers, and(c) a Northern Ireland devolved authority.”
Lord Stevenson of Balmacara
My Lords, we move from future prospects and problems around definitions and what other partners will do to a matter which will lie very much in the hands of the Government as we go forward. As and when trade agreements become the responsibility of this Parliament, there need to be procedures for establishing how and on what basis these are agreed, but also, as is the subject of Amendment 32, for reviewing our progress in carrying these forward.
The amendment is rather full. It contains a long list of issues so it is perhaps not a probing amendment, but I hope the Minister will accept that we would be open to further discussion on the wording. It is meant to set out broadly all the issues that we think need to come into play on this issue but the detail itself could be subject to discussion.
I hope all Members of the Committee will agree that we need to have a system under which we have confidence that any trade negotiations taking place on behalf of the people of this country are subject to effective periodic review of the issues involved, what the process will be and how many dimensions are involved in the consultations and engagement with the devolved Assemblies and Parliaments, as well as the involvement of those affected by the negotiations, such as consumers, those who work in the industries concerned and the companies themselves.
Of course, there is an issue about what impact these trade agreements will have regionally, not just across the national regions but within England in particular, with variations that will need to be picked up. We need to make sure that Parliament, in assessing how these trade deals are done, has access to all the information that is required.
The whole process is set out in Amendment 32. Amendment 81, in the name of my noble friend Lord McNicol—he did so well with his previous amendment that we have given him the afternoon off to recover, so I am speaking for him on this amendment; we are working together, of course, as noble Lords would expect—sets out in more detail the question of independence for the responsible body. There are many candidates for that. We do not need to go into it, but it is important that there is separation between those who set up and agree trade agreements and those who review them for the benefit of the public interest.
This issue can be developed across various activities. I think there will be contributions from those who will wish to see more stress placed on the social rather than the economic issues. The Government are involved in international treaties that will come into play on this. There is a great deal to be said about how you would do this, with what process and everything else. The amendment attempts to set that up. I beg to move.
Baroness Neville-Rolfe (Con)
My Lords, I shall speak to Amendment 64 in my name in this group. I also welcome the noble Lord, Lord McNicol of West Kilbride, to the joys of tabling amendments. They provide the ability to lead scrutiny and discussion of significance in a very freewheeling way. I was also going to say “succinct”, except that the previous group, on rules of origin, took nearly an hour.
My amendment is inspired by Amendment 32, which was just moved by the noble Lord, Lord Stevenson. However, having studied other amendments to the Bill and the Government’s reaction to them, I have opted for a simpler formula in the hope that this might attract support across the Committee. It provides for a review, after five years, by the Secretary of State of the impact and effectiveness of each international trade agreement under Clause 2, but it deliberately omits the long list of criteria in Amendment 32. That is because I believe in simplicity. I do not believe we should lay down detailed areas that the review should cover, worthy though they may be. As we know, policy priorities change over time and the review should be conducted from a contemporary perspective.
I pray in aid a precedent that the noble Lord, Lord Stevenson, will remember well: the report on innovation and economic growth provided for under the Intellectual Property Act 2014. I believe that was the result of an amendment that he tabled during the passage of that Act. As a Minister, I found the process of producing the report every year very helpful, as did the Intellectual Property Office. In fact, its CEO confirmed that to me only last week.
I have some doubts about the wisdom of setting up a special compliance monitoring agency, as proposed in Amendment 81, which is also in this group. It seems a big stick, given the Bill’s scope. However, on a separate point, compliance would appear to be in the purview of a general review of effectiveness. I have provided for such a review to be laid before the devolved Parliaments, to which the noble Lord attached importance, because I believe this would be a good way to keep them up to date, ensuring that the reviewers, looking back, think about their interests as well as English and UK interests. Such a review would also cover SMEs, which we discussed in another long debate last week. I look forward to hearing from my noble friend the Minister.
Lord Purvis of Tweed
My Lords, I have great sympathy with Amendment 81 in the noble Lord’s name. It struck me, as a former Member of the Scottish Parliament, that one result of our leaving the European Union will be that we have, in effect, a single market within the United Kingdom, while, for the implementation of trade agreements, some elements of those agreements will be under the auspices of the devolved Administrations. Therefore, if it comes to compliance, the body that has entered into the agreement with the third country will be the United Kingdom if the United Kingdom Government are also a regulatory body to the devolved Administrations for areas for which they have executive and legislative competence. That is potentially an uncomfortable situation. There is merit, therefore, in considering how the United Kingdom might have, in effect, the equivalent of the European Commission. What will be the bodies that operate across the United Kingdom that will consider compliance with trade agreements? It sits uncomfortably if the UK Government are that body when it comes to the component parts of the UK that have both ministerial and legislative competence for those.
Turning to my Amendments 52 and 60, one of the issues concerning what the Government call continuity agreements, which they are seeking, is that they might not just be temporary rollover agreements: they might last a long time. They will be treaties in their own right which, by definition, will be permanent, but the regulations that come with them to translate them for ratification could well be permanent or, at the very least, operate for three-year terms, which could be indefinite if they are renewed. On the point that the noble Baroness, Lady Neville-Rolfe, made about a five-year period, the option I have put forward is that, in advance of Parliament being asked at the end of the initial three years about the impact on the United Kingdom, before decisions have been taken on whether they should be renewed or whether the Government might seek to go back and consider the contents of those agreements, that is the appropriate time for reporting to be carried out. Therefore, it is important at that stage, in advance of the end of the initial three-year period, that a review is carried out of the impact on the UK and specifically on the nations and regions. We know from both Governments’ data, information from the devolved Administrations and academic research that trade deals with countries that have a particular bias in certain sectors affect some parts of the United Kingdom more than others, whether car manufacturing in the north-east of England or food and drink in Scotland. Therefore it is very important to specifically mention the nations and regions.
It is also important, as suggested in subsection (2) of my proposed new clause in Amendment 52, that we have a means by which we can test what has been said repeatedly—that we could trade with those countries better if we were not part of the single market than if we had continued to be part of it.
Amendment 60 looks forward to any proposed future trading relationship between the UK and the EU and its impact on the British economy. I hope that the Government will be sympathetic to this amendment because it has already been agreed in principle to publish modelling of what the impacts on the British economy would be for some of these areas, even if—and this is the most charitable way of describing it—the Government had to be persuaded to publish this information rather than allowing MPs to enter a darkened room to study it in private. Now that this information is out in the public domain and the principle is there, economic modelling of the impact of our relationship with the EU, depending on the way forward and the options taken on that trading relationship that are to be negotiated, is very important. After last night’s vote in the House of Commons, it is even more important, given that whatever alternative arrangements are considered which have an impact on our future trading relationship, we will need to know what kind of impact they will have on the British economy and its different parts.
Regardless of that, it is necessary now for us to consider what architecture we put in place to consider the impact of our trading relationships with countries around the world on the different parts of the United Kingdom and then on the United Kingdom as a whole. It will be even more important given that the European Union has been and will continue to be our biggest trading partner, so that we do not repeat the process we have had over the last two years and try to reverse engineer what the likely impact will be. We are starting to establish some of that framework now, which is why Amendment 60 has been tabled. I hope that the Government will be sympathetic to it. If it is not accepted in this precise language, I hope that the Minister may be able to present in some form of language that there will be consideration of the architecture of how we look at the economic impact across the UK of the future relationship with our biggest trading partner.
Baroness Thornton (Lab)
My Lords, I will intervene on the Bill, which is not my normal territory, although I have 20 years’ experience of working on equalities issues in your Lordships’ House. I will speak in support of Amendment 32, in the name of my noble friend Lord Stevenson, which requires the Government to lay before Parliament a qualitative and quantitative assessment, after five years, of the impact of new international trade agreements on human rights standards and people with protected characteristics under domestic equality law, among other things. It also provides transparency on the impact of such agreements on fundamental rights. As far as I can tell, the UK Government are a party to all the bodies mentioned in this amendment, so this should not be an issue and there should be no question about it. I should like some assurance from the Minister that, over the next five years, we will comply with all these international treaties on human rights and equalities.
I agree with noble Lords who said that compliance with equalities has to be judged by an independent body—I certainly know that. It should not be judged by the Government themselves. I thank the Equality and Human Rights Commission for its briefing on this subject. Its concern is that we,
“retain the UK’s equality and human rights legal framework as we leave the EU”,
and we ensure that,
“the UK remains a global leader on equality and human rights”,
after we leave the European Union. That is consistent with the UK being an open and fair place to live and do business. Certainly, if the Government do not accept the length of this amendment, I hope that they will accept the spirit of it, and that that will be expressed at the next stage of the Bill.
Baroness Hooper (Con)
My Lords, I also have sympathy with the concept of impact assessments. After all, they will apply equally to rollover agreements and future trade agreements, so it is perfectly appropriate to raise this issue and discuss it at this stage of the Bill. I also agree that it is important to have an independent body and not the Government themselves as a monitoring body, and that there should be arrangements to cover all parts of the United Kingdom equally and fairly. I am persuaded by the argument for simplicity in all this; therefore, I support my noble friend Lady Neville-Rolfe’s amendment in particular. There is a danger in making lists, because they can become out of date.
Lord Lilley
My Lords, the amendment tabled by the noble Lord, Lord Stevenson of Balmacara, and others of the same gist are remarkable. In my 35 years in Parliament, I do not recall Parliament ever having subjected any trade agreement negotiated by the European Union to the level of scrutiny which it is proposed that future trade agreements negotiated by ourselves should be subjected. This is remarkable evidence that the Opposition are converted to the merits of having an independent trade policy because it will mean that we can influence it and work it to our own advantage. Of course, that would not be the case if we had a customs union-type arrangement similar to Turkey. Turkey does not participate at all in the negotiation of European free trade agreements with others, but is simply a pawn in those agreements. We would be too, if we were in a customs arrangement with Europe but not part of Europe—in other words, if the policy of the noble Lord’s party were to become effective, as I am sure he would agree—and those sorts of assessments would become irrelevant.
More substantively, in the past when I was involved in negotiating the Uruguay round, for example, one thing that disturbed me was the difficulty of becoming accountable to the House—then the House of Commons—for what I was doing. It is quite difficult for Ministers to be accountable for something that they are negotiating, because they can always come back and say, “We got the best possible deal. If it hadn’t been for my brilliant negotiation, it would be even worse”. It is very hard for the House to respond to that. That left me feeling uneasy. If we can find a way to ensure that negotiations are properly reported, assessed and held accountable to the House, that is a good thing. One of the bad consequences of them not being accountable is that officials did not take the job of being accountable to Parliament at all seriously. They felt they were accountable to the international organisations with which they were negotiating. One needs to be worried about that and it is why it is important that we have accountability. If Parliament holds Ministers accountable, officials will be responsive to Ministers and to what the House wants—not to what international organisations and their peers in other organisations want.
That is not a party-political point. When I made that point in the Commons, my Labour opposite number came up and said it was exactly the sort of thing she experienced, not in trade matters but in other matters. Where she was not responsible to the House, officials did not take that responsibility seriously. The noble Lord and his colleagues are on to something important with their approach, which I prefer to the simplicity of the approach of my noble friend Lady Neville-Rolfe. When we have our independent trade policy, it will be important to find ways to hold Ministers to account.
Lord Bilimoria (CB)
My Lords, these amendments strike at the heart of the issue, because the Bill contains no provision for greater parliamentary involvement in trade agreements. Parliament’s role in UK treaties is much more limited than the democratic scrutiny given to EU trade agreements. It has no formal role in negotiations, does not have to debate, vote on or approve them. I follow on from what the noble Lord, Lord Lilley, said: for EU trade agreements, the Council gives the European Commission a mandate to negotiate on behalf of member states and authorises the signature and conclusion of agreements. The European Parliament does not take part in the negotiations but is kept fully informed at all stages, questions the Commission and can issue non-binding but politically important resolutions. The European Parliament’s consent is usually required before trade agreements can be concluded. National parliaments also scrutinise EU trade negotiations through their own EU scrutiny processes. In the UK, draft Council decisions on signing, provisionally applying or concluding an agreement are deposited and scrutinised by the EU scrutiny committees in both Houses, and may be debated on the Floor of the House or in committee.
Baroness Kramer
My Lords, I thank the noble Lord, Lord Bilimoria, as he has said a great deal of what I was going to say, and I am not going to repeat it. I would underscore, to the Minister, the general frustration at this point in time of knowing that we, the UK Parliament, know far less about the negotiations that are proceeding with these rollover and continuity agreements than we would have known had we been in the European Parliament and this was a trade deal that was being negotiated by the EU. We would have been far more informed, consulted and engaged. That loss of democratic input is exceedingly frustrating. This is not a terribly good sign for the future. I hope very much that, having decided secrecy is the way forward for these continuity arrangements, the Government change their mind before they go on to any new arrangements.
Amendment 60, in the name of my noble friend Lord Purvis, would insert a new clause, “Additional review of the impact of the proposed future trading relationship with the EU on the United Kingdom economy”. Another general frustration is that, at this point in time, we still do not have the Government’s assessment and analysis of the impact of the deal that Theresa May has negotiated—never mind the one that she may negotiate—on the future economy of the UK.
If noble Lords will remember, in November the Government published EU Exit: Long-term Economic Analysis, which modelled a number of scenarios including the Chequers deal, but did not actually model the deal that was on the table. I am sure it was inadvertent—I said it on the day—but the Chancellor, when speaking on various media outlets, therefore quoted the economic consequences that came from an analysis of the Chequers deal, not from an analysis of the deal that Mrs May had then staked as her option and choice. The numbers were starkly wrong as a consequence. All of us had advice from various different institutions—I cannot remember whether it was the IFS in this particular case—that, if we wanted to dig through the numbers and find something close to the May deal, we had to choose a set of numbers called “modelled White Paper with 50% non-tariff barrier sensitivity”. We were told that would give us better numbers, and they were dire compared to the numbers that were in the charts for the Chequers deal. I never want to see a Chancellor of the Exchequer—I fully believe it was inadvertent—quoting and talking to the British public about a set of outcomes which his own document counters significantly.
It seems to me that, if the Government were to undertake to provide us with accurate figures or their best estimate of an accurate forecast, that would be exceedingly helpful for the complicated discussions we are involved in. It would be helpful, even today, to have the figures for the May deal, never mind the May deal as it is to be adjusted. I am really quite shocked that, having known they handed us wrong numbers in November, the Government have not given us reasonable and rational numbers now.
Baroness Fairhead
My Lords, I thank the noble Lords, Lord Stevenson and Lord Purvis, for tabling Amendments 32 and 52. I note the noble Lord’s statement that we should not focus too much on specific wording. I am very taken by the suggestion of my noble friends Lady Cooper and Lady Neville-Rolfe that simplicity is a good approach, but I would welcome any conversations about specific wording.
As the House is aware, we are seeking continuity as far as the existing EU trade agreements are concerned. This means the existing impact assessments of the existing trade agreements that the EU is in will continue to be relevant. They have already enabled Members of both Houses, as well as the public, to consider the impact to the UK. There is an impact assessment, for example, of the EU’s free trade agreement with South Korea. It is online, and it has been available since February 2010, alongside many others that are also available online.
As for a broader evaluation of policy, the Government also undertake evaluations of the impact of their policies as a matter of course. In addition, I am happy to confirm that we are developing proposals for how monitoring and evaluation can best be conducted when the UK takes responsibility for our own trade policy. I would be happy to meet noble Lords to reflect their views, and I take to heart my noble friend Lady Neville-Rolfe’s suggestion of a contemporary approach.
Further, the Government have already committed, through Clauses 3 and 5 of the Trade Bill, to lay in Parliament a series of reports explaining our approach to delivering continuity in each of our existing trade agreements. They will also explain, if any, significant changes to and the economic impact on the new UK bilateral agreement when compared to the existing impact assessment. We believe that this is proportionate and better suits this unique programme, which seeks to preserve existing benefits rather than establish new ones. In the earlier debate before Committee, we made a firm commitment to bring forward proposals on our future trading relationships. We have been clear: we will ensure that Parliament plays an appropriate role when the UK has its own independent trade policy.
I am not trying to avoid the questions of my noble friend Lord Lilley and the noble Lord, Lord Bilimoria, about future parliamentary scrutiny. On the Floor of the House, I have been clear that we will bring forward proposals because we understand fully how critical proper parliamentary scrutiny is. I have stated, and am happy to restate, that I am open to suggestions. We are looking at the suggestions of the ITC in the other place and waiting for input from the Constitution Committee. This issue will be covered in much more detail by my noble friend Lord Younger in the debate on the next group of amendments, so with the leave of noble Lords I will leave that to him.
On Amendment 60, tabled by the noble Lord, Lord Purvis, the Government have met their commitment to provide Parliament with a robust and extensive analysis of the long-term economic impact of our future trading relationship with the EU. As I understand it—we can discuss this if I am incorrect—the amendment asks for a short-term analysis. However, as the Chancellor said in his letter in reply to the Treasury Committee, the cross-government group is not suited to provide analysis of short-term impacts. Within their statutory mandates, the Bank of England and the OBR produce short to medium-term forecasts for the UK economy. The Bank of England has already provided the Treasury Committee with its analysis of short-term impacts and the OBR will continue to update its forecast in line with its mandate.
The amendment also asks for the economic impacts of the backstop to be modelled but, as the Chancellor made clear, the backstop is an insurance policy that neither side wishes to use and, if triggered, would be explicitly temporary. Furthermore, there is not yet sufficient specificity on detailed arrangements for modelling purposes. This would be a matter for further discussions through the joint committee; without such detail, the Government would not be able to model its impacts meaningfully. Ahead of further discussions on those arrangements, Ministers have a responsibility not to release information that could reveal or imply potential negotiating positions.
Lord Hannay of Chiswick (CB)
I am sorry, but the Minister has rather shocked me by saying that she will not handle the next amendment. It is probably the most important amendment we will discuss, concerning negotiation mandates and so on. The Minister gave an answer on the Government’s thinking that her noble friend will, I am afraid, find inadequate if he repeats it. I assume she is aware that this House has said that the Report stage will not proceed until the Government have tabled amendments on this matter. Can she confirm that that is the Government’s understanding?
Baroness Fairhead
I am happy to confirm that.
I turn to Amendment 64. Trade continuity agreements, which Clause 2 would be used to implement, simply continue the effects of existing EU trade agreements. Many of the benefits are already being reaped by UK businesses. I hope that my noble friend can take comfort from my reassurance in my responses to Amendments 32 and 52, and I would like to reassure her further by confirming that any impact assessments published at the time the agreements we are transitioning came into force remain valid. On the international agreements referenced by my noble friend, I can confirm that we have not changed our commitment to them. The process of exiting the EU will not alter the UK’s commitment to upholding either international laws or our international commitments. These include commitments on climate change and the sustainable development goals.
The noble Baroness, Lady Thornton, and my noble friend Lady Hooper both raised issues in a number of areas such as human rights, labour and environmental standards around the world. In an earlier debate in Committee we confirmed that we will proudly continue to comply with those international obligations. In response to the comment of the noble Baroness, Lady Thornton, on monitoring by independent bodies, I can confirm that that too will continue.
I turn now to Amendment 81, tabled by the noble Lord, Lord McNicol. Let me be clear that the Government will continue to ensure that Parliament and the devolved Administrations play a crucial role in the scrutiny of the UK’s trade agreements. We are in discussions at both official and ministerial level on this.
Specifically in relation to compliance, I must stress that the UK will not bring into force any international agreement without first ensuring that it is fully compliant with its obligations. Where we are transitioning existing ratified EU trade agreements, we have been complying with those agreements as a member of the EU. We are working hard to ensure that we continue to be compliant after leaving the EU, for example by using the powers in the European Union (Withdrawal) Act to make UK law operable without reliance on the European Communities Act 1972. Any secondary legislation necessary to ensure that we are in compliance will be made before ratification, following the usual parliamentary processes. This means that we will start from a point of being in compliance with our agreements. We would expect the same of our international partners. This is simply what is required when it comes to making international treaties.
Normally within trade agreements there are mechanisms for monitoring and reviewing the agreement through bodies such as joint committees. This applies both to our compliance and the compliance of our partner countries. We will of course look to replicate the functions of these existing mechanisms. The noble Lord, Lord Purvis, mentioned that we should make sure that we reflect the regions and the devolved Administrations. Again, I am happy to meet with him to discuss how that can be done. We will operate the mechanisms according to the terms specified in the relevant agreement. These will of course differ by agreement, but we will be accountable for compliance overall. I hope that this reassures the Committee, and I would ask the noble Lord to withdraw his amendment.
Lord Stevenson of Balmacara
My Lords, it is pretty much an open secret that amendments of the type we have just spoken to are usually tabled by Oppositions when they have very little to say about a topic. You call for a review and that usually ties up the civil servants for days trying to work out what that is supposed to do. It gets the Minister into a knot and allows you to have a relatively easy passage, especially if the Bill is a bit boring at that particular point. That is not what has happened today, and indeed we have been reminded that it has worked in the past. I recall the discussion during the passage of the Intellectual Property Act and it has worked out well.
There is a case here for thinking really hard about what we want to see happen as a review. I accept absolutely that my amendment is ridiculously overspecified and gold-plated. I am happy to learn from noble Lords who have served as Ministers and those who have experience of this on the other side. We could probably with advantage put together quite a sensible, minimalised amendment which would cover the ground. The Minister spoke about wanting to meet to discuss this; that would be worth while. If we can get sensibility, scale and scope in a reasonable approach, we can make some progress here.
I do not think this can just be left to the passage of time. It is true that the Bill as currently drafted has considerations of reviews, but these were late additions and are not well drafted. We have already noted earlier in Committee that while Clauses 3 and 5 make provision for reports to be provided, Clause 4 provides an opportunity for Ministers to duck out of that; and they deal with the process of agreement, not of review. I therefore think there is a bit of a lacuna here in the Government’s approach. We may be able to resolve it by statements in the House, but there may be a case for having at least something in the Bill to cover it.
Other points were made in this very rich debate. I do not think we need to look too hard—I was going say to the noble Lord, Lord Lilley, but he is not in his place. The EU model, although it exists and operates, is not perfect, and there is already much documentation on how it needs to be improved if it is to be effective. The question of independence is not dealt with in the current drafting of the Bill. I think there is a sense around the Committee of a coming together on this issue. We should take advantage of that—a meeting would be very useful—and I look forward to being able to make some progress on this in a relatively easy way. I beg leave to withdraw the amendment.
“Establishment of Committee on Trade Agreements
(1) A body corporate called the Committee on Trade Agreements is to be established consisting of nine members who are to be drawn both from the members of the House of Commons and from the members of the House of Lords in accordance with the provisions in Schedule (Committee on Trade Agreements).(2) Negotiations towards a free trade agreement may not commence until the Secretary of State has laid a draft negotiating mandate before the Committee and it has been approved by a resolution of that Committee.(3) Prior to considering a resolution approving a mandate relating to the negotiation of a free trade agreement, the Committee must produce a sustainability impact assessment in accordance with the provisions in Schedule (Committee on Trade Agreements). (4) Before either House of Parliament may approve by resolution the text of a proposed trade agreement in accordance with the Constitutional Reform and Governance Act 2010, the Secretary of State must lay the text of the proposed agreement before the Committee and that text must be approved by a resolution of that Committee.(5) Prior to considering a resolution approving the text of a free trade agreement under subsection (4), the Committee must produce a report setting out a recommendation in relation to the ratification of the agreement.(6) The Secretary of State must lay the report produced under subsection (5) before both Houses of Parliament.(7) Schedule (Committee on Trade Agreements) contains further provision about the Committee.(8) In this section, “free trade agreement” refers to any agreement between the United Kingdom and one or more partners that includes components that facilitate the trade of goods, services or intellectual property including but not limited to—(a) Free Trade Agreements (FTA);(b) Interim Association Agreements, Association Agreements (AA);(c) Economic Partnership Agreements (EPA);(d) Interim Partnership Agreements;(e) Stabilisation and Association Agreements (SAA);(f) Global Agreements (GA);(g) Economic Area Agreements (EAA);(h) Cooperation Agreements (CA);(i) Comprehensive Economic and Trade Agreements (CETA);(j) Association Agreements with strong trade component;(k) Transatlantic Trade and Investment Partnerships (TTIP);(l) Investment Protection Agreements.”
Lord Stevenson of Balmacara
My Lords, in moving Amendment 33 I will introduce some of the discussion topics raised by the other amendments in this area. I look forward to the response from the noble Viscount, Lord Younger, who is standing in on this issue. The subject of the amendment is, as previously described by the noble Lord, Lord Hannay, a key—probably the most important—part of the Bill. I take his advice and am happy to try to man up and make sure that I establish the case in the sorts of terms he would like to see. We have also had contributions from the noble Lords, Lord Lilley and Lord Bilimoria, and the noble Baroness, Lady Kramer, which have set out some of the scene, so I do not think we need to go right down to the very basics of it. I would like to focus on some of the principles that are important in trying to assess this issue.
We are talking here about how Parliament and wider civil society get engaged with a process that we in this country have not really had much direct involvement with since 1972 because the function we are talking about—trade—has been a sole competence of the EU. Yes, there have been occasions when issues have come back but, as we heard in earlier discussions, they have not been very detailed and there has not been proper scrutiny. I think there is a general feeling that the procedures set out in the CRaG Act 2010 do not now satisfy those with an interest in this area.
I have eight principles that I think should inform our discussion. These are: how do the Government intend to ensure that formal consultation with external stakeholders, in advance of any negotiation mandate being drawn up, is exercised? How do the Government intend to ensure proper transparency of trade negotiations and negotiating mandates, and what role will Parliament play in that process? How do the Government intend to ensure maximum transparency in advance of those consultations? Obviously, they are constrained to some extent by issues that would be regarded as necessary to be taken under some level of secrecy if they involved security or other issues, but how will that transparency happen? In particular, how will the Government prepare proper impact assessments and make these available to inform the debate?
There is a general question about reviewing reporting on trade agreements after a specified time period, but also in relation to progress—we touched on this earlier, but it is part of a principle that we need to build in from the beginning. How do the Government intend to ensure that parliamentarians are able to access the negotiating texts? Without knowledge of the texts, very little scrutiny can take place. Some texts will be very sensitive, but nevertheless it is important that there is a mechanism under which they can be reviewed and discussed.
What will be the formal process or procedure for the ratification of trade agreements? The current arrangements under CRaG are not satisfactory. What will be the formal procedures for changes that need to be brought forward—not new trade agreements but how, particularly in light of the need for broader discussion and debate, we amend and change agreements found to be deficient, unfair or working badly in relation to any aspect of our economy or our part of the country?
Those are the issues the amendment seeks to open up. Again, it is gold-plated—I accept that—but it is important that we see the full range and depth of the issues raised and I hope to have a good debate around that. I beg to move.
Lord Hannay of Chiswick
I support Amendment 33, about which a great deal was said in the debate on the previous amendment, although some of the contributions more properly belonged to the discussion of this amendment. I have no hesitation whatever in suggesting that this is probably the single most important article in this legislation—except that it is not there, of course, at the moment, but it needs to be there.
Why is it so important? It is because until now the British Parliament has had no clear role in giving mandates or setting out the broad lines under which the Government should negotiate trade agreements, nor has it had any proper system for oversight of them. Possibly that did not matter in the far distant days before we joined the European Union, but it certainly matters now when free trade and other trade deals are, as the Government have said again and again, at the heart of their Brexit strategy. Britain’s ability to negotiate on its own on trade is at the heart of the Government’s pleading to back their deal.
This is really urgent now because the Government have made it urgent by refusing to take no deal off the table. If they took no deal off the table, as the Spelman amendment passed by the House of Commons did last night, we would have time to look at this. However, if no deal remains on the table—and the Prime Minister has said that it does—we have to realise that the Bill we are now discussing may be operational in 60 days’ time on 30 March this year. As currently drafted, the Bill says nothing about approving mandates before the Government can negotiate on trade with a particular country. That is a lacuna which cannot be left unfilled.
When he replies, I would like the noble Viscount the Minister to repeat what the noble Baroness the Minister said: that the Government will table amendments before Report and explain how they believe that Parliament’s authority should be established in the context of an independent trade policy. I agree that it may not be needed on 30 March and we would be mad to leave without a deal on 29 March. But the Government have decided to go on saying that we may and therefore we had better be prepared. I hope the noble Viscount will deal with that point as soon as he starts his response.
The substantive issue at stake relates to the provisions—or lack of them—for parliamentary mandating and oversight of all negotiations with third countries once we are able to conduct them on our own. They are important because without them, if the Bill remains as it is currently drafted, together with the provisions for the approval of international agreements, the only say that Parliament will have will be after the Government have conducted and concluded negotiations and then put before Parliament an up or down, yes or no agreement to what is in them. That is what we call in this House, when we are talking about statutory instruments, the nuclear option. It would be absurd if we went into the conduct of an independent trade policy with nothing for Parliament except the nuclear option. What does the nuclear option mean if it is ever deployed? It means that the Government would in good faith have negotiated with a third country—reached agreement with it, settled all the tariff details and the non-tariff barriers—and then the deal gets rejected. How much negotiating credibility would we have left after that? Zero.
Lord Purvis of Tweed
My Lords, I shall speak to Amendments 59 and 71 to 74. They are quite distinct. Amendment 59 most certainly does not meet the Hooper test of brevity but I can dispatch it fairly quickly—no doubt to the great relief of colleagues in the Committee—because it may be considered a continuity amendment. It replicates the need for a meaningful vote process for the future relationship with the EU as we go through the withdrawal agreement process. It need not be controversial but it provides for the necessity for Parliament to authorise the agreement. It provides for that to be in primary legislation and sets out the procedures should the Commons resolve against the agreement. If we leave, this will be necessary for our future trade agreement with the EU to avoid a repeat of the “running down the clock” situation. Therefore, it is right that we have this put in place now.
Amendments 71 to 74 are perhaps the core of that element and have formed part of the discussions so far about the role of Parliament going forward. In a moment I will come to a live case study of a continuity agreement to show that this is not just about the future policy but is relevant now. Fundamentally, the reason that Parliaments around the world—the elected bodies other than simply the Executives—are now involved at early stages of trade negotiations is that trade negotiations are now markedly different from how they were 30 or 40 years ago.
By definition, the European Union now enters into discussions on deep and comprehensive trade agreements. In the past, the agreements were primarily about tariff rates and little else, but now trade agreements take into consideration the impact on domestic law of environmental standards. The social, economic, environmental, gender, human rights, labour, development and regional impacts are all core components. If you look at the most recent trade negotiations that the European Union has carried out with British participation, whether it is with Singapore, Japan or Canada, they have included sections on the development and sustainability goals. There are now clear positions when it comes to human rights, labour development and the impact on local communities. These are core parts of the trade negotiations that we have embarked on, and that is why the United States, Australia and the European Union have a much wider role for their Parliaments throughout the process. The Government’s position is in stark contrast to that: we would simply use the existing treaty provisions, which are not only out of date but will prove ineffective.
The only other aspect of ratification of treaties under the Constitutional Reform Act concerns what Mr Hollingbery, the Trade Minister, said in oral evidence to the International Trade Committee. He said that, although he did not want Parliament to have binding votes on these agreements, there was one aspect where he thought that Parliament should have an overrule. He said:
“But I do believe that Parliament should be able to opine upon the outline approach”.
Parliament being able to opine on the outline approach of trade negotiations might be a slightly unfortunate turn of phrase but the Government have given some indication that they are willing to consider it. I think that on the previous group the Minister gave an indication of that kind, and I agree. We are looking forward to hearing the Government’s position on the amendments to the Bill and to them giving a clear steer.
In the spirit of assisting the Government, these amendments in my name, with back-up from many civil society organisations, suggest what I consider a quadruple lock of parliamentary involvement from the outset in considering the sustainability impact so that there is a degree of transparency for all the different aspects that I mentioned earlier—the social, economic, environmental, gender and human rights impacts and so on.
One reason why that is important to me is that when I co-chaired with the Nigerian Trade Minister a commission for an all-party group on trade and development in the Commonwealth, it became abundantly clear to me that, to be a force for good in the world, trade also now has to take into consideration all those components. The British trade approach could be an especially good force for good for development around the world. We know that until recent years trade agreements have not been proactive in the areas of gender, human rights or those parts of society that have not been economically empowered. We could see trade agreements not simply as protective measures or as things where we are fearful of giving away British negotiation positions; we could see them as potential forces for good.
The second element of Parliament being involved in setting a mandate by resolution is a proactive mechanism for that. It is why this is now established in the European Union and I believe it would be of great merit for our Parliament to be involved in it. The third component proposed in the amendments is transparency, involving Parliament and the people, whom ultimately we all represent, because they are likely to be a key part of these trade negotiations. We know from the previous examples how difficult some trade negotiations can be, and that is when we look at the impact on both our communities and those of the country with which we are signing up to an agreement. The final component is scrutiny before signing, which I believe to be of fundamental importance. That quadruple lock is important. In essence, it is simply a way of replicating British representation through the European Union.
We have elected representatives in the European Parliament who take part in the early stages of negotiations. There is a very helpful document called Negotiating EU Trade Agreements: Who Does What and How We Reach a Final Deal. It is very straightforward and simple. It shows that even in preparing the position that it will take, the Commission publishes its negotiating directives online and sends them to the Parliament. The Parliament is informed at the earliest stage of the process and even prior to that. After each negotiating round, reports are presented to both the Council and the European Parliament, as was the case in the latest round involving Australia. I tried looking on the British Government’s website to find out about our discussions that led to the mutual recognition agreement with Australia but there was nothing. That was in stark contrast to the position with the Commission.
The fourth stage is that, when the Commission plans to table negotiation proposals, it informs the European Parliament about them, and it then informs the European Parliament at every stage of the developments, keeping it updated. The Parliament is then able, through its Committee on International Trade, to pass resolutions on the progress of those processes. When the negotiators from the two sides come close to finalising the text, the Commission tells the Parliament. The Commission also informally sends the text to the Parliament. In finalising the process, the chief negotiators of both parties usually initial the text of the proposed agreement to mark the end of the negotiations and that text is sent to the Parliament. The 10th element of the process is that, after both sides sign, the Council examines the proposal for conclusions and sends the agreement to the Parliament for its consent. The 11th stage is consideration by the committee of what to recommend to the plenary, and consent or no consent is then given to the agreement. There are 12 parliamentary stages in the negotiating process.
We understand that the Government have made only two agreements so far. One is with Switzerland. The text from the Swiss party was immediately put online; the text from the British side came subsequently. But we should do a case study of the announcement last week of what our Government said was an agreement in principle to sign a free trade agreement with Israel, while the Israeli Minister, Eli Cohen, said that the text was “concluded” on 23 January. I asked the Library to find a copy of that agreement—but there is none. I understand from the Government that the text will be placed in the House alongside an explanatory memorandum and an associated parliamentary report in due course, once the agreement has received signature.
Viscount Waverley (CB)
The noble Lord has drawn attention to the issue of scrutiny by the European Parliament. In listening to him, it occurs to me—he may wish to agree—that one of the difficulties is that the UK Parliament is so underresourced. Do we have the resources to carry out the type of scrutiny to which he draws attention?
Lord Purvis of Tweed
I believe we do. Not only are we resourced in Parliament, but we are resourced in this House. Our committees do a remarkable job in scrutinising both European legislation and secondary legislation. As we approach the Bill, many noble Lords stand ready to scrutinise proactively and constructively some of the proposals. But we cannot do that if our role is only at the last stage. Indeed, the Government would be much more effective in securing final agreements on such arrangements if Parliament were involved at the early stages. If that principle had been applied to the process of negotiating our withdrawal, we might now be in a different position.
Lord Fox (LD)
The noble Lord, Lord Lilley, before he had to hurry off, spoke of transparency as if it were a threat to negotiation. Speaking to another amendment earlier, the noble Baroness, Lady Neville-Rolfe, who has more contemporary experience than the noble Lord, spoke of her regrets about the TTIP negotiation, and the fact that the NHS brouhaha that blew up around it scuppered, or terminally injured, that negotiation. Transparency is not a prerequisite just because it is a good thing; in the modern world it is needed to get consent for such things to happen. In the world we live in today, such negotiations can be stopped—and if we think the TTIP negotiation was an example of that, we have not seen anything until we have seen a US treaty being negotiated. Transparency is not just a good thing; it is an enabler, which allows us to have such treaties.
Viscount Younger of Leckie (Con)
My Lords, forgive me for stretching the definition of repetition, but before I address the amendments in detail I would like to underline the fact that the Bill concerns continuity for our existing EU free trade agreements as we leave the European Union. I mention that without wishing to revisit the emphasis that we placed on the word “continuity” on Monday last week. Scrutiny of new free trade agreements is not part of the Bill, nor is scrutiny of our future relationship with the EU.
Lord Hannay of Chiswick
I really plead with the noble Viscount not to say that again. We all know that if, through inadvertence or incompetence, the Government take us over the cliff on 29 March, this Bill—by then, presumably, an Act—will be the only instrument we have to guide our trade policy. Therefore, will he please stop saying that it is only about continuity and admit, as his noble friend Lady Fairhead did when replying to an earlier amendment, that it is meant to be capable of providing for both eventualities? Will it provide not only for the eventuality in which it is a continuity measure that lasts for the transitional period—what is sometimes laughingly called the implementation phase, in which nothing is implemented—but for circumstances in which we have to operate an independent trade policy on 30 March 2019?
Viscount Younger of Leckie
I had only just started, and I stand by my words, because I was about to go on to say that, none the less, I understand the desire of noble Lords, including the noble Lord, Lord Hannay, to debate these issues today—and that is what we have just done. I also appreciate the desire to understand how the Government intend to fulfil our commitments to transparency on and scrutiny of future FTAs as we exit the EU.
The amendments on future FTAs pursue many aims, which the Government understand. To be helpful to the House, during my remarks I will give as much information as I can on progress and process on FTAs. I will also answer the question raised earlier by the noble Lord, Lord Hannay—but not just yet—and will agree with the remarks made by my noble friend Lady Fairhead.
Amendments 33 and 99, which the noble Lord, Lord Stevenson, spoke to, seek to ensure that Parliament has a significant role in free trade agreements via the creation of a new Joint Committee. Amendments 71 to 74, which the noble Lord, Lord Purvis, spoke to, seek to achieve similar outcomes through imposing obligations on the Government in relation to mandate-setting, transparency and scrutiny before signature. I will address those amendments together.
First, I shall give a little context. Brexit does not change the fundamental constitutional principles that underpin the negotiation of international treaties. The making of treaties, including international trade agreements, is a function of the Executive. At the same time, it has long been held—and this Government continue to hold—that Parliament should have the opportunity to scrutinise treaties effectively. In 2010, the Constitutional Reform and Governance Act confirmed, after a process of consultation, the respective roles of the Government and Parliament in treaty-making. The Government will continue to support and facilitate parliamentary scrutiny of treaties under CRaG.
The noble Lord, Lord Purvis, asked about the Israeli trade agreement. There is agreement in principle on an FTA, but subject to—
Viscount Younger of Leckie
If I may be allowed to complete this point, I will then give way to the noble Lord. There is agreement in principle on an FTA, but it is subject to a few remaining technical issues so the final text is not quite ready. When a continuity agreement is finalised, it will be laid with an Explanatory Memorandum and report.
Lord Bilimoria
I thank the Minister for giving way. He mentioned that the Government are for scrutiny, so why are these amendments required? The amendments have been tabled because there is a complete lack of parliamentary participation in the Trade Bill. Surely he can understand the uneasiness of this House. The Government tried to railroad the implementation of Article 50 without the permission of Parliament, and the case had to go all the way to the Supreme Court for Parliament to have a say. The Government then tried to withhold a meaningful vote from Parliament, and Parliament had to fight for that. The Government tried to hide their legal advice and Parliament had to fight for its disclosure. Now we have Henry VIII powers being implemented left, right and centre and a Trade Bill acting in a similar way over future trade agreements.
Those agreements are going to be hugely difficult to negotiate. They take a long time to implement, as I know. India has only nine bilateral free trade agreements with other countries, and not one with a western country. This process is going to be hugely difficult, and it looks as if Parliament is going to be cut out of it altogether. We are wrecking the constitution of our country and the balance between the legislature, the Executive and the judiciary. I do not think the Minister can just say, “We are allowing scrutiny”.
Viscount Younger of Leckie
If the noble Lord will allow me to continue, he will see that I am not saying that Parliament has been cut out of this altogether; far from it. I said at the beginning of my remarks that I would give as much information as I could, and I hope it will give reassurance to the noble Lord and indeed the whole Committee.
Baroness Kramer
I am sorry to trouble the Minister but I have one question. I did not quite understand what he meant just now by the word “finalised” when he talked about the treaty with the Israelis. If he meant that the treaty would be a signed done deal and would then be brought to Parliament so that we could look at it, would we scrutinise it? Would it be like an SI, whereby we cannot impact the terms in any way, so we simply have the nuclear option of accepting or rejecting it? The message of this House has been that we regard scrutiny as something far more contributory than that, involving engagement in the process at a much earlier stage. That is why we are extremely troubled. Will the Minister clarify exactly what he means by “involving Parliament”—after the fact or before the fact?
Viscount Younger of Leckie
As I said earlier, I have some more remarks to make about the process for future trade agreements. What I said about the Israeli agreement was that when a continuity agreement is finalised, it will be laid with an Explanatory Memorandum and report and will be under the affirmative procedure.
I will briefly touch on what we have already committed to in this area. My right honourable friend the Secretary of State for International Trade reiterated in an Oral Statement that Parliament should have a crucial role to play in future free trade agreements. The Government will ensure that parliamentarians are given the opportunity to consider the level of ambition of the Government’s approach to negotiations and the potential implications of any agreements. We will lay our outline approach to each negotiation before both Houses in order to facilitate that before we begin negotiations. During negotiations the Government will keep both Houses updated on progress, including providing analysis of appropriate points. Once an FTA has been negotiated, it will need to be implemented and then ratified. I remind the House that free trade agreements cannot of themselves change domestic law.
To implement a new trade agreement with a new partner, the Government will bring forward a bespoke piece of primary legislation for each new trade agreement that requires changes to legislation where there are no existing powers. Parliament will have the opportunity to scrutinise the new legislation in the normal way.
Lord Purvis of Tweed
I am grateful to the Minister for giving way; his contributions are helpful. This may be a technical point, because we have had an element of that statement from the Government at Second Reading. There could be a marked difference regarding a trade agreement that could have a big impact on our country, but which does not require any changes to primary legislation. If a trade agreement does not require any changes to primary legislation because that is still on the statute book, the Government are proposing that no measures be brought to Parliament to approve—only the primary legislation, if that does not currently exist. The case made by noble Lords is that a trade agreement in its own right needs to come forward for authorisation, regardless of whether it requires additional primary legislation. That is the point we need to get across.
Viscount Younger of Leckie
The noble Lord makes a good point. I reassure him that what is also very important is that the negotiation and scrutiny of these trade agreements has to allow for a certain flexibility. I will go on to say a little more about the process, because implicit in it is that treaties between different types of countries using different types of products can be extremely different, as the noble Lord will be aware, so flexibility is very important.
The legislation must be brought forward before ratification, as I was saying. The same will be true of our future relationship with the EU, which will surely require detailed implementing legislation. I hope this demonstrates that the Government are already committed to Parliament being able to shape and scrutinise future trade agreements. I listened carefully to what the noble Lord, Lord Purvis, said about current processes and steps in considering trade agreements. However, since July work has been taking place in both Houses to consider Parliament’s role in future free trade agreements. The Constitution Committee has an ongoing inquiry into the parliamentary scrutiny of treaties. The Joint Committee on Human Rights is inquiring into human rights protections in international agreements, and that touches on Parliament’s role. In the other place, the International Trade Committee published a report just after Christmas that makes a number of recommendations in this area.
To assist the noble Lord, Lord Hannay, the Government are listening carefully to these views and we are conducting our own work. We have little quarrel with his remarks and aspirations, and I hope there is agreement there. We recognise, not least following the resolution of this House on Monday, that more detail is needed on how we envisage Parliament—and particularly this House—being involved in the scrutiny of trade agreements. The question of how Parliament scrutinises future FTAs must be answered, with the benefit of close and considered dialogue between the Government and Members of Parliament. I have listened to the contributions of noble Lords today, and I assure the Committee and the noble Lord, Lord Hannay, that we will reflect on them seriously. I confirm again that we will bring forward our proposals with more detail before Report.
Lord Purvis of Tweed
That is very helpful. As the Minister knows, the devolved Administrations have also submitted evidence to the International Trade Committee in the Commons and are participating in the revision process. The devolved Administrations were mentioned specifically in the resolution of this House last Monday. I wonder if, in advance of the Government bringing forward any of their proposals, they could write to noble Lords or give a clear statement on how they envisage the devolved Administrations, and potentially the regions of England and the combined authorities, having an active role.
Viscount Younger of Leckie
I thank the noble Lord for that. It does indeed take us back to the debate we had last week, and I hope he remembers that I gave certain reassurances on that point. What I can say—without having the details in front of me—is that, as he knows, there is ongoing dialogue with the devolved Administrations to ensure that they are kept fully in touch with what we are doing. That will be the general tenor of the ongoing discussions as we look forward to FTAs.
I would like to pick up on some of the remarks made by the noble Lord, Lord Bilimoria, in the last debate as they are relevant to this point. He asked how our approach differs from the role of the European Parliament in EU trade negotiations. He may well know this but I shall spell it out: the European Parliament’s role operates in relation to EU trade policy. We are offering scrutiny for the UK Parliament at every stage of the process in a way that is appropriate and proportionate to the UK constitutional context. In the UK, the power to make treaties is a power held by government, but the context of the negotiations will be different. The European Commission negotiates free trade agreements representing the interests of the 28 member states. It is given the mandate to do so by the Council, and final agreements are approved by the European Parliament and the Council before they can come into force. UK-only free trade agreements will be negotiated by the elected Government in the best interests of the UK. The Ministers responsible for the negotiations are directly accountable to Parliament.
Lord Lansley
My noble friend might also reflect that there is some truth in what the noble Lord, Lord Kerr of Kinlochard, reminded us of in previous debates. American negotiators often find there is significant benefit in having what I think they describe as “Congress reserve” in negotiations—what we might call “parliamentary reserve”. That sense of engagement with Parliament during the course of negotiations is important in itself. What happened last night in another place might give anybody engaged in such negotiations pause for thought; it is important that they know during the negotiations that they can take Parliament with them.
Viscount Younger of Leckie
I said at the beginning that this is likely to be a wide-ranging debate; my noble friend’s remarks will indeed be fed into the processes being considered at the moment.
I would like to address a question raised by the noble Lord, Lord Stevenson, who asked what access parliamentarians would have to negotiating texts. We take seriously our commitment to keeping Parliament apprised of the Government’s negotiating intentions. That is for the purposes not just of transmitting information but of inviting scrutiny and allowing Parliament and its committees to take informed views. While we support Parliament’s important scrutiny role, Ministers have a specific responsibility, which Parliament has endorsed, not to release information that could undermine our negotiating position. On transparency more generally, I reiterate our commitment to a transparent approach. We are developing proposals for the release of updates on negotiations; we will bring these forward shortly.
Let me say more about the consultation process, an issue raised by the noble Lord, Lord Stevenson. The amendments also seek to ensure wide consultation on FTAs, which is a good idea; indeed, that is the approach the Government are taking. We conducted one of the largest consultation exercises ever undertaken for the new FTAs we are considering with partners without an existing FTA with the EU—the US, New Zealand and Australia—and for our potential accession to CPTPP. This included a 14-week public consultation open to all businesses, individuals and other organisations in the UK and abroad, and 12 outreach events throughout the UK, including in each of the devolved nations. We have also conducted ongoing engagement with stakeholders on trade policy, including “town hall” style briefings, roundtables with different groups of stakeholders, regular stakeholder briefings and webinars designed to engage with smaller and regional stakeholders.
I would also like to touch on impact assessments. I do not propose to address—
Lord Purvis of Tweed
I am grateful to the Minister for giving way; he is being very tolerant. He may recall that I mentioned on Second Reading that I took part in one of those consultations, posing—if that is the correct word—as a Scottish business and taking part in the Government’s consultation on the prospective trade agreement with the United States. I mentioned then and repeat now that in that consultation, I was presented with no information about what the parameters of any trade arrangements with the United States were likely to be. In effect, I was being asked questions the parameters of which I did not know. That is not meaningful consultation. Can the Government reflect on the consultation process they have carried out? I do not believe it was sufficiently meaningful.
Viscount Younger of Leckie
I am listening to the noble Lord. I do not know the details of that negotiation, but I will take that back and reflect on it. There may have been some very good reasons why the information was not forthcoming, but I will reflect on that and write to the noble Lord with some information.
Lord Hannay of Chiswick
I am very grateful to the noble Viscount for some of the remarks he made about what the Government are likely to do before Report in tabling their own amendments on the negotiating process. That was helpful and it will be good to look forward to that. However, in everything he said, I am afraid I detect an unwillingness to give Parliament a role at a time when it would really help. Everything he said involves decorating the final stage—the approval of an agreement already negotiated—with all sorts of wonderful bells and whistles. We all know that then you have only the nuclear option. You have concluded the negotiations and, if Parliament objects, you cannot amend the text that has been negotiated with the third country. If it objects, it can reject the agreement and that will be very damaging for the national interest and the relationship with that country.
I listened very carefully to the noble Viscount. At one stage, he claimed that the Government would negotiate on trade as the Executive and under their right to do so. That is just the problem. The word “mandate” did not come into a single thing he said. All I can say—politely, I hope—is that when the Government table their amendments, the word “mandate” had better be there. If it is not, I think they will get badly stuck. It is not magic. The mandates under which the European Union negotiates are quite general; they are not specific about this or that tariff, but they are very helpful in setting the parameters under which the negotiations are conducted. I believe the Government would benefit from that, so please think a little about the word “mandate”.
Viscount Younger of Leckie
Again, I listen carefully to what the noble Lord says. The best way to answer him is to say that I will indeed feed back his views. They are somewhat negative—somewhat too negative, I would argue. I have spent a lot of time spelling out the details of processes and procedures, as far as I can. Before I give way to the noble Viscount, I also mention that the noble Lord, Lord Hannay, said that we were going to table amendments on Report. I want to make it absolutely clear that I have pledged to come forward with proposals before Report. I give way to the noble Viscount.
Viscount Waverley
I thank the noble Viscount. With the greatest respect, I think it would be fair to describe the Government’s record on bringing ratification processes before Parliament as patchy. When the noble Viscount goes back to his department, I ask him to consider the Government’s record in the ratification timing process, so that that can be included in some way, either in this amendment or the Bill at large.
Viscount Younger of Leckie
That is a helpful contribution from the noble Viscount. I think he has some experience in these matters, so I will certainly pass that on. I would like to move on fairly rapidly to talk about impact assessments, but I do not propose to address the aspects of these amendments regarding impact assessments in this speech, as the issue was addressed in earlier Committee debates and I believe the Government’s position is clear. Nor will I revisit the assurances that we have already given on our absolute commitment not to lower standards through trade agreements.
Let me move on to the future relationship with the EU. One amendment in this group—Amendment 59, tabled by the noble Lord, Lord Purvis—is targeted specifically at our future relationship negotiations with the EU. I appreciate what the noble Lord is trying to do here in replicating Section 13 of the European Union (Withdrawal) Act 2018. However, Section 13 was drafted for the very particular context of our withdrawal package under Article 50. It is not an appropriate or necessary mechanism for Parliament to approve our future relationship treaties with the EU. With Section 13, we knew what form of documents were coming to us for approval. We then judged it necessary to create a role for Parliament over and above the existing provisions of the Constitutional Reform and Governance Act 2010, or CRaG, to ensure that the withdrawal agreement treaty and the accompanying political declaration could be considered as one package.
This amendment, however, is grappling with the difficulty of trying to legislate for a treaty or treaties where the number and form of those treaties is not yet known. The amendment attempts to bypass this issue by linking its provisions to any trade agreement that,
“gives effect to any or all of the provisions set out in the framework for the future relationship so far as they relate to trade”.
However, this leaves it unclear which treaties would be caught and whether it would remain active long into the future, beyond the conclusion of our future relationship negotiations. The Committee can be reassured that our future trade agreements with the EU are bound to be subject to the provisions of the Constitutional Reform and Governance Act 2010. Furthermore, those agreements will almost certainly require detailed implementing legislation, which means that the arrangements could not come into force without the authorisation of Parliament. No doubt this is a question to which we will return. I hope this reassures the Committee and that noble Lords will withdraw, or not move, their amendments.
Lord Stevenson of Balmacara
My Lords, I am grateful to the Minister for his extensive response. He has been attempting, within the constraints he is undoubtedly under, to give us as much information as he can. I will need to read Hansard to be absolutely sure what we have and have not been promised. I certainly heard the word “amendment” in one of his sentences, but it may have been a misunderstanding on my part. If there are not to be amendments to this Bill, I am intrigued—that is parliamentary language for “a bit confused”—about what exactly the Government are going to offer us to resolve the obligation placed on the House by the Motion passed in the name of my noble friend the Leader of the Opposition relating to progress on this Bill, which is a point that the noble Lord, Lord Hannay, has also raised.
We can hope that the two aspirations at play here come together, because despite the Minister’s valiant attempt to remind us that this is a continuity Bill—an aspiration negated in the second amendment after we started this process, and continually ignored in every amendment we have discussed so far—we should get real and understand that the mess we are in will not be helped by having an artificial distinction between what is a continuity issue and what will be a non-continuity issue, or, in other words, the real world in which we live. We need to get this right, and we on this side of the House have offered—I am sure the party on my left has also offered—to work through this with the Government, and that offer remains on the table. We will meet at any time, at the Government’s request, to see if we can come together to make something of this that will work for the future, because it is that important.
That said, I endorse what has been said by others: any attempt to rely on the procedures in the Constitutional Reform and Governance Act 2010 will be doomed to failure. The Government have to get over that hurdle before we can make significant progress. The 2010 Act is inadequate as a process, and would be inadequate under any terms, because it allows the Government to use the negative resolution procedure for secondary legislation, so that the treaty we agree comes into law automatically, irrespective of any opposition or amendments Parliament might want to make, provided it has been laid before Parliament for 21 sitting days. That is not the right process, as we are talking about trying to get Parliament to engage with the process by bringing it back to the mandate arrangements, and allowing Parliament plenty of time, lots of information, a good process and a proper committee structure for proper decisions to be reached in the public interest. The Government should not play games with procedures and say, “We’ve got that already, so why are we bothering about it?” This needs to be dismantled and rebuilt in a way fit for the 21st century.
A new system is required, and the time has come. If there is any doubt about the interest in that, the Minister should be aware that six major business federations—the CBI, the BCC, the EEF, the ICC, the IoD and the FSB—have taken the unprecedented, in my experience, step of bringing forward a joint statement with the TUC, Unite, the Trade Justice Movement, the Consumers’ Association, Which? and other industry bodies calling for a proper model of consultation and scrutiny to govern the UK’s policy-making process in the future. The Government cannot ignore that; it has to be something that they will do.
We will come back to this, whether in the form articulated by the Minister, or in amendments we consider at later stages. I hope there will be a Report stage, because the Bill is important and needs to go through, but the danger is that delay or difficulty in coming forward with something clear enough for this House to respond to will mean the Government finding themselves in real difficulty on the Bill. I do not say that lightly; the last thing we want to do is use procedural issues to hold back what is, at its heart, a good piece of legislation, which we support. I beg leave to withdraw the amendment.
Lord Grantchester
“Division of agricultural tariff rate quotas
It shall be the objective of an appropriate authority to take all the necessary steps to ensure that after exit day the division of agricultural tariff rate quotas with the European Union remains at the same level as prior to exit day.”
Lord Grantchester (Lab)
My Lords, I declare my interests as stated in the register. Tariff-rate quotas have been set for mostly agricultural products, to allow some countries preferential access to the EU single market below the tariff rate set for those products. The UK does not have its own national tariffs but merely shares in the amounts set for all member states across the EU. This is most important to the agricultural sector and industry, as it sets out the quantity that comes into the EU at preferred competitive rates, bearing in mind that products still have to be compliant with the relevant EU standards.
On exit, these TRQs at EU level will need to be split between the remaining states and the UK. The proposal agreed between the EU and UK is that the product quota should be split according to the relevant usage or consumption of the product in the UK and EU. The difficulty arises on the specific quantities, as there is a lack of data to inform the division. Although there is detailed information on the point of arrival of products into the EU, there is not the same detail regarding where the product may be consumed. The EU and UK, in bilateral discussions, have agreed to adjust the schedules without triggering renegotiations under Article XXVIII of GATT. This was submitted in October 2017. However, it was almost immediately challenged by the large exporting countries, such as the US, Brazil, Australia and New Zealand.
I cannot overstress how critical this issue is to British agriculture and the nation’s consumers. It is revealing that so many glib answers are often proposed in the current impasse over Brexit. From a lack of information and knowledge, poor judgments are made, leading to a lack of appreciation of the consequences. I am sure I do not need to explain to the Minister the delicate balances in the market, where price volatility results from small changes in supply, quite irrespective of the huge discrepancies in tariffs under preferential treatment and other third countries that have allowed managed change to take place.
To give one example, Britain’s sheep exports, with large implications for the Welsh economy, comprise more than one-third of production, with almost all of it destined for Europe. This trade is virtually one-way, with minimal imports from the EU. Without agreement, and a smooth transition, tariffs to the EU would render this trade immediately uneconomic. The seriousness of the issue was underlined by a joint letter from the British Retail Consortium, signed by the chief executives of all the major supermarkets—Sainsbury’s, Asda, M&S and Waitrose, among others—only two days ago. The BRC stated that it wanted to maintain the same tariff-rate quotas. The wording of the amendment signifies that it is a probing amendment to ask the Government to provide some certainty in their answers to the challenges, and their approach to the future.
Amendment 54, in the name of the noble Lord, Lord Purvis, calls for a report to Parliament, and I look forward to the noble Lord’s remarks. The concern is that access to the home market—and, hence, the vibrancy and well-being of agriculture and the rural economy—will be sacrificed as a pawn in negotiations in rolling over trade deals to be ratified by third countries in the future, especially in relation to the interests of other industries. The Committee has already debated the fear that standards would also be under jeopardy. It is imperative that the UK Government continue to maintain the present TRQs. I beg to move.
Lord Purvis of Tweed
My Lords, Amendment 54 is in my name. As the noble Lord, Lord Grantchester, pointed out, the division of the tariff-rate quotas is of great importance to parts of the UK economy, especially the rural economy, but it is also important to our trading partners. Some likely trading partners when it comes to agriculture have already stated their concern about the agreement the UK and EU have reached.
I admit that this amendment was prepared with the expectation that there would be more than a month between the Act coming into force and exit day. That was a naive hope. I thought that the Government might have been able to have this legislation on the statute book long before, but with the delays that have occurred I admit that one month would be tight between the Act receiving Royal Assent and potential exit day. Nevertheless, the core element of the amendment, which seeks to get clarity on the UK’s position, is important. Clarity is sought in two areas: first, what our current position is regarding discussions with third countries about the division of the tariff-rate quotas; and, secondly, how the Government would consider the impact of these decisions on our economy.
As the noble Lord, Lord Grantchester, indicated, agreement was reached between the UK and the EU in 2017. He was right that that provoked immediate objections. The countries considered that the changes proposed by the EU and the UK for the division of the tariff-rate quotas amounted to more than simple rectification of the schedules. The European Parliament said in a report to its own committee that the changes had,
“involved less flexibility and market access for their exporters”.
Its stated objections to the EU-UK quota subdivision, saying that,
“other concessions should compensate for the loss of market access”.
These are the questions that the European Parliament is asking the Commission about what concessions there are likely to be. The questions the European Parliament is asking the Commission are ones that this Parliament should be asking our Government.
The expectation might be that we will want to trade on certified WTO schedules. As the Minister said previously, it is not necessary for us to trade under these, but they are desirable because they mean that the negotiations, on which concessions could be provided, are not ongoing, and that concessions have either been provided and then accepted and settled, or that there are ongoing negotiations in which we have to monitor what concessions are being offered to secure the prize of certification. My amendment asks for a report from the Government to be clear about what that position is.
As with the debate we had on the previous group, I was able to secure information about what had happened at the WTO market access committee in October, and the position of the other countries and of the EU. I was able to see the text of a Council regulation, EC32/2000—the proposal to modify the implementation of the tariff-rate quotas bound in the GATT. The discussions that took place between the Council and the European Parliament have been reported on. On 14 November the Parliament decided to enter into inter-institutional negotiations based on the Council’s report on its proposal. In none of that has it even been suggested that there could be a role for our Parliament in discussing with the Government the potential impacts of the concessions offered to secure approval for our TRQ division. The provisional agreement reached with the Council at the Parliament on 10 December to discuss what the European Union’s position would be is in stark contrast to this place, where there have been no equivalent proceedings with the British Government.
If we are not going to be involved as the European Parliament is on the European side, at the very least we need a report on what the likely impact will be after the Bill becomes an Act, if it does so. On that basis, I hope the Government will accept that we need much more information not only about the current standpoint but, similar to what the European Commission has provided to the European Parliament, on what the likely impact will be.
Baroness Byford (Con)
My Lords, I declare my family’s farming interests. I have read and reread the amendment of the noble Lord, Lord Grantchester. I have a couple of queries, so I have to ask whether he and my noble friend the Minister can help me.
My worry is this: the amendment would surely tie the UK Government to whatever the rate is at that moment and not look towards the future. There is no timeframe or limit on this, as far as I can see. My concern is whether this means that the negotiation would not allow for the improvement of the UK’s share in a particular agricultural tariff-rate quota. As a result, would the amendment close the door to meaningful discussions of recent changes to the UK share of a particular quota?
I heard what the noble Lord, Lord Grantchester, said. He is a great ambassador of long standing for standards and equality, and on fair trading for agricultural goods in general; I hope I am as well. He is quite right to raise the whole question of fair trade and the standards that are set for our producers. When we first discussed this last Monday—I think; I lose track of where we are at—we talked in great depth about the expectations of a product, how it is produced and the responsibilities and standards set.
I do not think I need to ask the Government to pay exceptional attention to the needs of the agricultural industry, but the noble Lord raises a very important point regarding sheep farmers in particular. Sheepmeat is not eaten as much in this country as it used to be, but it is exported widely. Trade with Europe is very important and I hope there will be trade beyond Europe, but I wondered whether he could explain the way the amendment is written, because I have apprehensions about it. Will my noble friend the Minister be able to explain? Maybe she does not share my slight concerns but I felt they were worth raising. The thrust of the amendment is right but I am not sure that the wording is.
Baroness McIntosh of Pickering
I congratulate the noble Lord, Lord Grantchester—on what I think might be his birthday—on moving the amendment. I repeat my concerns relating to the earlier group of amendments, not just for the hill farmers of Wales but for the hill farmers of the north of England, including North Yorkshire, County Durham and Northumbria, and Scotland, as well as other parts of the United Kingdom. The noble Lord raised his concerns in an interesting way but I have to echo my noble friend Lady Byford’s concerns, which she so ably addressed. It would be helpful for the Minister to explain whether our understanding is correct and what the relationship is between this amendment and the earlier tariffs we discussed, and whether, if we were to introduce the zero-rate tariff, this would equally be of concern with this amendment.
Lord Whitty (Lab)
My Lords, I would like to put in a brief word here. The noble Baroness, Lady Byford, will recall that, towards the end of the time when she and I were crossing swords on agricultural policy, the issue of agricultural trade multilaterally fell down in the Doha round precisely on this issue of tariff-rate quotas. The amendment of my noble friend Lord Grantchester—who was also present on those occasions—is a probing amendment to see how we are going to deal with the situation for imports.
Our exports, to which the noble Baronesses, Lady Byford and Lady McIntosh, referred, are also vitally important, but we need to have a line from the Government in relation to the existing tariff quotas for European imports with a number of our trading partners. It is not necessarily in the interests of those trading partners to preserve what is de facto the UK share of imports from them to the whole of the EU. Some of them are fly enough to actually notice that their bargaining position in relation to the UK on its own might be slightly greater than their bargaining position in relation to the EU as a whole. It is therefore not entirely surprising that, in these existing potential rollover treaties, there might be some attempt to change the amount of imports that the tariff quota allows into the UK. That itself, of course, is potentially a danger to our domestic production in many of these areas. However, assuming that it will be an easy task simply to roll over all of these existing EU-wide treaties is one of the features of the Government’s complacency.
Of course, the issue becomes even more important when rather bigger agricultural producers might actually be approached by us, or approach us, for a free trade agreement down the line, when their interests will undoubtedly be to press for very high import quotas— from Brazil, America or Australia—in any potential free trade agreement that we are seeking to make primarily on behalf of our manufacturing and service sectors. It might well be something on which we need to put down a marker now.
The Government might have some difficulty with the wording of my noble friend’s amendment, but we need to know what their position is on this. Otherwise, we will be presented with a whole series of treaties that incorporate the existing division, which might not be to our benefit and, more importantly, will set a precedent for how we are going to deal with future treaties and agricultural trade within that context.
Baroness Fairhead
My Lords, I thank the noble Lords, Lord Grantchester and Lord Purvis, for tabling Amendments 34 and 54 and for giving this House the opportunity to discuss this important area. I entirely agree with the concerns that have been raised, particularly on areas such as agricultural products, affecting farmers and rural areas, which were addressed by the noble Lord, Lord Grantchester, and my noble friends Lady Byford and Lady McIntosh. I would like to take these two amendments together, because there is a fair amount of overlap in the questions that each amendment raises. I would also like to do so in some detail, because they cover a very technical area and I hope that my clarification will help—that is the aim of what I am trying to do.
We have tariff-rate quotas both in the existing EU FTAs that we are working to roll over and in our WTO schedules. A different approach is required for each, which I am happy to explain. In doing so, I will also address each amendment first as it refers to the EU FTAs and then as it relates to the WTO TRQs. I will first address TRQs in EU free trade agreements. The EU has been clear that it will not revise its free trade agreements with third countries as a result of the UK exiting the EU. This is because usage of those quotas tends to be low. The UK is therefore engaging directly with our trading partners to agree new TRQs to apply under the continuity agreements, and we are making good progress. We are agreeing TRQs for the same products at levels that protect existing trade flows. We will continue to report fully to Parliament on the TRQs agreed as part of our Clauses 3 and 5 reports on changes to the agreements. Amendment 34 would therefore be impossible to implement in respect of EU FTAs, as there is no division with the EU to refer back to.
On Amendment 54, as I mentioned, the Government have already committed to lay before Parliament for each transitional FTA a report that sets out any substantial changes to trade-related matters. These reports will include details of changes to the TRQs. Let me assure noble Lords that the reports will also include an indication of the impacts associated with the changes to the TRQs. However, we would not expect there to be substantial business impacts from changes to TRQs, as we are maintaining TRQs for the same products sized at a level which protects existing trade flows.
On the EU Council decision relating to the modification of TRQs, to which the noble Lord, Lord Purvis, referred, I am happy to write to the noble Lord on that point and I will put a letter in the Library.
I turn now to the TRQs found in our WTO schedules. Here, the Government have taken quite a number of steps, and in addressing these amendments I believe it would be of value to noble Lords if I walked through them. To prepare to leave the EU, the United Kingdom has had to establish its own schedules of goods and services at the WTO. In doing so, we have taken the approach that we should maintain our current obligations as far as possible. This was announced to both Houses through Written Ministerial Statements on 5 December 2016. While much of our goods schedule is directly replicable—for example, our bound tariff rates—some parts, such as tariff-rate quotas, are not. Quotas are not directly replicable because they are a quantity coming into the EU 28, as your Lordships will know, and if they were exactly replicated this would lead to an expansion of market access into both the EU and the UK. This is why the Government agreed a co-operative approach with the EU to apportion WTO tariff-rate quotas, based on historic trade flows. This was agreed in October 2017 and communicated publicly through a joint letter by the UK and EU ambassadors to the WTO.
The UK schedule was finalised in July 2018. We sent it to the WTO on 19 July, and once again both Houses were informed through Written Ministerial Statements. Our schedule then began its formal three-month certification period on 24 July. That period was completed on 24 October. While most WTO members agreed with our approach, as I and the Secretary of State for International Trade once again explained through Written Ministerial Statements laid on 25 October, some WTO members have argued that their market access has been reduced by our approach to TRQs. This is why we announced the Government’s intention to enter GATT Article XXVIII negotiations on TRQs at the WTO to establish whether the apportionment we have proposed is a fair representation of the UK’s current rights and obligations.
Between October and 21 December, when the Government formally launched the Article XXVIII process, work was completed to prepare the necessary trade data and the notification for our Article XXVIII process to begin. We are now in the first phase of this, a 90-day notification period that lasts until 21 March 2019, during which WTO members can examine our TRQ trade data and register an interest in negotiating with us. After this, the UK will examine those claims and determine with whom and on which commodities we will be negotiating under Article XXVIII.
I should also mention briefly the EU’s corresponding transition at the WTO. The EU has launched its own Article XXVIII process, as it, of course, apportioned the EU 28 TRQs with the United Kingdom. It formally started this on 22 July 2018. The reason it was able to do so before the UK is because it did not have to establish a new schedule of its own. Our process and that of the EU are legally distinct and are being pursued separately. However, they are linked in that they derive from the same initial obligation, and WTO partners will need to be convinced that their access to the EU 27 and UK markets will be no less favourable once both processes are complete. So our processes are separate but complementary.
Lord Purvis of Tweed
The Minister has been exceptionally helpful and very clear, but I hope she will be able to address one question. If we leave without an agreement with the EU and this process of negotiation is under way, what will bind us to have the same position as the EU when it comes to what is being queried: namely, the methodology of the division of the timeframe and the statistics? It seems that if we leave without an agreement, there is no mechanism whereby we can consistently have the same position as the EU. At the moment, we have the same interest because of the agreement signed, but that is not a binding agreement that we have with the EU going forward. What, then, would link us to ensure that we have the same position? If that is not in place, a third country, quite rightly, would have doubts as to whether the EU position would be the same as that of the UK, and vice versa.
Baroness Fairhead
My understanding—again, I will write to the noble Lord if this is not the case—is that the apportionment approach that was being used is utterly within WTO provisions and normal practice. The WTO laws will dictate how that process works and, therefore, as I said, the EU is pursuing its own Article XXVIII and we are pursuing ours; they are separate legally but obviously complementary. On the noble Lord’s specific question about what else oversees that, I think it is more the WTO, but if that is incorrect, I will write to him.
Lord Purvis of Tweed
I am grateful for that, and the Minister is helpful. That leads on to my next point, which is that the countries themselves have said that other concessions could compensate for the loss of market access. Negotiations are therefore, by definition, discussions about whether the UK and the EU continue to hold to their agreement or whether other compensation concessions could be offered. My question applies similarly to that. At the moment, we have a united position with the European Union. If we leave without an agreement, nothing is in place to ensure that concessions that could be offered to compensate for the loss of market access will be united between the UK and the EU. That raises questions about whether, when it comes to the discussions with third countries, they will seek different concessions from the UK. That opens up the whole issue that we are fearful about: will we offer different concessions to other countries which would potentially have a negative impact on our own industry?
Baroness Fairhead
I said that I will write to the noble Lord. I tried to address that in my first answer, and this is an inevitable follow-on question from that, should my answer not have been correct. However, they are two separate legal processes.
Baroness Kramer
The Minister has been tolerant. Perhaps I lack all the understanding I should have in this area, but my understanding is that, to be effectively a member of the WTO, it is necessary that the schedules are approved by all the existing members—the Minister can correct me if that is wrong. There can be temporary permissions when one is progressing along a path, but in effect any member country has a veto, and that does not have to have a reasoned basis. If any country felt that these new arrangements—the split of the tariff-free quotas, if you like, that was on offer to them—was not fair, it could not only argue that the arrangements were unfair but could simply say, “I don’t like this. Give me something better. And if you don’t give me something better, I’m not going to sign off on your schedule”. That means that we are then hampered in functioning, even on WTO rules. Can the Minister help me with that relationship?
Baroness Fairhead
I will try. First, the UK is already a member of the WTO; it was a founder member and it is a member. When its schedules have been lodged, they become the schedules, and even if they are not certified, we can continue to operate on that schedule. I committed to respond to the noble Lord, Lord Purvis, following a conversation we had following some press reports about certification and whether one country could operate; I have the draft of the letter and am about to sign it, and again, I will put a copy of that in the Library. It is clear that a country can operate on an uncertified schedule; indeed, the EU 28 are currently operating on a schedule which is not an EU 28 schedule. All that is set out in detail in this letter, which I hope will provide satisfaction.
Having now laid before your Lordships the steps the Government have taken at the WTO, I turn again to Amendments 34 and 54. We have made our proposed apportionment of WTO TRQs on the basis of the best data available to us regarding recent patterns of trade in the relevant products, so that any apportionment does not distort existing trade patterns. However, we have always said that, should trading partners have alternative data, we would be prepared to examine that in order not to distort trade flows in these commodities. If allowed, Amendment 34 would prevent us doing this, and, in doing so, would undermine one of the UK’s obligations to our WTO partners at the moment when we are re-establishing and reasserting ourselves as an independent member of the WTO.
Amendment 54 requests a report detailing our progress on GATT Article XXVIII negotiations. I trust that the Government’s frequent updates on our WTO transition reassure this House that the Government are committed to keeping Parliament informed at every stage of this process. We will continue to update Parliament as we progress and complete our Article XXVIII process.
The report in Amendment 54 also requests an assessment of whether the objections raised by other countries that gave rise to our Article XXVIII negotiations affect the UK’s ability to trade on our goods schedule after we leave the EU. I hope that I addressed that in my previous answer to the noble Baroness, Lady Kramer. We will be able to use and base our trade policy upon our goods and services schedules even if they remain uncertified at the point they become operational—whether that be after the conclusion of the implementation period or in a no-deal scenario in April 2019. We are also able to negotiate, sign, ratify and bring into force trade agreements with uncertified WTO schedules. This situation is not without precedent. Indeed, the EU has done precisely this for years while signing several trade agreements, including with Canada and Japan.
Given the broader work already in train, the impact these amendments may have on that and the Statements that the Government have made and will continue to make throughout our trade policy transitions, I ask that these amendments be withdrawn.
Lord Grantchester
My Lords, I thank the Minister for her answers and explanations. Once again, I am grateful to the Committee for allowing me to come forward with this probing amendment to understand better the processes and procedures that the Government are currently undertaking. They will be of great importance to large sections of our economy. They were put forward in the context of continuity—very much, as the noble Baroness said, of rolling forward existing trade flows. Hence, I was very happy to take questioning and probing from the noble Baronesses, Lady Byford and Lady McIntosh, on the amendment’s meaning. The answer is that I wanted to get the subject matter down for debate and to understand it better—and, indeed, to underline the difficulties of the word “improvement”, which the noble Baroness, Lady Byford, used for how we might want to change things and go forward. Obviously, improvement means different things to different stakeholders in the process.
I am very grateful to my noble friend Lord Whitty for explaining the background so comprehensively. What is really referred to is market access. Does improvement mean better market access, and for whom? How does this affect other stakeholders and the balance of interests between the countryside, the food chain and consumer interest and consumer prices? I was not really coming from the angle of an importer or an exporter, but I wanted to have the issue debated. The Minister has provided a lot of background interest and information that will certainly take a lot of reading and reflection.
Finally, the process outcome still seems far from clear. We will be talking about the apportionment that can result from it and how this may still give rise to anxieties and the balancing of those interests. Having made those remarks, I am very grateful to the noble Lords and noble Baronesses who have taken part in this little debate. I beg leave to withdraw my amendment.
Lord Grantchester
“Internal energy market
It shall be the objective of an appropriate authority to take all necessary steps to implement an international trade agreement which enables the United Kingdom to fully participate after exit day in the European Internal Energy Market.”
Lord Grantchester
My Lords, Amendment 35 seeks to set the objective that the UK should fully participate in the European internal market after exit from the EU. This wording may also need to be examined. However, it is once again merely a probing amendment to enable the Government to provide more clarity on their intentions in the Bill and in future scenarios. Full participation may be said to imply continued membership in the internal energy market. While the Government have now been clear that leaving the EU will also include leaving Euratom, they took some time to explain what the close relationship with Euratom would mean. We now know that it means full duplication of regulations and regimes. However, what is the situation regarding the internal energy market, and—turning to Amendment 36—how does this outcome bear on the internal all-Ireland energy market?
Once again, an industry is calling out for clarity over trading arrangements as the UK leaves the EU. In the event of no deal, the outcomes become even more precarious and pose risks to the functioning of the UK energy market. Energy and climate should be among the first topics covered in negotiations to preserve security of supply and aid completion of the modernisation of the UK’s energy system, which requires tens of billions of pounds in investment in a smart power grid, low-carbon transport and heating to underpin the competitiveness of all UK business. Electricity and gas cross-border trading is an increasingly important part of efficient markets. Net imports of electricity accounted for 4% of the UK’s power supply in 2017 and 47% of gas arrives via pipelines from Europe. Increased interconnection and a proposed doubling of these connectors with neighbouring markets are planned—for example, from Peterhead—and will help balance the security of power supplies.
I am grateful to my noble friend Lord McNicol for tabling his Amendment 36, to which I am also speaking in this group. It draws attention to the challenges posed by the integration of the island of Ireland’s single electricity market. Also included in this group is Amendment 46, which proposes that there should be no hard border between Northern Ireland and the Irish Republic. Will the UK continue to participate through membership of the internal market to avoid disruption across both Ireland and the UK and maintain a low-cost, efficient power supply through integrated systems under common international environment laws? Losing access could lead to higher bills for consumers and potential disruptive effects, and raise critical issues regarding the EU emissions trading scheme. It is important that the Government provide clarity. I beg to move.
Lord Purvis of Tweed
I am not speaking on behalf of my noble friend Lord Teverson, the absolute expert on these Benches on these issues, but simply to ask a number of questions in support of those raised by the noble Lord, Lord Grantchester. He rightly points out that one of the core relationships that currently exists between Britain and Northern Ireland, and the United Kingdom and the Republic of Ireland, is energy. It is something that has perhaps not had the same profile or publicity as border checks, but it is very significant to consumers on both sides of the Irish Sea. It is of interest to me, as someone who represented a Scottish Borders constituency, that Northern Ireland’s security of electricity supply depends on the supply of natural gas from Moffat, which is just outside my former constituency and supplies 100% of its gas requirements. After the UK’s exit from the EU, Northern Ireland will continue to source 100% of its gas from Great Britain. As a consequence, the integration of the energy market for the Republic of Ireland and Northern Ireland now depends on an integrated single electricity market. The interconnectedness of energy is something that political agreements will have great difficulty disentangling. The request for clarity on the current position is very important. It is even more important given that there is now a real prospect of leaving the European Union with no agreement. The Government have said in their position paper on Northern Ireland and Ireland that,
“the new framework relevant to the energy market in Northern Ireland and Ireland should … facilitate the continuation of a single electricity market covering Northern Ireland and Ireland”.
But how this is to be done separate from the European Union raises significant questions. I hope the Minister is able to respond to this.
The evidence provided by Minister Richard Harrington to the Lords committee is interesting. He said:
“Whether we are in the EU or not in the EU, it is in the interests of both Northern Ireland and the Republic of Ireland to continue a shared electricity system … We are held up in sorting this out only by the progress of the general talks in Europe”.
The question mark over where we currently are with these general talks in Europe means that it is urgent that we have clarity on the current position on securing agreement on a shared electricity system. The real question in leaving without an agreement with the EU is whether that raises issues with regard to maintaining the single internal energy market.
The final point on which I ask for clarification from the Minister is that it is not just the operation of the market on a regulatory basis that is of importance. The market operates primarily because of the free movement of people and professionals and the regulatory systems that surround it. We also know that when it comes to the operation of the market there is the jurisdiction of the European Court of Justice. What is the Government’s position on the jurisdiction of the legal supervision of how such integrated electricity markets will operate?
Free movement of people and clarity on jurisdiction are core elements of why we believe that moving from the European single market will cause real damage. The integrated single electricity market is a case study in itself in how it operates effectively at the moment and why question marks over its future need to be addressed. Clarity, as sought by the amendment, is necessary. I hope we can secure it from the Minister’s response.
Lord Hain (Lab)
My Lords, it is a pleasure to follow the noble Lord, Lord Purvis, who made some important points about the energy market, especially on the island of Ireland.
Amendment 46 is consistent with the provision of the EU withdrawal Act after a near-identical amendment passed by your Lordships’ House was accepted by the Government last summer. The central purpose of the UK’s, Ireland’s and the EU’s shared objective of avoiding a hard border is to protect the hard-won peace and reconciliation. That peace process was begun by the Good Friday agreement of 1998 but is still just that: a process—which is now, I think, sadly in reverse. Although it would be wrong to overstate the link between that and recent dissident IRA activity, specifically the car bomb in Derry/Londonderry, it does demonstrate the willingness of paramilitaries to exploit the current Brexit uncertainty and devolved government limbo to undermine the fragile peace, as the noble Lord, Lord Empey, said last week in this House.
The border is often described as the Irish border. It is not just that: is the UK’s land border with Ireland and the EU. Therefore, it is our responsibility as much as it is Ireland’s and the EU’s. Some 110 million person crossings take place over the border every year. Northern Ireland, with a population of 1.8 million, exports £3.4 billion over the border. It is by far its biggest export destination outside the UK and the first export destination for new and growing enterprises. At least 5,000 Northern Ireland companies, and probably many more, trade with their neighbours over the border. Tens of thousands of people live on one side and work on the other. Supply chains operate across the border without impediment. For instance, each year, more than 400,000 lambs and 750 million litres of milk are exported from Northern Ireland to Ireland for processing; 4.6 million heavy goods vehicles and light vans cross the border every year, along with 22 million cars. These crossings take place all along a 300-mile border with 300 crossing points.
A little-noticed document published on 7 December by the Department for Exiting the European Union lists no less than 157 different areas of cross-border work and co-operation on the island of Ireland, many of which have been facilitated by Ireland and the UK’s common membership of the EU. Almost every one of those areas concerns people’s everyday lives, and almost all are linked to the European Union and Ireland’s and the UK’s common membership of it since 1973.
Life has become pretty normal for most people in Northern Ireland over the past 20 years or so. Like anyone else in the UK, people there go to jobs near to them or in the next town. They go to doctors, chemists and hospitals near to them. They buy local fresh food. They use trains, buses and roads to get around.
The difference is that for many in Northern Ireland, the next town can be in a different jurisdiction. If we get Brexit wrong, it will cause serious inconvenience and cost. But for British and Irish citizens living in Northern Ireland, getting Brexit wrong will bring immediate and harsh consequences; many aspects of normal life will be much harder or even impossible. People live on one side of the border and work on the other. Because of EU rules that the UK helped to make, cancer care and ambulance services are run jointly across that border. You can get a prescription on one side and medicines on the other because of more EU rules that we share. Cheaper energy and more choice across the island of Ireland again exist thanks to those common EU rules. Cross-border work and co-operation on the island of Ireland, facilitated by EU laws, covers livestock movement on farms straddling the border, food safety, tourism, schools, colleges, farming, fighting crime, tackling environmental pollution, water quality and supply, waste management, GPs, blood transfusions, bus services, train services, gas supply, electricity supply and so on.
All those things add up to making life feel normal after, just 20 years ago, the Good Friday agreement all but finished the violence and murder which killed thousands of people, including many in Britain. The border being invisible today is a big part of that peace process and we must not let Northern Ireland go backwards by putting up any new barriers.
It is those very low-level, ordinary aspects of daily life that are the real signs of the precious achievement of the peace process. Although I strongly reject the Prime Minister’s deal, I cannot and will not join those attacking what is known as the Irish backstop. Any Brexit deal of any kind must include this insurance policy or backstop. It is an insurance policy: a rainy-day back-up plan in the event that a new UK-EU trade deal is not ready by the end of 2020—or beyond. It is a sensible policy to be used only if needed—and everyone hopes it will not be—to ensure that the border between Northern Ireland and Ireland remains open and invisible.
It is not just that Ireland and the EU will not accept it any other way; nor should we in the UK. Whatever happens with Brexit, it is vital we protect what we have achieved together in Northern Ireland in the past 20 to 30 years and avoid any hardening of the border in any way. I call on our fellow politicians to stop playing politics with Northern Ireland, as so tragically happened in the House of Commons yesterday, and insist on an insurance policy regarding the border. We should also demand an end to attacks on the Irish Government, who, in insisting on the backstop, are merely fulfilling their obligations under the Good Friday agreement, as we in the UK should also be doing.
The UK and Irish Governments, along with the EU, were right to prioritise the Irish border in the Brexit negotiations. Your Lordships’ House has rightly focused on it too, not least because the blunt truth is that maintaining an open border always was the Achilles heel of a hard or no-deal Brexit.
Experts argue that there are four key ingredients for successful border management: first, trust and co-operation between authorities and agencies on both sides; secondly, the harmonisation of these agencies’ approaches; thirdly, the application of common standards to minimise the need for checks and controls in the first place; and, fourthly, the use of technology to improve efficiency. Those arguing that technology can solve all the Irish border Brexit problems are plain wrong. It may help, but whether a border is frictionless depends on the rules being applied to movement across it being the same either side—it is the rules themselves, not so much the means used to facilitate enforcement of those rules. Yet Brexiteers seem unwilling to acknowledge that leaving means a growing divergence of the rules on either side of the border. Their conundrum is that divergence is something they favour to build their free-trade, deregulated, low-tax nirvana— fantasy, I think—otherwise, they argue, what is the point of Brexiting?
The UK and Ireland have their common—I stress, common—obligations under the Good Friday agreement to ensure peace, stability and progress. The agreement contains two approaches to this that directly affect the border: intensification of British-Irish and north-south co-operation, and de-securitisation. De-securitisation meant not only the removal of security installations but the British Government’s commitment to bringing about measures appropriate to and compatible with a normal, peaceful society. The last remnants of the militarised border were removed only 12 years ago.
It is simply no good politicians or commentators saying, “Nobody wants a hard border so there won’t be one”. There will be if we do not stop it, because if we Brexit without a deal or without a backstop, both Ireland and the EU will have responsibilities to ensure protection of the single market and customs union. The UK will have its own responsibilities, including meeting World Trade Organization requirements, which in turn mean a hard border.
The Minister of State, Department for International Development (Lord Bates) (Con)
My Lords, I need to manage noble Lords’ expectations as to what I am going to be able to say. The noble Lord, Lord Hain, has given a polemic based on his deeply held views on the situation in Northern Ireland, born of great experience and service. I do not think I will be able to persuade him on this issue and Amendment 46, so he will doubtless come back to it on Report. I will, however, put some important points on the record regarding where, as of today, Her Majesty’s Government stand on these crucial issues.
The noble Lord, Lord Grantchester, talked about the internal energy market. Again, I have to be careful: I am not able to give him an answer at this stage, beyond that set out in the political declaration. I know he has read that carefully, along with the explanatory note; section XI deals with energy co-operation.
Let me first put some comments on the record about the nature of the internal energy market, and then I will turn to the single energy market and north-south co-operation, addressed by the noble Lord, Lord Purvis. The Government continue to support the development of energy interconnectors—which bring benefits to countries at both ends of the cables, including improved security of supply and the lowering of prices for businesses and consumers—and support efforts to decarbonise. That is why we set out in the political declaration that both the UK and the EU should co-operate to support the delivery of cost-efficient, clean and secure supplies of energy and gas, and to ensure as far as possible that efficient trading over our interconnectors continues. Our aim is to secure the best possible future arrangements for trade in energy, and which achieve the objectives set out in the declaration, to which I referred.
On the effect of the shared wholesale market, the all-Ireland single electricity market provides significant benefits to consumers and the economy in both Northern Ireland and Ireland, as the noble Lords, Lord Purvis and Lord Hain, alluded to. It is also an example of north-south co-operation on the island of Ireland. The Government are firmly committed to facilitating the continuation of a single electricity market in any EU exit scenario. The agreement reached on the single electricity market annexe, as part of the Northern Ireland and Ireland Protocol to the withdrawal agreement, should ensure that the SEM is maintained. We also expect to reach an agreement with the EU on a future economic partnership that will maintain the SEM without engaging the backstop. As set out in a technical note on electricity trading, published in October 2018, which the noble Lord, Lord Purvis, referred to, we will take all possible measures to maintain the SEM in the event that we are unable to reach an agreement. Even in this scenario, which I stress—
Lord Purvis of Tweed
Perhaps I might add some clarification. The Minister has just said that not all of the Northern Ireland protocol is now up for renegotiation—as the Commons have voted for—only part of it. He said that the energy component of it is going to carry on. So which parts of the backstop are being renegotiated and which parts are not?
Lord Bates
I have been on the Front Bench long enough to see a curveball lumbering down the crease. If the noble Lord will forgive me for not taking a swing at it, at such a delicate time, I do that in all seriousness because I want to get the wording precisely right in relation to this. The noble Lord has heard the remarks that I made in relation to the annexe to the Northern Ireland protocol, and that is the position. If we have more to say, I will certainly say that ahead of Report, but even in the worst scenario—
Lord Purvis of Tweed
I did not intend to bowl a curveball or even a googly—or anything. It was a genuine point. The Government’s position now is that they are seeking to renegotiate the whole protocol, commonly known as the backstop. If that is not the case, Parliament needs to know, because we understand that the Government are now seeking a renegotiation of part of the agreement. We know that the European Commission has said that this is not up for renegotiation. If the Government are telling the Committee that only part of it is being renegotiated, that is really significant, because at the moment we understand that the whole element is being renegotiated.
Lord Bates
I am happy to put some additional comments on the record for the noble Lord, in that spirit. Last night, the majority of MPs said that they would support a deal with changes to the backstop, combined with measures to address concerns over Parliament’s role in the negotiation of the future partnership relationship, and commitments on workers’ rights. We will now take this mandate forward and seek to obtain legally binding changes to the withdrawal agreement that deal with concerns on the backstop while guaranteeing no return to a hard border between Northern Ireland and Ireland. We are keen to work with the Government of Ireland to ensure that the SEM will continue in any scenario, and welcomed their statement in December that they were engaging intensively with the EU to ensure that the single electricity market would continue. I hope that this provides some reassurance.
On the point made by the noble Lord, Lord Hain, we have been consistent in our commitment to avoiding a hard border between Northern Ireland and Ireland, upholding the Good Friday agreement and maintaining the conditions for north-south co-operation. We are delivering on those commitments. We negotiated a withdrawal agreement that delivered on those commitments in good faith; we have worked hard to build support for it in Parliament over many months. It was clear to the Prime Minister, having met parliamentarians from all parties, that a change to the backstop would be necessary to get the agreement through. The Prime Minister was clear that there are a number of ways to do that and that she will work with colleagues from all parties, and with the EU, to secure changes that command the support of Parliament. Although the Government will seek to secure legal changes to the backstop, their commitment to avoiding a hard border and maintaining the necessary conditions for north-south co-operation remains undiminished.
In a paper published earlier this month, the Government set out their commitments to Northern Ireland, including: a legal guarantee that the backstop could not be used to alter the scope of north/south co-operation; a role for a restored Northern Ireland Executive in UK-EU discussions, through the Joint Ministerial Committee, on matters concerning Northern Ireland; a commitment to seek the agreement of a restored Northern Ireland Assembly before new areas of EU law could be added to the protocol; and a legal guarantee that Northern Ireland businesses will continue to enjoy unfettered access to the entire UK market.
Let me be clear: the Government are committed to ensuring that any arrangements to avoid a hard border on the island of Ireland respect the devolution settlement in Northern Ireland. The UK recognises our unique relationship with Ireland. The UK-Ireland relationship should continue to operate through the well-established three-stranded approach set out in the Good Friday agreement. At this stage, I am unable to add to the remarks I have already put on the record, but I thank noble Lords for the opportunity to make them. I know that we will come back to this issue on Report, but in the meantime I hope that the noble Lord will feel able to withdraw his amendment.
Lord Grantchester
I am grateful to all noble Lords who have contributed to the debate. As the Minister said, this issue relates not only to the energy market but to crucial aspects of the UK border on the island of Ireland, as spoken to by my noble friend Lord Hain, whom I thank for his remarks.
Returning to the amendments on energy, I am sure that co-operation between industries from member states will continue on a practical basis, but against the challenges of modernisation with low-carbon energy, a clear commitment from the Government could settle the issue. Interconnectors are not the only relevant things here, as the internal energy market provides challenges to the Government on other aspects, such as continued participation in the EU emissions trading system. I note that the Minister was most careful with his words, which the Committee will study with interest. I beg leave to withdraw the amendment.
Trade Bill
Wednesday 30th January 2019
(5 years, 9 months ago)
Lords ChamberRead Full debate Trade Bill 2017-19 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 127-III Third marshalled list for Committee (PDF) - (28 Jan 2019)
“Bilateral system of civil judicial cooperation
(1) It shall be the objective of an appropriate authority to take all necessary steps to implement an international trade agreement which enables the United Kingdom, after exit day, to fully participate in a bilateral system of civil judicial co-operation for the purposes of facilitating trade between the United Kingdom and the European Union. (2) A bilateral system of civil judicial co-operation under subsection (1) shall include agreed conditions on—(a) jurisdiction, including applicable law and choice of jurisdiction; and(b) bilateral enforcement and recognition of judgments.”
Lord Marks of Henley-on-Thames (LD)
My Lords, Amendment 37 in my name and that of the noble Lord, Lord McNicol of West Kilbride, would make it the objective of an appropriate authority to secure a bilateral system of civil judicial co-operation between the UK and the European Union, to include arrangements for the choice of jurisdiction, the choice of law and the bilateral enforcement and recognition of judgments.
The amendment is relevant to the Bill in at least three ways: first, to new free trade agreements with third countries that currently enjoy FTAs with the EU, and therefore with us through the EU; secondly, to bilateral FTAs with third countries that might enter such agreements with us in the expectation of further trade through the UK with the EU member states; and, thirdly, in the event of no deal, when, as the noble Lord, Lord Hannay, pointed out earlier, the Bill—which will then be an Act—after exit day will be the only legislation bearing upon the arrangement of future FTAs.
In moving the amendment, we have every reason to believe that we are pushing at an open door. In debate after debate since the 2016 referendum, mine has been just one of many voices arguing that if we leave the EU we must maintain the whole gamut of the arrangements for cross-border judicial co-operation that we presently enjoy as a member of the EU. Every time, the Government have responded that they recognise and will maintain the benefits of these arrangements for the United Kingdom. Only yesterday we considered SIs laid by the Government on this topic. The noble and learned Lord, Lord Keen, was very clear that the SIs were laid only against the undesirable possibility of a no-deal Brexit, and accepted that should that occur we would be losing a significant benefit; I refer to columns GC 231 and GC 233 in yesterday’s Hansard. We would be forced to fall back on less effective, more costly, extremely inconvenient and altogether inferior alternative arrangements.
Whatever outcome emerges from the current impasse, we should do all we can to replicate all the arrangements for civil and commercial cases that we currently enjoy. These stem largely from the Brussels regime and its provision for the determination of jurisdiction and for the mutual recognition and enforcement of judgments. The Brussels regime principally comprises the Brussels Ia EU regulation and is supplemented by the 2007 Lugano Convention, which provides similar arrangements for Norway, Switzerland, Iceland and Denmark. Choice of law in contract cases, which make up the vast bulk of commercial litigation, is governed largely by the Rome I regulation, and Rome I applies throughout the EU except in Denmark, which has an opt-out for judicial co-operation.
If we failed to replicate the arrangements of the Brussels regime, what we would lose is well summed up in two bullet points in the Explanatory Memorandum to yesterday’s SI on civil jurisdiction and judgments. The first refers to,
“a system of uniform jurisdictional rules to identify the appropriate court in which to bring a civil or commercial claim”.
The second refers to,
“a simplified mechanism to recognise and enforce the judgments of EU Member State/EFTA state courts in civil and commercial cases, with a view to reducing costs for litigants and increasing efficiency. The possibility for such simplified and almost automatic treatment of the judgment of one such state in another is based on the ‘mutual trust’ that each state will have applied the uniform rules of jurisdiction”.
These arrangements have been built up over decades and British lawyers, jurists and judges have played a major part in their development. The European Judicial Network in civil and commercial matters, established in 2001 by the European Council, is an important forum for cross-border co-operation between courts across the EU. It seems to me that there is no significant reason why we should not be able to negotiate some continued access to the European Judicial Network after we leave the EU.
Throughout the European Union, citizens and businesses now know where cross-border disputes are to be determined. They know what law is to be applied. Crucially, they can be confident that court orders obtained in one member state will be recognised and enforced without fuss, delay or extra proceedings throughout the Union. This system has been of incalculable benefit not just to those who use our legal system but to our economy as a whole, because it is widely understood that all member states respect the arrangements and decisions of courts in other member states.
It often seems to me—I hope I can say this as a lawyer without special pleading—to be largely overlooked that our legal system has contributed significantly to Britain’s commercial success during the decades of our EU membership. One reason the United Kingdom has been so successful in attracting both inward investment from outside the EU and trade from elsewhere within the EU has been the fact we have not just excellent financial services and a sophisticated financial architecture—another plus is sometimes said to be political stability but I somehow doubt that at the moment—to add to the benefits of the English language and a convenient time zone, but a well-respected commercial legal system, one that functions without undue delays and at cost levels that are reasonably competitive in the international market, and which produces outcomes that are relatively predictable and generally accepted.
A very important component of that success is that our legal system functions internationally in supporting cross-border trade and international commerce. If we lose that, however frictionless we may make our trading arrangements, we will have compromised our future both as a destination for international investment, attracted to the United Kingdom as a gateway to the European Union, and as a trading partner for member states of the EU and the EEA. Put shortly, at a time of major upheaval, we will have needlessly thrown away a significant competitive advantage. That is something we cannot afford to do and it would be folly indeed. I beg to move.
The Minister of State, Department for International Development (Lord Bates) (Con)
I thank the noble Lord, Lord Marks, for moving this amendment and raising this very important issue. He is right to highlight the contribution which UK law has made to the commercial contract area and the success of trade and financial services.
We have long made clear our intention to negotiate a new relationship with the EU which covers civil judicial co-operation. The political declaration provides a positive means for discussion on this. It makes it clear that the UK and EU have agreed to explore a bilateral arrangement on matrimonial and parental responsibility and other related matters. This goes further than the arrangements that the EU currently has with any other third country to date.
The UK also remains committed to future co-operation on civil and commercial matters with the EU—recognising that this is in both our interests, for the reasons the noble Lord, Lord Marks, set out—and to similar co-operation with other international partners. In this area, the UK will, as a minimum, continue to prioritise joining Hague 2005 in our own right and seek also to accede to the Lugano Convention. The UK will engage with EU partners to ensure that these important issues, which provide vital protections for citizens, are the focus of detailed negotiations with the EU.
On the specific issues which the noble Lord referred to, co-operation in this area makes clear that the UK and EU have agreed to explore a bilateral arrangement on aspects of law. This goes further than any arrangements that the EU currently has with a third country. The UK also remains committed to international co-operation in future.
The noble Lord asked what would happen in the event of no deal. As a responsible Government, we are preparing for all outcomes, hence the statutory instruments debated in Grand Committee yesterday. We have published a dedicated technical notice for civil judicial co-operation, detailing how the rules would change in the event that we cannot reach a deal. This is not our preferred outcome—we remain focused on getting a deal that works for the UK and the EU. The rules on civil judicial co-operation rely on reciprocity. After exit, even if the UK were to apply these rules unilaterally, there would be no requirement on EU member states to apply the same rules in the UK. Without the guarantee of reciprocity, our broad approach is to repeal existing EU instruments and revert to applying the rules which the UK currently applies in relation to non-EU matters.
I am grateful to the noble Lord for raising this important matter, and I hope that I have provided as much reassurance as I am able to at this stage.
Lord Marks of Henley-on-Thames
My Lords, I am grateful to the Minister for his response, and I will be withdrawing the amendment, with your Lordships’ leave. The plain fact is that the arrangements the Government have in mind in the event of no deal are what I described yesterday as “thin gruel indeed” compared with what we have. They are inferior, bitty and involve a great deal of scope for satellite litigation where parties are having to litigate on issues such as enforcement and jurisdiction in different jurisdictions. This is so important because it highlights an area which has had far too little attention in the event of no deal. It is a significant danger for us—no deal will deprive us of the competitive advantage we enjoy as a member of the EU.
I share the Minister’s confidence that, in the event that we secure an agreement, we will also secure an agreement on judicial co-operation during a transitional period, because it is in the EU’s interests as well as ours. The danger is that people float into no deal by accident, and cost us everything involved in losing judicial co-operation. It is a significant feature that ought to weigh heavily in the minds of all the policymakers involved. With that warning, I beg leave to withdraw the amendment.
“UK participation in Common Transit Convention
It shall be the objective of an appropriate authority to achieve before exit day the implementation of an international agreement to enable the United Kingdom to participate in the Common Transit Convention after exit day.”
Lord McNicol of West Kilbride (Lab)
I rise to move Amendment 38, and thank the noble Baroness, Lady Randerson, for her support. This grouping includes many amendments along the same vein. Your Lordships will be pleased to know that I am not going to speak to each one individually, but I will address the common themes of this group of amendments, pulling out a few specific details. I am sure that a number of noble Lords will be speaking in more detail to their amendments within this group.
This group seeks the inclusion of new clauses after Clause 5 which will put on the face of the Bill a host of organisations, agreements and arrangements which are vital to the continuing smooth operation and functioning of life, organisations and businesses post Brexit. As I am sure the Minister is aware, many of these amendments have come from organisations, trade unions and businesses that are concerned about how they will be affected post Brexit and are seeking ways to mitigate any harm. Many of these amendments do not fully resolve the problem of Brexit, nor all the costs associated with leaving, but if the Government were to accept them it would offer a level of protection and certainty that is currently not there.
Lord Fox (LD)
My Lords, I am grateful to the noble Lord, Lord McNicol of West Kilbride, for introducing this group. As he pointed out, there are 17 amendments that cover objectives for future free trade agreements. The noble Lord, Lord Hannay, is not in his place right now, and I would never disagree with him. He identified a different group of amendments as being the most important part of what we are debating, but, for many people and for the impact that this is going to have out there in the country, this group of amendments is the plumbing. They cover the day-to-day operations of life, so I consider this to be a most important group of amendments.
I am not going to speak to all 17 amendments, but I am going to speak to four of them, which means that, unfortunately, I will break my own rule of brevity, but I will try to be efficient in what I say. I am going to speak to Amendments 39, 43 and 44, to which my name is attached, as well as Amendment 69, to which my noble friend Lady Jolly added her name. She is unable to attend.
Amendment 39 requires the UK to negotiate with the EU an international trade agreement that creates a system for the mutual recognition of professional qualifications, as the noble Lord, Lord McNicol, set out. It must be at least as exhaustive as our current system and allow people to work across borders, allow workers to demonstrate the necessary requirements where qualifications diverge, and provide for co-operation between regulators. The noble Lord, Lord McNicol, used the example of architects; looking at the other side of the coin, 20% of the architects in this country come from an EEA or Swiss background. That is just one profession—one activity. The Government have the stated aim of building 300,000 houses; they will not have enough architects if we are not successful with this activity.
Under the current mutual recognition arrangements, for doctors, nurses, vets, dentists, midwives, pharmacists and architects the recognition is automatic, providing that conditions on minimum training and professional experience are met. For others, there is a general system whereby regulators cannot ordinarily refuse applications to practise from other EEA or Swiss nationals in this country if they hold the qualifications required by their home state. Since 1997, the UK has recognised over 142,000 EU qualifications. This is a big job. Noble Lords should remind themselves that there will be a lot of work to do around this, including for lawyers, social workers and engineers. Over 27,000 decisions to recognise UK qualifications have been taken in the EU.
The political declaration states:
“The Parties should also develop appropriate arrangements on those professional qualifications which are necessary to the pursuit of regulated professions, where in the Parties’ mutual interest”.
I suggest that replicating the system to be at least as good as the current one is in the interest of this party—the United Kingdom. On that basis, I hope that, as the noble Lord, Lord McNicol, said, we are pushing on an open door here. The four principles set out in this joint amendment are the same as the Government’s four priorities for a future mutual recognition regime. I hope that the Minister can confirm that that is the Government’s understanding; perhaps they can settle some nerves by putting this amendment in the Bill.
Clearly, a no-deal Brexit situation would make life much more difficult. A statutory instrument is running its way through the system; it has been published, but it is subject to the affirmative process and has yet to be debated in the House. I look forward to that; I say that because there are so many SIs, but I look forward to that process, because this is an important part of what we need to do.
The point made by the noble Lord, Lord McNicol, about UK workers working in the EU is equally important and vital. Clearly, if we leave the European Union with no agreement, we cannot mandate what happens to all our professionals in the EU 27, EEA and Swiss territories. However, I urge the Government to explain what representations they will be making in the event of a no-deal Brexit to carry over the qualifications at the very least, and then, of course, to put in place a regime that works.
Amendment 43 requires the UK to seek to negotiate an international trade agreement with the EU that binds the UK to EU rules on open and fair competition. We have had some discussion around state aid in the debate on a previous amendment, so I will not repeat that. However, this also includes mergers and anti-trust behaviour. The political declaration states:
“The future relationship must ensure open and fair competition. Provisions to ensure this should cover state aid, competition, social and employment standards, environmental standards, climate change, and relevant tax matters, building on the level playing field arrangements provided for in the Withdrawal Agreement”—
clearly, now we do not know what that agreement will be—
“and commensurate with the overall economic relationship”.
We have had this discussion in a different context, but a binding undertaking that there will be no regression on standards is important to a lot of people in this House, and other noble Lords who are not here today have made this point with strong arguments.
On Amendment 44 and REACH, the noble Lord, Lord Hain, spoke about regulatory divergence; if there is ever an opportunity for regulatory divergence, it will be around the complexity of something like chemicals legislation. I will not go into huge detail about UK REACH, but this House needs to understand the scale and the scope of this activity. I have experienced it from a business side, and the commitment of European businesses in sitting on literally hundreds of sub-committees, debating and working through the nature of chemicals, how they should be used, and the associated risks, laws and regulations is absolutely huge. I can see looks of consternation.
Baroness McIntosh of Pickering (Con)
My Lords, I shall speak to Amendment 63 in my name and those of the noble Lords, Lord Dykes and Lord Browne of Ladyton. I thank them for lending their support to the amendment, which relates not just to Amendment 39 but also, I would argue, Amendment 45—it is bizarre that they are not in the same group.
The amendment relates to lawyers in particular and the right to provide services, establish yourself in the legal profession and practise. I am a currently non-practising Scottish advocate but, as a young, recently qualified advocate, I went to Brussels to practise European law without having to take a separate qualification. I am greatly indebted, as I think are your Lordships, to the noble and learned Lord, Lord Keen of Elie, for moving the relevant statutory instrument, the Services of Lawyers and Lawyer’s Practice (Revocation etc.) (EU Exit) Regulations 2019, which the House adopted. I shall quote him because I cannot put it better than him. He said:
“In the event of us exiting without any deal, there will be no reciprocal rights—which was one reason why, as I indicated, these regulations are required. They are necessary in order that we can establish a position in which all third-party country lawyers will be on the same standing in the absence of a free trade agreement or other agreement with a third-party country. There will be no reciprocity—that will be a matter for the relevant EU country to consider—but clearly it is a matter that we would wish to address in future negotiations consequent on our exit from the European Union. This is dealing with the position in the United Kingdom in light of the existing regulatory regime under EU law. Clearly, and quite patently, you could not address the question of how the EU 27 are going to treat our lawyers going forward”.—[Official Report, 15/1/19; col 177.]
What concerns me greatly is that the next generation of young, budding advocates will qualify on 30 March or 30 April and will be unable immediately to ply their trade, or to continue to ply their trade after 29 March, if we crash out of the European Union without a deal. I could not find it in Hansard, but I took a note of what your Lordships said. I would not like to attribute it to my noble and learned friend Lord Keen, but we learned when the regulations were passed that Ireland’s professional body has taken the opportunity to increase the cost of qualifying as an Irish lawyer to practise there from £300 to £3,000. That is quite an increase. I think we learned from the Liberal Democrat Benches that, in another EU member state, a rule was passed to prevent the sharing of an office or creating a partnership with a British or other third-country lawyer wishing to practise in that country.
We will have a two-tier system. Having passed the regulations, we have, quite rightly, granted those EU lawyers who currently practise here or are qualified and wish to continue to practise here rights to continue or enable them to do so. How can that possibly be? I ask that the Minister use her good offices to ensure that that position is not sustained beyond 29 March.
I entirely endorse what the noble Lord, Lord McNicol, from the Labour Benches said in moving Amendment 38, and I look forward to Amendment 45 on much the same lines. I hosted a meeting here of all the professions that are deeply concerned: architects, dentists, lawyers, nurses and so on. I remind your Lordships that the mutual recognition directive took 21 years to agree in the case of architects. That is not a position to which we would wish to return.
I had a meeting with the Irish Commissioner, Phil Hogan, who was kind enough to receive a group of us from the House of Commons when I was on the Select Committee there. I am currently a member of the all-party parliamentary racing group, and in that capacity and others I attend race meetings. I also had the privilege to represent Thirsk Racecourse, and trainers throughout Thirsk and Malton and the Vale of York, during that period. I am grateful that Amendment 48 is being discussed this evening. If the tripartite agreement existed in its own right before it became part of the arrangements of the European Union, would it not make sense if it reverted immediately to that—a backstop, if you like? Is that the Government’s intention? I see no benefit in taking the tripartite agreement forward as part as existing arrangements. It will get lost in the wash, as it has done this evening in this group of amendments—I have not counted how many of them there are. That would be a very neat way forward. I am sure it would get the agreement of the French and the Irish, and it would be very much in the interests of the business. I remember, when Ireland reduced the rate of VAT, the number of trainers and owners that left this country. Personally, it has been to my advantage because the cottage I live in when I am in North Yorkshire was vacated by a trainer, Sue Bramall, who I understand has had great success training in Ireland, but obviously it is to the UK’s detriment. I would hate to see that happen again here.
I was aghast when I heard the Minister say earlier that the Government sought to revisit Clause 6 on the European Medicines Agency. One of my outside appointments is to work with the Dispensing Doctors’ Association, whose headquarters is based in Kirkbymoorside in North Yorkshire. We are in this curious position where we are going to follow the falsified medicines directive unless we crash out with no deal. That is the only benefit I can see of crashing out with no deal. The GPs in Ireland have been deemed to be self-employed, so they are going to be exempt from the provisions of the falsified medicines directive. Why is there this dichotomy—that we do not wish to be part of the European Medicines Agency, but we do wish to be part of the falsified medicines directive? I would like a route to understanding. I would be very happy to accept a letter on why that should be.
I am not going to rehearse and itemise all the agencies in Amendment 70, but I would make a particular plea for the EASA, the European Food Standards Agency and European Environment Agency. As I have mentioned previously—I have not yet had satisfaction on this point—we should commit to remaining part of the European rapid alert system, on incidents of food hygiene and food poisoning. The need for this was never more apparent than during the 2010 Horsegate scenario. We were lucky that that was a case of food fraud, where horsemeat was passed off as beef. Whatever happens to Clause 6, I hope that the Minister will confirm this evening that we will remain part of the European rapid alert system for such incidents.
Lord Lansley (Con)
My Lords, I refer to Amendment 62 in my name, which is part of a series of amendments in this group concerning mutual recognition— mutual recognition of good manufacturing practice, in this instance. I was prompted to table the amendment not least because many people in the pharmaceutical industry see this issue as an important part of our future economic partnership arrangements with the European Union, whether we continue to be EU members or in the single market or not.
Like Amendment 42 on the mutual recognition of authorised economic operators, Amendment 62 relates to instances of where the European Union has substantial mutual recognition agreements with third-party countries. In the case of authorised economic operators, those countries include Switzerland, Japan, the United States and similar countries—although not China in the instance of good manufacturing practice. It would be deeply perverse for us to start with standards that align entirely with those of the European Union, whether on authorised economic operators or good manufacturing practice, looking at the two amendments. If we lost that relationship with the European Union, it would make obvious good sense to maintain that mutual recognition.
In that context, the amendments commend themselves to my noble friends on the Front Bench because they are about continuity and trying to maintain the existing structure of agreements. Of course we want mutual recognition of good manufacturing practice with not only the European Union but the United States, Japan and Switzerland because, if we leave the European Union, four of the five largest pharmaceutical companies will be outside the European Union, with two in Switzerland and two in the United Kingdom. This issue matters a great deal to this important industry. Unfortunately, given the uncertainty and the way in which the European Commission sent advice to companies on their responsibility to prepare as if there would be no deal, pharmaceutical companies have, of course, already invested a considerable amount in ensuring that their batch authorisations and conformity assessments—and the authorisations associated with those—can be conducted inside the EU 27. That has cost quite a lot of pharmaceutical companies quite a lot of money already.
The noble Lord, Lord Fox, was quite right: this group of amendments is about the plumbing, the innards, of this issue. I am afraid that day by day, evidence of the enormity of the cost—in time, energy and money—of trying to stay as close as we can to the position we would have been in if we had stayed in the European Union is mounting. It does not do to dwell on that but there we are.
Finally, I am really surprised that some of our Brexit-supporting colleagues are not here to laud Amendment 38—the lead amendment in the group— on the common transit convention, which will assist significantly with customs simplification and the achievement of some reduction in the friction that might otherwise occur in trade. It is achieved with third-party countries and is not something that the EU absolutely has to offer. However—although I stand to be corrected by my noble friends—as the noble Lord, Lord McNicol, has said, it appears to have been agreed not only that we would remain within the common transit convention after exit day but that we would continue to remain in it even if we were to leave without a deal. That is a positive development.
Associated with it is the new computerised transit system which will help us to try to make progress on some of the customs simplifications that, whatever happens, will be important to the reduction of business costs. I commend to my noble friends Amendment 62, which should certainly be an objective of the Government in their current discussions about the future relationship with the European Union.
Lord Risby (Con)
My Lords, I will speak to Amendment 48. I am a director of the Horserace Betting Levy Board as a government appointee, and a former Member of Parliament for Newmarket, which, after all, is historically the world headquarters of racing. Equine matters are very dear to my heart.
The situation we have, which is a tripartite deal, developed before the European Union became involved. There is some level of involvement on the part of the European Union and negotiations have been going on in Brussels between the British Horseracing Authority and the Commission. It is important to highlight this because the system has been in existence for many years and has been absolutely seamless. The relationship between the United Kingdom, France and Ireland has flourished. We can think of Irish horses winning in large numbers at Cheltenham, French successes at Ascot and Newmarket, and our own recent victories in the Prix de l’Arc de Triomphe.
The real key is this. The system of horse passports and documentation is managed in the United Kingdom by our highly respected industry bodies: Weatherbys, the Thoroughbred Breeders’ Association and the British Horseracing Authority, with the approval of Defra and the Animal and Plant Health Agency. It works extremely well and is therefore something that should be cherished. It is particularly important to the economy of the Republic of Ireland. People in the equine industry in Ireland are extremely anxious about this situation being damaged in any way.
As a result of the support over the years of our Governments for the equine industry, stretching right across party divides, it has turned into a great success story and is the best-managed and best-organised racing industry in the world. It contributes to the pleasure of millions of people who watch horseracing either at racecourses or on television. All our facilities have been upgraded and the industry should be supported.
I will refer to the comments made by my noble friend Lady McIntosh. If it were somehow possible to retrieve this from where it seems to have landed up and see it go back to its original tripartite status, which was actually free of the European Union, that would be excellent. However, the reality is that for whatever reason there has been a process of greater and greater involvement by the European Union; in which case, I will ask my noble friend two simple questions. What will happen during the transition period in this area of activity which is so important to us? What is our negotiating objective for the longer term as far as the work of the British Horseracing Authority with our own Government is concerned?
I conclude by expressing my admiration for many colleagues both in your Lordships’ House and in another place who have done so much work over the years to keep this industry up to the highest possible standards of governance and popularity. Finally, I will praise one particular individual. When the Single European Act came in and there was a change in the way that VAT was dealt with, we nearly lost the racing industry altogether. We had a huge fight, but it was saved by the former Chancellor of the Exchequer, my noble friend Lord Lamont. For anyone who is interested in and has a passion for racing, he of all people is someone to whom we owe a great deal.
Baroness Randerson (LD)
My Lords, I start by craving the indulgence of the Committee and offering an apology for the fact that I missed the start of the speech of the noble Lord, Lord McNichol. I was racing back from Cardiff, but noble Lords will know that that involves the Great Western Railway. The train was only a few minutes late but that was the time I needed in order to hear the beginning of the noble Lord’s speech.
I have three amendments in this group, all designed to ensure that we try to keep the transport system running as normally and smoothly as possible after Brexit. I will start with Amendment 41, which relates to road haulage. We have heard the story many times about the dangers to our road haulage system. Indeed, last week the leaked Border Force document estimated that there could be a decline of up to 87% for three to six months after a no-deal Brexit if some arrangements were not put in place. We have had the preparation for the ECMT certificates that would have to come into place if we had no deal: roughly 1,200 certificates for a haulage industry that involves 30,000-plus hauliers. Clearly, this is totally inadequate. We have had the fiasco of the ferry-less ferry services to try to smooth the process.
We have talked many times in this House about Dover, but I want to say a word about Holyhead, the second-largest roll-on roll-off ferry port in Britain. Some 500 lorries per night go through Holyhead—that is three miles of queues, and the route to the port is through the town. In other words, any kind of queuing system caused by a no-deal Brexit would make it impossible for the town to function. I have had meetings with representatives of the Road Haulage Association, who have alarmed me with some information about the way in which the modern haulage industry works. They pointed out to me that an Amazon lorry can have 8,000 individual shipments on it, which—if we do not have arrangements in place—could lead to an individual customs declaration in each of those 8,000 cases. Each customs declaration has 36 different fields that have to be completed. They estimated that it would take 170 staff one day’s worth of work to deal with one lorry. We all know that Amazon will adapt, but it cannot adapt in two months.
There are numerous other cases and examples of the disruption that no deal would bring, so in this amendment I seek to ensure, in relation to road haulage, that we do not have no deal and keep the arrangements as close as possible to what we have now. We should bear in mind—I was told this by a representative of the freight industry—that it is in what it describes as a huge hole. They said, “The moment we do not apply the rules, we lose control of the border”. So it is no good for our Government to say that we will not do the checks and will take it on trust. The point the freight industry is making is that the moment we start taking things on trust, without the checks, we will have serious problems.
In Amendment 57 we move on to aviation. Many noble Lords will recall that last week the airlines came in for criticism because they had been selling tickets without drawing attention to the fact that, if there is no deal and we leave on 29 March without any arrangements, they felt that those tickets might not necessarily be honoured. That was the criticism and yet the Government have claimed that the aviation situation is arranged and organised.
Viscount Trenchard (Con)
My Lords, the hour is late and a large number of amendments are being debated. I shall not touch on more than one or two. I was impressed by the mention by my noble friends Lady McIntosh and Lord Risby of Amendment 48, on the tripartite agreement. I declare an interest because my brother-in-law is a racehorse trainer near Newbury and he is worried that he will not be able to move his staff and horses round Ireland and France as is necessary for his business. I see no reason why this agreement should not be grandfathered through because it existed before the European Union was founded. I fear, as my noble friend Lord Risby also intimated, that the tentacles of the European state have already embraced Ireland and France to such an extent that they will not have the freedom unilaterally to decide to continue the agreement. I hope, though, that our United Kingdom will have such freedom after Brexit but perhaps we can find a way to preserve this tripartite agreement for the future.
It is clear that all of us would like as little disruption to current arrangements as possible, but most of these amendments should not be in this Bill. They have nothing whatever to do with its purpose. I simply wish to comment on Amendment 55, tabled by the noble Baroness, Lady Kramer, who has not, I believe, spoken to it. Does she not realise that the City of London has suffered from the imposition of several barriers to trade in financial services as a result of having been forced to implement some new European regulations in recent years, such as parts of MiFID II, AIFMD and others? One of the benefits of Brexit is that the City will be free to adopt proportionate and sensible regulation that will enhance its business in years to come.
Brexit also provides an opportunity for the UK to play an enhanced role in the development of proportionate regulation at the global level, balancing the need to protect the consumer and the environment against the requirement to provide an innovation-friendly environment that will enable us to abandon some of the more cumbersome and restrictive parts of the European regulatory regime to which we have become progressively shackled and which is, in places, more about harmonisation and protectionism than about the genuine protection of consumers.
I shall give one example. I have known the chief executive of a Japanese pharmaceutical company for more than 30 years. He told me that when Brexit came along he was not happy, but he has spent more than $8 million upgrading his European network and is now confident that he will be able to research, manufacture and distribute medicines in both the UK and EU27 after Brexit, just as he does now, on whatever basis we leave. He told me that now that he has spent the money, he would like to see the upside of Brexit. He says that the upside is that he expects us to return to what I believe is a more natural state for this country, in which we will have a less cumbersome regulatory regime that will be more helpful for a life sciences company such as his to innovate in new therapies, new drugs and new medicines. What worries me is that, although we are about to leave the European Union, we will, through this type of amendment, promise to continue to align entirely with EU regulation, which in places relies too much on the precautionary principle, and in that case there will be absolutely no upside to leaving. Therefore, we must have a balance here.
Baroness Kramer (LD)
My Lords, perhaps it is sensible to come in right after the noble Viscount, Lord Trenchard, following that invitation. I will try to be brief.
Amendment 55 stands in my name. In the past two and a half years I have been shocked by how little attention has been paid to financial services and to what would happen to our access to the EU 27 in the field of financial services after any Brexit. I do not suppose that I have to rehearse for this Committee the significance of this industry. It accounts for something like 80% of GDP; it pays £76 billion a year in taxes, which support our National Health Service; and it has created 2 million jobs spread over the country. It is absolutely critical but has been very largely ignored. I make a plea to the Government that they should begin to get serious about financial services and understand their significance.
If I were to describe the industry in the UK, it basically breaks into thirds. Financial services range all the way from the smallest fintech companies, through insurance, asset management and banks, right up to the global sector of the London Stock Exchange and the London Clearing House. It is huge and varied, but roughly a third is domestic-facing and relatively untouched by Brexit.
About a third is intensely based on the industry’s EU 27 clientele. About half of that business has already gone or is in the process of leaving, and if anyone speaks to government on a day when they are being honest, basically they do not think that we have much chance of keeping much of that one-third in the UK over the medium term and certainly not over the long term.
We come to the final third, which is absolutely critical and where the decisions made in the coming weeks and months will have a great impact. I refer to the global piece, which one could think of in a way as being bigger than but represented by the London Stock Exchange and the London Clearing House. The future of that final global third has a real question mark hanging over it.
I say to the noble Viscount, Lord Trenchard, that London is a global centre partly due to its long-standing experience and partly due to good regulation, but critical to it is that it is the global financial centre for the euro—the second most significant global currency. That is what underpins London and its global role. Unfortunately, in all finance, where we know that risk exists, the ultimate protection and backstop in a time of risk is liquidity, and for all euro-denominated transactions that source of final liquidity is the European Central Bank. Therefore, from a European perspective, to be exposed to that level of risk, which is in euro trillions, with no ability to control the regulation, monitoring or supervision of a major global financial centre is really serious and significant.
I believe that fundamentally the Government have never looked at this issue from a European perspective and that they completely underestimate the medium and long-term interest in the European Union in pulling back much of that activity to an area where it can regulate, monitor and supervise because it carries the ultimate risk. Suggestions that have come from the City, which have been kicked around in government and in this House, have come largely from a very small Brexiteer think tank. I know the people well and have been to many of their meetings.
Viscount Trenchard
I totally agree that the bulk of the settlement of euro-denominated transactions takes place in London but, in a similar way, London is the most important centre for the settlement of offshore dollar-denominated securities—or even renminbi, or yen. That is because London is the leading global financial market in the world. I have not seen any moves by the United States Fed or Japan’s FSA to try to repatriate London’s role in their currency securities.
Baroness Kramer
I assure the noble Viscount that from the perspective of the dollar, far more of the transactions clear through New York. It is a bigger market. I know we often say that we are the largest, but if we look at the table comparisons, New York is frankly bigger. Certainly, dollar dominance is exercised through New York. The yen is less of a controversial player, and there are not a lot of renminbi. If anybody thinks that China is going to allow its currency to develop a real global presence and not be regulated, monitored and supervised by the Chinese state, they have missed any understanding of how China works. We are convenient but temporary, and we need to recognise that.
People talk about the growing market, but essentially the global markets function in the dollar, the euro and—in the future—the renminbi. They will not function in small African or South American currencies. Those are not players; they are minor currencies. Sterling is treated by the industry as a minor currency. There are two, and there will be three, major currencies that essentially underpin global activity. At the moment one is dominated by New York and the other by London—and the one dominated by London is the euro.
What worries me is that the think tanks that have been going through this process have an underlying conceit and arrogance, and imagine that somehow we are fundamentally and in the long-term superior, that no one else will have the capabilities that we have, and that in the end, Europe needs us more than we need Europe. But Europe works on a five to 10-year strategy to gradually bring back choice pieces of that industry—and we can see it.
I have a real question for the Minister in all this. The right-wing think tank came up with a solution called “mutual recognition”, which basically required the European Union to change how it made regulation and to change its legal framework completely. The think tank thought that was entirely reasonable. It was irrational, and has been abandoned. The Government have finally recognised that it was complete nonsense. There is now an idea that third-country equivalence could be the mechanism that will apply. However, we all know that third-country equivalence can be cancelled for no reason at 29 days’ notice. That is a very unstable way to provide access for a key industry.
Various attempts have been made, but little thought, effort, discussion or energy has gone into trying to find solutions. I am exceedingly worried about that. Looking at that global sector that I talked about, as I understand it, the European Union has provided an equivalence ruling for the London Clearing House for 12 months only. I am sure that it will extend the ruling beyond that—but it is a message. I understand that, as of this moment, no equivalence has been put in place for the London Stock Exchange. Again, that may come, and it may come very much at the last minute. But there is a deep message in all this. I make a real plea to the Government to take our amendment seriously and to recognise that they will have to get totally engaged and make some real compromises—I suspect around their own red lines. If they do not, they will be making absolutely sure that, over five to 10 years, significant parts of the industry will be sucked back into very capable hands in Frankfurt, Paris and Amsterdam.
This is not an instant crisis, although there may be some areas of instant crisis. But it is an area where the Government need to move now, and not lock themselves into a position from which they will see this industry, not perhaps disappear altogether, but lose its global leadership, when they could, with more intelligence and flexibility, have provided some degree of protection.
Baroness Hooper (Con)
My Lords, I apologise for being tail-end Charlie in this discussion—at least, I hope I am. I agree that this is a very important group of amendments. I shall concentrate particularly on Amendment 39 because that is the overarching amendment giving mutual recognition of qualifications, which has been so important for frictionless commercial activities and relationships throughout our membership of the European Union. I trust and hope that the mutual recognition and—dare I say it?—harmonisation to some extent of professional qualifications will be able to continue, to give the continuity to which my noble friend Lord Lansley referred, but also, for example, in the field of education, where university qualifications and degrees have been based on mutual recognition of qualifications and the ability to work in professional fields in more than one country.
My own interest in this is that as a solicitor I went to work in Paris in 1973, a year after we joined the European Community. Although I did not need a carte de travail—a work permit—at that stage, I still needed a carte de séjour, but that was progress. There have always been particular difficulties for the legal profession simply because of the difference between the common-law system and the civil law system. That has led to a different approach to our understanding of what we have been trying to do within the European Community throughout our membership.
I may not be up to speed on all the detail. There may have been discussions, and possibly solutions, about continuing the recognition of professional qualifications, but I am not aware of them. I am surprised that the Law Society, for example, has not provided any briefing in this respect—at least not to me. Still, I would like to hear what the Minister has to say about this. At the next stage of the Bill I would hope that we could be given more certainty about what may happen in future. I am curtailing my remarks because it is a late hour, but I feel that this would be so important, not only to British and Scottish lawyers—I look to my noble friend Lady McIntosh in this respect—but to all the European Union lawyers who have set up offices and are operating in London and other parts of the country, making our commercial activities ever more possible.
Perhaps, as a sort of PS, I might refer to Amendment 48 and the tripartite agreement. I am not sure how this applies to polo ponies. As your Lordships will know, I take a great interest in Latin America and Argentina. Polo ponies are not only from South America and the UK; they have passage rights within the EU. I do not think the tripartite agreement itself applies to polo ponies but I hope that any consideration of this element of the debate could include that important aspect.
Lord Foster of Bath (LD)
My Lords, the noble Baroness, Lady Hooper, hoped that she was tail-end Charlie, and I apologise for depriving her of the appellation. In introducing this group of amendments, the noble Lord, Lord McNicol, described them as being about the smooth organisation of business post Brexit, while my noble friend Lord Fox described them as the necessary day-to-day plumbing of post-Brexit life. As we have heard, the amendments cover a wide range of issues, including mutual recognition, not least of qualifications, but also seeking a way to have the maximum continued relationship with many EU bodies, expert groups, agencies and so on. In that regard, Amendment 70 is perhaps the most comprehensive. I share the view of the noble Lord, Lord Lansley, that it is of mutual benefit to ourselves and the European Union if we can find ways of staying as close as possible to many of those bodies. If we fail to do so, there will be some serious difficulties. I believe we need to take positive steps, as is suggested in Amendment 70, for instance, to achieve that close working relationship. If we do not do that, I believe there will be very significant problems.
To illustrate that very briefly, I will touch on two of the bodies that are referred to in Amendment 70: the Body of European Regulators for Electronic Communications—BEREC—and the European Regulators Group for Audiovisual Media Services, or ERGA. It is worth remembering that the telecoms industry in this country has revenues of something like £40 billion a year and our broadcasting industry is probably one of the best in the world; both are critical to the UK’s economy and their success depends to a large extent on close co-operation with the EU 27 countries. That is because, in the case of the telecoms industry, for instance, many of the bodies regulated by our own regulator, Ofcom, are members of subsidiaries which operate in many of those other countries—Virgin Media, Vodafone, Three and Telefónica are very good examples. In broadcasting, we have our own domestic channels, but Ofcom also acts as host to something like 500 channels which are not shown in the UK, but are regulated here and shown in other countries. Therefore, it is very important that our regulator continues to work in a way that allows close alignment with the regulations that will apply across Europe. That means having close involvement with those two bodies, BEREC and ERGA.
As such, my questions for the Minister are about how that will be achieved. I suspect he will reject most of the amendments in this group but that he will say it is important to have close relationships, as the noble Lord, Lord Lansley, said. It is worth reflecting that in the other place, the Minister for Digital and the Creative Industries, Margot James, said that Ofcom intended to “seek observer status” within BEREC. As I pointed out on another occasion, that is no longer possible following changes to BEREC’s regulations in December last year. For us to have observer status in BEREC, it would now be necessary for a formal agreement to be made between the UK and the European Union. I am not entirely convinced that that will be easy under the current arrangements without very active steps being taken by the Government.
In Grand Committee last week, the Minister, the noble Lord, Lord Ashton of Hyde, said he was confident that Ofcom would be able to be part of BEREC. He said that during the transition period,
“the UK will no longer be a member state of the EU but, as is set out in the terms of the withdrawal agreement, common rules will remain in place. That is why we expect Ofcom to continue to participate in BEREC”.—[Official Report, 23/1/19; col. GC 96.]
That is what they are expecting, yet it is in stark contrast to what the withdrawal agreement actually says. In Article 128, it says—I will paraphrase—that with only one caveat, we cannot participate in decision-making or even attend meetings of expert groups or similar entities. The caveat says—again, I paraphrase—that UK representatives or experts may, upon invitation, exceptionally attend meetings or parts of meetings of bodies such as BEREC or ERGA, provided that either the discussion concerns the UK or UK residents or,
“the presence of the United Kingdom is necessary and in the interest of the Union”.
The noble Lord, Lord Ashton of Hyde, saw this as a green light, and declared that there was “every reason” the EU would want Ofcom on these bodies because,
“Ofcom is one of the leading telecoms regulators in Europe—if not the leading one. The interchange between Ofcom and other European regulators has been extremely beneficial … There is every reason to think that they would wish to continue that”.—[Official Report, 23/1/19; col. GC 97.]
That is not an interpretation of Article 128 which any rational person can give. It actually says that we can be involved only in a small way, in exceptional circumstances and when it is necessary, so I do not read Article 128 as meaning that we will easily be able to participate in that particular organisation. The same case could be made for all the other organisations which the Government may wish for us to continue to have close relationships with. My question for the Minister is simple: does he agree with my interpretation, or with his noble friend during the debate in Grand Committee? If he agrees with my interpretation of Article 128, are the Government willing to take the positive steps referred to—for example, in Amendment 70—to achieve that close working relationship which is so important?
Lord Stevenson of Balmacara (Lab)
My Lords, I have to say a few words because my noble friend Lord Grantchester, who would have spoken to a couple of amendments which have not been touched on, unfortunately is unable to be with us this evening as he has a family illness which he had to attend to. I am sure your Lordships will want to send best wishes to him.
The two amendments which have not been referred to are Amendments 47 and 49. One is on time-sensitive goods and the worries here concern the arrangements, particularly around the Channel Tunnel, for goods that are required for immediate delivery. The question underlying the amendment, which the noble Baroness, Lady Neville-Rolfe, also put her name to, was whether the Government had any further information about developments, since if the current arrangement is not going to work, other arrangements will need to be brought into place, as time-sensitive goods are what they say on the tin.
Other noble Lords have spoken about medical isotopes. On behalf of my noble friend Lord Grantchester, I wanted to mention the time-sensitivity of these, not only in the general sense but particularly with air travel, which is often used to transport them. We have experience of problems which have occurred, particularly in Northern Ireland, because the route for radioisotopes required in Northern Ireland is through Coventry Airport, and even under existing arrangements, we have had delays which caused problems for patients, including the cancellation of treatments. Again, any comments from the Minister would be helpful.
On Amendment 49, the pet travel scheme has raised interest among those who travel to Europe with pets, particularly dogs and ferrets, which are the two main groups carried. The existing scheme is thought not to be very effective, and there is a chance to revisit it when it collapses after Brexit. Are Ministers aware that the BVA has set out 16 recommendations on changes to pet travel rules after Brexit? Many of these are sensible and needed, and this would be an opportunity to give the Committee an update on where they are on this matter.
Lord Bates
My Lords, I thank noble Lords who have taken part in this debate. The noble Lord, Lord Stevenson, referred to the pet travel scheme. The noble Lord, Lord McNicol, started the debate by talking about transport. The noble Lord, Lord Fox, referred to arrangements for UK-EU chemicals through REACH in particular. My noble friends Lady McIntosh and Lady Hooper talked about legal services. My noble friend Lord Risby talked about horseracing and the tripartite agreement. The noble Baroness, Lady Randerson, talked about transport. My noble friend Lord Lansley talked about authorised economic operators. My noble friend Lord Trenchard talked about horseracing and financial services. The noble Baroness, Lady Kramer, focused very much on financial services. The noble Lord, Lord Foster, talked about telecoms and broadcasting.
That is a flavour of the catch-all that we have here, with 17 amendments. I am looking at the representatives of the usual channels: I am not sure how the grouping of these amendments happened, but they cover a very wide range of agreements. We have heard 12 excellent speakers. They have ranged extensively and generated some 24 questions, to which it falls to me to respond. I am conscious of the time. I will bring my best endeavours to this, but I have the feeling that rather a lengthy letter will be winding its way to noble Lords.
Lord Bates
Yes, of course. I will probably miraculously sit down sometime around 10.39 pm. I think that is the convention. Let me go through as much as I can. I apologise to Members of the Committee and to the reporters of our proceedings for the pace at which I am going.
The noble Lord, Lord McNicol, and my noble friend Lord Lansley referred to the common transit area. As my noble friend hinted, this is an area where we have some good news, because the UK has agreed the common transit convention with the secretariat. Letters were received on 19 December 2018. That is taking shape.
The noble Baroness, Lady Kramer, talked about financial services. The Government are seeking a close future relationship on financial services with the EU that reflects our uniquely integrated markets and respects UK and EU autonomy. The political declaration includes commitments to close and structured co-operation on regulatory and supervisory matters, grounded in the future economic partnership. There will be a certain Groundhog Day feeling to the answers to a lot of these questions, because I will simply say that they are a matter for the future economic relationship, which we hope will be deep and extensive across all these headings. Of course, that is for another piece, or other pieces, of legislation.
The noble Baroness, Lady Randerson, spoke to her amendments. On haulage, the Government have been clear that we want to maintain the existing levels of access for UK and EU hauliers. A mutually beneficial road freight agreement with the EU will support the objective of frictionless trade. I very much take the point that the noble Baroness made about us often talking about Dover in the context of roll-on, roll-off, but there is strategic importance, particularly on the island of Ireland, for Holyhead and movements through there. However, we understand that we need the reassurance that we will have in place the arrangements needed to maintain continued access. On that basis, we welcome the contingency proposals being made by the European Commission on the basis that the Government are seeking a very close partnership based on reciprocal and binding agreements that protect the rights of road hauliers to access EU markets and vice versa.
The noble Lord, Lord McNicol, also talked about rail services, which are mentioned in Amendment 40. The Government are carefully considering the potential implications of leaving the EU, including implications for the continuation of cross-border rail. The noble Lord, Lord Fox, also referred to this through the Channel Tunnel and on the island of Ireland. I assure noble Lords that we understand the importance of maintaining the continuity of these important cross-border rail services, and we will continue to negotiate with our European partners to secure the best possible outcome.
In addressing Amendment 43, the noble Lord, Lord Fox, talked about open and fair competition. The Government recognise that commitments to open and fair competition are fundamental to all trading relationships; continuing the control of anti-competitive subsidies and creating a UK-wide subsidy control framework are crucially important. To support the desire for a future relationship, we propose rule alignment on state aid to be enforced by the Competition and Markets Authority, which already has a strong reputation in the UK. We also have strong proposals in other areas, including non-regression provisions for the environment, social issues and employment to ensure that we maintain the highest of standards, as my noble friend Lord Lansley requested.
Turning to Amendment 62, my noble friend Lord Lansley and the noble Lord, Lord Stevenson, said that it raised important issues for the future relationship with the EU, by providing that the patients should not be disadvantaged. We have given commitments that patients should not be disadvantaged; industry should be able to get its products into the UK market as quickly as possible, and we continue to play a leading role in promoting public health. The Government have already set out their aim to secure participation in the European Medicines Agency. The political declaration sets out the mutual commitment of the UK and the EU to explore working together in future medicines regulation and negotiating the UK’s ongoing co-operation.
Lord Purvis of Tweed (LD)
Will the Minister clarify what he said about seeking to participate in the European Medicines Agency? The noble Baroness, Lady Fairhead, in an earlier grouping, said it was the intention to remove Clause 6 from the Bill, or at least bring forward different language about what that participation means. It is pertinent to the point my noble friend Lord Fox made. If it is the Government’s intention to participate in many of these institutions, what do they envisage that participation mechanism to be? If the Government are seeking to change Clause 6, they have to be clear about how they intend that participation to operate.
Lord Bates
My noble friend Lady Fairhead made very clear our hesitation in the other place when this amendment was proposed, but it is now in the Bill. We see the commitment to all necessary steps in relation to the European Medicines Agency. We have been very clear that we do not wish to see that extended to other agencies, but it is there in the Bill at present.
Lord Purvis of Tweed
Just so that we know what might be coming on Report, is it the Government’s intention to bring forward amendments, as the noble Baroness, Lady Fairhead, said, to remove this?
Lord Bates
Our position is simply that we are committed to as close a relationship as possible with the European Medicines Agency. We see its value, we are committed to it, and it is in the Bill. We have made our positions clear on that, in terms of how we would view it if similar amendments were proposed for other agencies.
Amendment 39, on mutual recognition of professional qualifications, was spoken to by my noble friends Lady Hooper and Lady McIntosh and by the noble Lords, Lord McNicol and Lord Fox. The Government have clearly set out their objectives for mutual recognition of professional qualifications in the future relationship with the EU. We recognise the importance of mutual recognition for many sectors of our economy and the public sector. It offers all individuals working in regulated professions a means of having their qualifications recognised so that they can continue to provide valuable services. However, Her Majesty’s Government must be in a position to negotiate the best possible outcome. I note the risk that this amendment could undermine that objective and compel Her Majesty’s Government to reject highly beneficial agreements on mutual recognition simply because an agreement delivered its possible outcome in a way that differed from the detailed requirement set out in this amendment.
Lord Bates
I reassure my noble friend the Chief Whip that I have no problem in keeping it going for as long as he indicates is necessary—such has been the quality of the debate.
I have had a note passed to me which might be important. On Amendment 39, on mutual recognition of professional qualifications, I may have said “Ireland” but I meant to say “Iceland”. I thank the officials for being so attentive.
Lord Fox
The Ireland/Iceland point is actually very important. The noble Lord, Lord Hain, made a point earlier about cross-border activity—of midwives who live in the north of Ireland and practise in the Republic, for example—which is now in jeopardy. I am less excited about Iceland, with all due respect, given that the island of Ireland’s economy is driven on the ability to have the mutual recognition of all these skills. I enjoin the Government to work quickly on that one.
Lord Bates
The Government are very happy to give that undertaking.
On legal services, raised by the noble Baronesses, Lady McIntosh and Lady Hooper, the outcome of the negotiations of course lies ahead of us, but I assure noble Lords that the Government will push very much for a strong relationship in this area. As EU and EFTA lawyers will be subject to domestic rules in the UK, UK lawyers in the EU and EFTA will be subject to the national rules and regulations of individual EU and EFTA member states, if the UK leaves the EU without a deal. This will vary between member states and within member states, where there will be multiple regulators.
The noble Baroness, Lady McIntosh, asked specifically about close participation in the European Medicines Agency. I think I have already dealt with that one and I do not want to tempt further interventions at this point. However, I am pleased that the Government have been clear that we want to remain part of the EMA, which will include remaining part of the falsified medicines directive.
Let me turn to horses—galloping into the final straight with Amendment 48. I am grateful to the noble Baroness, Lady Hooper, who spoke particularly about polo, and the noble Baroness, Lady McIntosh. I also thank the noble Lord, Lord Risby, who talked about his connections with Newmarket, and the noble Lord, Lord McNicol, who asked about this as well. Amendment 48 dealt with the tripartite agreement on the movement of horses. As part of our ongoing preparations for EU exit, the Government aim to ensure that the movement of horses will continue with minimal delay and bureaucracy, while safeguarding biosecurity and animal welfare. Let me reassure noble Lords that we are already working closely with the equine industry to retain the benefits of the tripartite agreement after the UK leaves the EU. The Government actively support a long-term industry-led proposal to allow horses of high health status from third countries to travel to the EU under the TPA arrangements.
I had a note on the pet travel service. As part of the ongoing preparations for EU exit, the Government aim to ensure that the movement of pets will continue with minimal inconvenience to pet owners while safeguarding the UK’s biosecurity and the welfare of travelling animals. We are already working closely with stakeholders in the veterinary and pet travel industries to ensure that the benefits of the EU pet travel scheme are retained after the UK leaves the EU. The Government will submit their application for listed status within the EU pet travel scheme imminently. The UK is seeking technical discussions with the European Commission on its application. Should the UK become a part 1 listed country, there would be little change to current pet travel arrangements. Only minor changes to documentation would be needed.
I hope that noble Lords will feel that in the time available I have dealt with as many issues as possible, and that the noble Lord will therefore consider withdrawing his amendment at this stage.
Lord McNicol of West Kilbride
I have a good 20-minute speech here—no, I am joking. I thank the Minister for his response and all noble Lords and Baronesses for their input to this rather large group of amendments. As I said in my introduction, there is widespread support not just across the House but outside, from organisations, businesses, trade unions and relevant bodies. My takeaway from nearly all the contributions is the mutual benefit that organisations and businesses inside the UK would get from the adoption and inclusion of the amendments. The other word which came from the Government Bench was that their adoption would lead to continuity—a word that has been used many times in the previous two days. With that, I beg leave to withdraw the amendment.
Trade Bill
Monday 4th February 2019
(5 years, 9 months ago)
Lords ChamberRead Full debate Trade Bill 2017-19 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 127-IV Fourth marshalled list for Committee (PDF) - (31 Jan 2019)
“Future partnership with the European Union: services
It shall be the objective of an appropriate authority to take all necessary steps to implement a future trade agreement with the European Union that—(a) ensures no additional barriers to trade in services between the European Union and the United Kingdom are erected after exit day;(b) protects—(i) the right of UK nationals and businesses to provide or receive services in the European Union, and(ii) reciprocal rights for EU nationals and businesses to provide or receive services in the United Kingdom;(c) protects—(i) the right of UK businesses to establish a company in an EU member state, and(ii) reciprocal rights for EU businesses to establish a company in the United Kingdom.”
Lord Stevenson of Balmacara (Lab)
My Lords, Amendment 45 is in my name and that of the noble Lord, Lord Purvis, for whose support I am very grateful. We are reaching the last quarter of our time on this Bill in Committee, and we have never touched, in any serious way, the question of services, which make up 80% of our GDP; they are an important part of our economy now and will be in the future. That curious absence of services has prompted this amendment; it is a probing amendment in the sense that I do not think there is any issue between the Government and us on this. We both recognise the importance of it and want to make sure that it is successful, but it is an opportunity for the Government to set out clearly what they intend to do in this area and to bring forward any thoughts they have about how the importance of services might continue, as the negotiations, which are currently with the EU and will return to the other place shortly, progress.
We hear a lot, importantly, about manufacturing and the physical goods that this country makes and imports. We do not hear nearly as much about services, and that is curious. It is important to be clear why that is. Direct trading of services across borders by purchasing or selling architecture, legal opinion or forms of insurance is a well-known measure of activity. This area has grown considerably and the UK economy is strong and strengthened by that. Business services, financial services and other aspects such as travel, including the tuition fees of foreign students who study in the UK, transportation and telecommunication information services make up the huge proportion of our activity in this area. Most trading of this type is with the EU. It is over 50% if Switzerland is included in the figures, but we also have considerable trade outside the EU and we should not forget that.
It is also important to recognise that, in some senses, exactly how this takes effect is hidden from plain sight. I should explain: we know a lot about the physical movement of things like car parts, because we are told, time and again, that the issue in modern-day trade is not so much the individual purpose of creating a particular object, machine or type of equipment; it is the assembly of the various parts. In the case of a car, bumpers, injectors and all sorts of things that go into the modern car cross the channel several times before being assembled, either here or elsewhere, in the final product, which is then sold. We are concerned about that and much of the Bill has this as part of its process, but the point is that this is not just about physical material. There is also a question about knowledge, intermediate input, services, financing and having the right people in the right place, which is necessary for this complicated pas de deux to work.
The single market, which underpins all this in the EU, plays a pivotal role in facilitating this process of increasing specialisation, because it includes as its basic point—this is derived from consideration within the GATS treaty under the WTO—the four freedoms for moving goods, services, capital and people. Hence, a focus on manufacturing the individual item sees only part of the story.
Why do services not feature more strongly in our discussion and debate? There are three reasons. First, services agreements are a relatively new form of trade negotiation. There are not that many around. They are difficult, because you have to negotiate and consider individual aspects, often regulatory and non-tariff barriers, to the way the trade happens. They cannot always be done by fiat from government; they have to involve large numbers of other companies and organisations. They are bureaucratic; they are not necessarily all organised from a particular aspect in government, such as BEIS or the Department for International Trade, because regulators and government departments will be involved in legal services and other areas. Finally, because different regulations belong to different bodies, it is more difficult to trade one sector, as it were, against another. There is not really an easy route through this, and that may explain why it is often left to the last.
I welcome the Government’s response on that, but it is a cynical response. We have done so well in services trade in recent years and our performance is one of the strongest in the world. We have more to lose in trade negotiations that focus on individual hardware and machinery parts if they do not also make sure that those trading in legal and other services are considered as well. We are in a quandary. We can argue the easy option of a goods-only agreement, because the rules for that are relatively straightforward: the tariffs are already very low anyway and we are not talking about substantial changes to the way in which we would do it. But if you include services then we are talking about a whole range of new activities, new players and the offering of new types of discretion. I will wait to hear the Government’s response, but it could be argued that we in Britain are not yet ready to engage with that successfully.
In that context, the opportunity is there for the Government to respond positively on how we are going to take forward this issue and how important it is to make sure that we get it right, and to make sure that we in this country do not suffer simply because the dog that did not bark—services—is still not barking. I beg to move.
Lord Purvis of Tweed (LD)
My Lords, I am grateful to the noble Lord, Lord Stevenson, for moving the amendment, which I happily signed. It will be no surprise that we on these Benches favour, still, the United Kingdom continuing as part of the single market of the European Union. However, in many respects this is a mitigating amendment on the basis that, if we are to leave the European Union, the most significant non-financial services sector for the British economy is, as the noble Lord, Lord Stevenson, said, the services sector. It is right, therefore, that we give proper focus to it in this Bill.
Up until this point, we have discussed the emerging elements of the continuity agreements. We have seen so far only one published, that of Switzerland, and are awaiting others. In the continuity agreement, Switzerland has components on services, and guarantees free movement of people for those providing services. That is beyond the elements in the immigration White Paper and in the withdrawal agreement from the European Union, and it is beyond what the Government have said. There are, however, some indications that the Government recognise that services are critical to the British economy. But it goes beyond that, as do our discussions with Switzerland, which are on the gold market and property.
This affects all parts of the United Kingdom. The UK is more dependent on services, especially non-financial, than perhaps any other country in the world. We export more in absolute terms than any country other than the United States. We have been able to get to that position because we have been doing so within an integrated market of the European Union. In many respects, we in the United Kingdom have been the driving force of the emerging integrated markets in the European Union. It is an irony that, as the architects of this approach to developing the services markets across the European Union to benefit our country, we are going to leave it.
If we are to have a future relationship, it is critical that we focus not only on tariffs and non-tariff barriers but on what is necessary to ensure that we can continue to benefit, at least to some degree, from a services relationship with the European Union. This applies particularly in digital services, as well as in the wider elements of research and development.
Many months ago, your Lordships’ committee reported on this, and in December 2017, in the name of the noble Lord, Lord Whitty, this House had an opportunity to debate the significance of the non-financial services sector to the British economy. Now, we have the Government’s clear position: we will be leaving it. We are choosing to leave an integrated market, which we have led, so how do we focus on some of the component aspects?
In the withdrawal agreement, we have seen some elements of mutual recognition of qualifications and some elements of professional standards being aligned so that those working in the services sector can be part of a wider operation on the continent and with the European Union. However, this is only a very small aspect of the overall need to have a much closer alignment. It requires government honesty: we may well be leaving the single market, but it needs to be clear what very close alignment would look like.
This applies to the discussions taking place this week and next week on the alternative to a backstop. The arrangements for the Northern Ireland backstop were as much to do with the continuity of the services sector for those providing professional and trade services from north to south and south to north as they were with the checking of the origin of goods at a border for tariff purposes. The all-Ireland economy is, by and large, an all-Ireland economy because of services. We are treaty-bound to protect that, so it is very important to have more clarity from the Government on what they expect to see as alternative arrangements to the Northern Ireland protocol if we are to protect the core elements of an all-Ireland services economy.
We know that we cannot rely on a much wider alternative, which is the WTO. In its last set of discussions, it could not even agree on a communiqué about taking forward future services agreements on a WTO basis. We know that the USA and China are in dispute not only on trade in goods, but also on services, and we know, as the noble Lord, Lord Stevenson, said, the complexity of even the European Union introducing services components to third-party trade agreements. If we know that it has been difficult, with the UK as the driving force, to secure agreements with other third countries, why do the Government think that it will be easy for the European Union to do it with us?
This amendment, therefore, is very important. I hope that it will allow the Government to be much clearer, because the services sector of the United Kingdom has, in many respects, been the driving force of growth in the UK, one that we cannot afford to put at risk.
Lord Hamilton of Epsom (Con)
My Lords, both the noble Lords, Lord Stevenson and Lord Purvis, have stressed how important the services sector is to the economy of this country and to the exports that we sell. However, anybody involved in the financial services industry would say that they have not been much helped by the single-market provisions of the EU, which have put up many non-tariff barriers, to which the noble Lord, Lord Stevenson, referred. It is probably quite ambitious, if we hope to have a free trade deal with the EU, to think that we are actually going to lower the non-tariff barriers that have been erected during our membership of EU, when the single market was supposed to provide a market for services as well as goods but effectively has not actually done so. I will be very interested to hear what the Minister has to say about this very important sector of the economy. We have not been much blessed by reciprocal agreements with the EU over financial services and very many other services in the past because of the non-tariff barriers that have been erected against them.
Lord Liddle (Lab)
My Lords, I strongly support this amendment, which is of profound importance. I apologise for an intervention that I made in Committee last week, where I was ticked off by the noble Viscount, Lord Younger, for intervening on an amendment when I had not been present for the start of the debate. I apologise again; I should know the rules better.
I was privileged to serve on the EU Internal Market Sub-Committee of your Lordships’ House. We conducted an inquiry into non-financial services, and I was very struck, not having known much about this before, by the importance of non-financial services. The sector makes up something like two-thirds of the total of the services trade. This is important, particularly for people who think that services just mean finance and the City. It is far broader than that and a lot of members of my own party might better understand that point.
Baroness McIntosh of Pickering (Con)
My Lords, I follow the noble Lord, Lord Liddle, in pursuing the aspect of services, and I have a specific question for my noble friend Lord Bates, who I think will be summing up. This debate is not dissimilar to the one that we had on the free movement of professions, and I am mindful of the fact that my noble friend Lady Fairhead has said on a number of occasions that the Bill before the Committee today is all about continuity. I also have regard to what my noble friend Lord Hamilton said—that there has been precious little reciprocity in terms of setting up and establishing services elsewhere in the European Union to date. So that does not fill me with confidence about what the legal position will be going forward.
There are some very helpful pages on the European Commission website about what the position will be as regards professions after 29 March and in the longer term, but there is precious little about establishing companies. This is becoming a matter of increasing urgency because we can see, in particular if we look at financial services, that the issue is not just free movement of people but free movement of services and capital. We have recently seen an increasing exodus of capital and people moving from the City of London to bases in Dublin, Frankfurt and Holland—and even Paris and Copenhagen are pressing for people to go and set up businesses there.
I would like to ask my noble friend the Minister how we are pursuing this on a reciprocal basis. We saw with professions, in the case of lawyers, that we have adopted the statutory instrument and the necessary regulation. What is the legal position of a UK company that wishes to establish itself and offer its services, first in the event of no deal after 29 March, secondly in the event of a deal during the transition phase, and thirdly at the conclusion of the transition period, whether it is as planned or extended? It strikes me that many of us are focusing on businesses already established in the UK and providing services. My concern is how much the ability of those looking to set up and establish themselves will depend on the right of residence, either now or at some future date in what will be a third country after 29 March.
Lord Davies of Stamford (Lab)
My Lords, I think that this is a very good amendment and I will come to the substance of it in a second. I just want to make two points by way of introduction. First, here we are at the beginning of February—a new week and a new month—and we are still in an absolutely ludicrous position, presenting an almost unbelievable picture to the world of a country with a Government doing their best to damage their own economy. Every day we have new evidence of this. Today we had the worrying story from Nissan. Many of us who have focused on the mess the Government are in could speak on the subject for hours.
There is another example from the last few days. We say that when we leave the European Union we want to sign trade agreements with those countries which currently have trade agreements with the EU. One of those countries is Japan. Japan has just signed a trade agreement with the EU. At the very best, I suppose, if the Japanese were to give us exactly the same terms—which is unlikely because our bargaining power vis-à-vis Japan is nothing like the power that the EU has—it would take a minimum of five years, and probably nearer 10, to conclude this deal. So the Government are saying that we are walking away from a trade agreement in order to spend a vast amount of time and money and suffer a lot of uncertainty before perhaps, in many years’ time, finally reaching another trade agreement that may not be as good as the one we now have. I put it to the Government: what kind of reason or logic is that? What a way to run a state. What a way to look after not only this generation but future generations of British people and make sure that they have a viable economy on which they can actually base a reasonable standard of living and a reasonable level of public services.
The Government are already under attack in this place, quite rightly, for their delivery of public services. We had a very interesting series of Questions earlier about the health service. The Government are undermining the future ability of the British economy to deliver the wealth we need to maintain our public services at acceptable international levels. This is quite apart from the impact of their policies on individual wealth and prospects for individuals who want to travel or study abroad or benefit from all the other freedoms we will be giving up. It is a very serious matter. The muddle the Government are in about the damage that is being done makes the whole picture even more disgraceful—that is the only word I can use.
I think my noble friend’s amendment is excellent. I agree with everything he said when he introduced it—and that noble Lords on both sides of the House said—about the importance of services. We all know that they are 80% of the British economy. But I have one question. Why has he not put goods in there as well? It seems to me that exactly the same principles apply to goods. I just looked at the amendment, and if you were to add the words “goods” wherever “services” are mentioned, you would not produce any particular anomalies or logical or linguistic problems. I do not know why goods have been left out of this particular picture. As I said, exactly the same principles apply. We want there to be no new barriers—that sums up everything. “Barriers” includes tariffs, quotas and non-tariff barriers, so the ground would be covered quite well by doing that.
My noble friend rather implied that he was putting forward this amendment in order to have a debate on an important subject—which is a very worthy thing to do in this place. Perhaps I have that wrong, but it sounded as though that was what he had in mind, and we are of course having that debate at the moment. However, it seems to me that it would be even better if we got this proposed new clause on to the statute book. We would be doing a very good day’s work for the country if we could manage to do that. Therefore, I ask my noble friend why he came to his decision. I am sure that there must be a very good reason, which perhaps I am being foolish in not anticipating, but I do not understand why we do not include goods.
These debates are becoming extremely unreal. One likes to think that one’s service in Parliament, whether in the Commons or in the Lords, is based on being clear in one’s mind and discussing and working out with colleagues what is the best policy for this country. But we have a Government who are not pursuing the objective of the best policy for this country. We have a Government who are destroying British industry and commerce where they can—so it is a very unreal situation. I do not know how much longer this country can go on in the hands of people who take that attitude when they have in their charge the very considerable, and in my view very important, responsibility of governing the United Kingdom to the benefit of our citizens both of today and of tomorrow.
Lord Lansley (Con)
My Lords, in following the noble Lord’s remarks, perhaps I may say that the unreality of debates in Committee on this Bill will be exacerbated if we not only have amendments that, quite properly, raise relevant issues that are not presently included in the Bill but we then use them as the basis for a wide-ranging debate on every occasion. Let us not do that. On occasion, we in this House look broadly at what the resolution to our current impasse might be, but we also have a responsibility to use our time well on this Bill to try to ensure that it is effective legislation, because we might need it.
In that context, there is a very simple reason why trade in services is not in the Bill: the General Agreement on Trade in Services is multilateral, not plurilateral, so there is no need to legislate for this as it is something we are a party to only by virtue of our membership of the European Union. That is why the government procurement agreement has got into the legislation. If that were true for the General Agreement on Trade in Services, that would have to be included as well, but it is not; every member of the WTO is a member of the GATS.
However, the question is: do we want to legislate to mandate the Government in the negotiation on a future free trade agreement to seek to provide for a continuing and complete reproduction of our current relationship with the European Union, or at least to the extent that the amendment asks for that? As far as I can see, it asks for it up to mode 3—it does not include mode 4 arrangements, which allow for natural persons to be present in other member states—thus excluding the free movement of individuals for the purpose of the delivery of services in other member states. Therefore, it is not a continuity amendment, or at least it cannot be presented as such.
From the point of view of Ministers, broadly speaking at the moment it is important for us to understand to what extent free trade agreements that might be reproduced by way of continuity agreements in the event of a no-deal exit might lead to the perverse situation whereby we have greater service sector access to third countries than we do to the European Union, which would mean considerable dislocation for service industries in this country.
Finally, much as I wish that we were staying in the European Union and continue to argue that we should be in a customs union with a degree of regulatory alignment—we will come on to that briefly later—I certainly would not go as far as the amendment implies, which is that effectively we should be rule-takers on services with the European Union. That could be a very unhappy place for us to be, given that services make up 80% of our economy, as has been said. The fact that we are in a customs union for goods will therefore not preclude us from engaging extensively in discussions on trade in services with third countries, which is where much of the action may well be in future trade negotiations.
Baroness Neville-Rolfe (Con)
My Lords, 80% of the UK economy—in fact, I think the figure is 85%—comprises services. I support the noble Lords, Lord Stevenson and Lord Purvis, in bringing forward this probing amendment although, for the reasons given by my noble friend Lord Lansley, I am not convinced that we should change the Bill and make ourselves rule-takers on services. If noble Lords will allow, I would like to keep the issue of the free movement of people separate. The question is: do we lose as much from losing the single market on services? It is not very well developed at all. I know this because I tried to cut down barriers on services within the EU when I led the presidency work in BEIS in 2016.
Last week the Chancellor spoke at the UK Finance dinner, which I attended. I was sorry as a result of that—the timing was unhelpful—to miss the last group of amendments, of which mine formed part. The Chancellor talked about liberalising trade in services—a sort of WTO services round—going forward. Of course, this would also extend to the European Union if it were to happen.
I have two questions about services for my noble friend the Minister, the answers to which will help me when we consider the Bill on Report. First, can he elaborate on the Chancellor’s idea, or emerging Treasury ideas, of doing something on services beyond the European Union, which would help us in the European Union as well? Secondly, can he confirm that the Government’s proposed deal—the withdrawal agreement or the political declaration—would not get in the way of bilateral deals with third countries on services, given that the multilateralism that I love is very hard going? In other words, would we be able to conclude a deal with the US—again, very tough—or, perhaps more realistically, with the emerging and already emerged countries of Asia, where we are now selling a lot of services and where it seems that aligning some of the rules on services could be extremely valuable?
The Minister of State, Department for International Development (Lord Bates) (Con)
My Lords, on behalf of all those who have spoken, I thank the noble Lords, Lord Stevenson and Lord Purvis, for bringing forward Amendment 45, the purpose of which is to provide an opportunity for the Government to put some remarks on the record about our approach to services which, as we all agree, is of crucial importance. So, before coming to some of the specific questions that have been raised during this short debate, I will take advantage of that opportunity to set out the Government’s position as it now stands.
As my noble friends Lady McIntosh and Lady Neville-Rolfe, and indeed the noble Lord, Lord Stevenson, said, the UK’s services economy is a global success story. Our internationally competitive industries play host to world-leading firms as well as thriving small and medium-sized enterprises, and we have undertaken significant engagement with the sector on issues related to EU exit.
I would like to reassure the House that the Government are seeking arrangements for services and investment that cover all modes of service supply—my noble friend Lord Lansley correctly referred to the variations; that provide substantial sectoral coverage, including measures on professional business services, which my noble friend Lady McIntosh referred to; that go well beyond both sides’ WTO commitments as set out in the General Agreement on Trade in Services, which my noble friend Lord Lansley also mentioned; and that build on the provisions in existing EU agreements.
Moreover, through the political declaration we have secured a commitment from the EU 27 that our future trading relationship will be ambitious, comprehensive and balanced, and will include market access commitments to ensure that service suppliers and investors do not face quantitative restrictions such as monopolies, economic needs tests or joint venture requirements, which my noble friend Lord Hamilton expressed concern about; national treatment commitments, to ensure that UK service suppliers and investors are not discriminated against by the EU 27 and vice versa, as my noble friend Lady McIntosh referred to; new arrangements on financial services, grounded in economic partnership, providing greater co-operation and consultation than is possible under existing third country frameworks; appropriate measures on the recognition of qualifications, as referred to by the noble Lord, Lord Purvis, to support UK professionals practising in the EU 27 and vice versa; arrangements that allow for temporary entry and stay in each other’s territories for business purposes, including visa-free travel for short-term visits, as the noble Lord, Lord Liddle, rightly identified from his extensive work examining the internal market as a member of the Select Committee; and mechanisms to promote voluntary regulatory co-operation to guard against the introduction of unnecessary barriers to services, trade and investment, to which my noble friend Lady Neville-Rolfe referred. I pay tribute to the work that she did at BEIS in seeking to remove those barriers.
We have also been clear that after we leave the EU, the UK will have an independent trade policy covering all aspects of goods and services. To deliver that objective, it will be important to retain regulatory freedom where it matters most for the UK’s services-based economy.
I turn to some of the points that have been raised.
Lord Davies of Stamford
Before the Minister moves on to detailed points, perhaps this might be a good moment for him to tell the Committee, out of all the countries with which we would like to have our own free trade agreements after we leave the EU—if we leave it—how many have indicated that they wish in principle to negotiate and sign such an agreement with this country; how many have said that they would do so on terms identical to their existing free trade agreement with the EU; and how many have indicated that they would not want to pursue such a negotiation at all?
Lord Bates
The noble Lord will remember from day three of Committee last week that one of the questions asked was whether we could provide the Committee with some running status on where we are with all those free trade agreements. That is a perfectly reasonable approach and it is something that my noble friend Lady Fairhead agreed to take back to look at and come back on ahead of Report. Rather than using this opportunity to rehearse that, I will say that it is something that we are looking at. Specifically on the EU and Japan, I was going to come to that topic and say that there is a working group with Japan to seek to replicate its effect as part of the continuity arrangements.
Lord Liddle
My Lords, on the point about freedom of movement, I have two specific questions for the Minister. I accept what he has said, but I would like to quote a personal example and declare an interest. For a period, my wife was chief executive of the English National Ballet. It was a requirement for the success of the English National Ballet that ballet dancers from all over the world were able to join, but the ENB had great difficulty with ballet dancers from outside the EU because they do not earn anything like the money that is put down in the Immigration Rules to justify easy entry. Are the Government prepared to be flexible on the earnings requirement to enable cultural organisations, which are very important to the British economy, to easily access talent from the EU, where people’s salaries will not initially be that high?
Secondly, if you are a small business in services and trying to expand by getting jobs, projects and contracts on the continent, one of the obvious business strategies you would pursue is recruiting young people from the countries in which you hope to do business. You take them into your consultancy, or whatever, and that gives you language and personal links into the markets you are trying to target. Again, there is no guarantee that, under the immigration policy outlined by the Home Secretary, young people coming from European countries would be able to get jobs in that kind of situation. We asked for a clear statement of the Government’s trade policy. The Government have to be clear on these issues before we can proceed on the Bill.
Lord Bates
I am happy to do that, and perhaps get some notes—I know we have a group coming up on the mobility framework, to which those points will perhaps be pertinent. I will, if I can, address them there. I also draw the noble Lord’s attention to section 9 of the political declaration, paragraphs 50 to 59 inclusive, which sets out the Government’s position on that.
The noble Lord, Lord Stevenson, and my noble friend Lord Hamilton pointed to or asked a very important question on bilateral services-only trade agreements. There is no precedent for a bilateral services-only trade agreement. Where service agreements exist, they are notified to the WTO alongside a wider agreement that also covers goods. We are leaving the customs union so that we can set our own tariffs and have an independent trade policy tailored to the strengths and requirements of our economy, which therefore includes—by implication and explicitly—the importance of services to our economy. The political declaration sets out a plan for a UK-EU free trade area for goods, including no tariffs, with ambitious customs agreements. This will be the first such agreement between an advanced economy and the EU.
The noble Lord, Lord Purvis, referred to the situation in relation to Northern Ireland. Without wanting to revisit that whole area in this group, the situation is that in Northern Ireland, under the common travel area, the rights to work, study and access social security and public services will be preserved on a reciprocal basis for UK and Irish nationals in the other state.
I turn to the questions raised by my noble friend Lady McIntosh and, in particular, the two questions raised by my noble friend Lady Neville-Rolfe. My noble friend referred to the Chancellor’s speech on liberalising services and looking for a more ambitious way forward. I am sure that is at the core of government policy, otherwise the Chancellor would not have said it. I do not have the text in front of me, so I cannot comment on its full meaning, but I will write to my noble friend on that point. My noble friend Lady McIntosh also asked a three-pronged question. For a company setting up in the UK, what would its situation be in the event of no deal on day one; in the event of the implementation period; and at the conclusion of a future economic framework? Some of those outcomes will depend on the extent of the negotiation, which we have set out in the heads of agreement in the political declaration. Between Committee and Report, I will write on my noble friend’s specific point relating to that. Again, I thank the noble Lord for giving us an opportunity to raise this very important issue.
Baroness Neville-Rolfe
Can my noble friend clarify the point about services and goods? I asked whether we would be able to continue to do deals on services if we had a tight agreement—a customs union or whatever —with the EU. He was saying that goods and services tend to be linked in trade agreements and are never separate. Would that mean that we could not have services agreements, assuming we got something quite tight on goods? That would obviously be a problem. I know that they are linked—often, the service for your car and the computer in it are as important as the car itself—but I had seen them as distinct in the WTO. If my noble friend could write to me on that, I would be very interested.
Lord Bates
I will be glad to do so. In a lot of such agreements, especially for the major manufacturers, the bulk of the value of the trade or the deal is the service package and the support provided thereafter. I will be very happy to write to my noble friend ahead of Report.
Lord Kerr of Kinlochard (CB)
In the early part of his speech, the Minister read out an impressive list of points that had been achieved or secured before he moved on to his brilliant ex tempore dealing with the questions raised in debate. I confess that I did not recognise those points. I cannot remember seeing them in the withdrawal agreement. Was he perhaps referring to the relevant part of the political declaration, in which case surely those points have not been secured or achieved and what has been agreed is that all these things may be discussed over the next three, four or five years as the long-term relationship is considered?
Lord Bates
Yes, except that the political declaration was of course part of the withdrawal agreement negotiated with the EU 27, so one hopes that it will form the basis of our future economic partnership.
Lord Purvis of Tweed
The noble Lord, Lord Lansley, and I have referred to the WTO. My understanding is that there have been objections to the UK’s submission of services schedules to the WTO and therefore they are unlikely to be certified if we leave at the end of March. We can still trade on them, but they are likely to be uncertified. Can the Minister give a little context about what concessions we might make or what discussions we would have with those countries that have lodged their objections? Clearly, they feel that we will not provide the same kind of market access to UK services as under the existing agreements. We could be starting from a situation that is much worse than simply carrying on with where we are at the moment at the WTO. If the Minister cannot respond at the moment, perhaps he could write.
Lord Bates
I am very happy to give further detail on that in the general update between Committee and Report, but, as the noble Lord knows, the schedules were tabled in December followed by a 90-day consultation period. There can be a variety of perspectives on them before they are finally adopted. I will get an update as to where we are on that before Report.
Baroness McIntosh of Pickering
To clarify, my concern is about British companies establishing their services in what will be a third country, another EU country. I would be happy for my noble friend to write to me.
Lord Bates
I am grateful for that clarification. I shall make sure that that is what is addressed.
Lord Stevenson of Balmacara
My Lords, it sounds as if we are starting off a new train of activity or various letters. I suspect that it might also be helpful if we had a short meeting on some of the issues just to draw them together. Like the noble Lord, Lord Kerr, I was entranced by the detailed nature of the early part of the Minister’s response and I got a bit lost—I think it was on the fourth point the second time round. We will need to read him and understand not only what he was saying but where these points are to be found in more detail. The chance to be able to do that in the context of the very rich debate we have had would be helpful.
That is not to say that I think there is that much between us: with friends like the noble Lord, Lord Hamilton, how can I complain? We are on the same side here, most unusually and extraordinarily, agreeing on points of some substance. There is some progress, it has not always been easy going and I think the noble Lord, Lord Lansley, was right to point out that this is partly because we are centring on an agreement which is brokered by the WTO through the GATS system. He is correct—his background in the chambers of commerce means that he reads these documents carefully and understands their provenance—that the wording of the amendment is indeed taken from the four pillars, but I was unable to get the fourth pillar in; the clerks would not accept that. The noble Lord, Lord Fox, managed to get it into the next amendment but one, so we will have that debate shortly. That complication sets us off in slightly the wrong direction: we are not trying to change that structure in essence, because that is the overarching world system and we have to be careful we do not try to take on too many battles at the same time.
The political declaration is not the same as the agreement and of course all that gets wrapped up into some form of yet-to-be-understood free trade agreement which may or may not include both customs elements and services agreements. I think the noble Baroness is right to pick up the question of how all that melds together: will we be able to trade off some aspects of our services in order to achieve a better tariff arrangement, or is it better to keep them separate and deal with the different arrangements? I do not think we have a clear answer to that, but I do not think we are very far apart on it. We want this to be the best for Britain. We have done pretty well, against all the odds. Why change it if it is not certain that the changes are going to be beneficial to us?
Having said that, the question from my noble friend Lord Davies is right: what is the point of this amendment if it does not improve where we are? That is where the test has to be. We must look carefully at the responses and make sure we have the right view. There may be some argument for having something, either in this Bill or in the non-continuity Bill yet to come, if that is the Government’s intention. However, at this stage we are unable to say that, so with that in mind, but with thanks to all who have contributed to a very rich debate, I beg leave to withdraw the amendment.
Lord Lansley
“Free Zones
(1) Within three months of the passing of this Act the Treasury must launch a consultation on proposals for the establishment in the United Kingdom of Free Zones, as defined by the Customs and Excise Management Act 1979.(2) The Treasury must lay a report of the consultation under subsection (1) before both Houses of Parliament within six months of its launch.(3) The report under subsection (2) must include—(a) proposals for the Free Zones to be established, and(b) an account of the extent to which each proposed Free Zone would allow UK manufacturers to secure an integrated supply and value-added production.(4) Within six months of the report under subsection (2) being laid, a Minister of the Crown must by regulations made by statutory instrument make provision for the establishment of Free Zones as set out in the report under subsection (2). (5) A statutory instrument containing regulations under this section may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, the House of Commons.”
Lord Lansley
I am grateful for this opportunity to raise the issue of free zones. I thought I was likely to end up moving this amendment at about 10 pm last Wednesday, so it is a pleasure to have it on in prime time but, recognising the value of this time, I will be as brief as I can.
The point about this amendment is that free zones were legislated for way back in 1979. Indeed, they featured, not least during the 1980s, as part of a broader industrial strategy. I do not propose today to debate the merits or otherwise of free zones, because there are arguments that cut both ways. They are, by their nature, a distortion: they distort the customs and regulatory framework in favour of specific geographical locations. None the less, there can be significant benefits associated with that happening in circumstances where one needs to advantage certain geographical areas. That is why, for example, they have been used in the past, and are used widely around the world, in relation to some more disadvantaged economic areas, and specifically in relation to ports of entry—not just seaports but airports and the like. The reasoning there is that the ports of entry to an economy are often in competition not so much with other parts of the geography of that country as with other ports in neighbouring areas.
The European Union has a general disinclination towards free zones because the single market effectively creates one single customs territory. Arguing against myself, if we were to be in a single customs territory with the European Union, the question of free zones would probably not arise at all—but if we are not to be, it ought to arise. Under these circumstances, it would be good to legislate in the Bill to encourage Her Majesty’s Treasury to bring forward both a consultation allowing the merits of free zone designation and its use in this country to be debated, and proposals to Parliament about how that designation might be deployed.
There are ports that are interested in this, and the Treasury’s approach—that it is happy to consider free zone designation under the 1979 legislation—is understandable. But it is for the ports themselves to decide whether they wish to do this. I understand some ports may wish to; Teesport and Humberside are interested, and Associated British Ports is interested. If we leave the European Union and do not form part of a customs territory with it, they may well bring forward proposals. In the interests of the legislative approach to this, we should have something that encourages that to happen as quickly as possible in an ordered way. That is why the deadlines in the amendment are swift: to initiate a consultation within three months, and to report on that consultation within six months. In quite short order after exit day, we in this country could see to what extent our ports would need and benefit from free zone designation to enable them to compete more effectively with other ports—not least those on the other side of the North Sea or the English Channel.
That is the reason we should think about this. Those bringing their goods to Europe have never previously had to think about customs or other formalities, or the imposition of duty on those goods if they are brought to the United Kingdom and then re-exported elsewhere in Europe. Unfortunately, they may have to think about that.
Lord Davies of Stamford
I am grateful to the noble Lord for giving way. As he rightly says, free ports are distortionary by definition. If you create a free port close to another port, one will survive and the other will probably disappear altogether. Does he think his Government would be tempted by the thought that they could say, “If we have a local MP who votes for us and supports this Government, we will make the port free; but if we have an MP who dares to vote against us, we will make the port unfree and ruin it”?
Lord Lansley
The noble Lord will observe that the amendment seeks a consultation on the part of the Treasury, and that consultation would undoubtedly enable these issues to be explored on an even-handed basis. In the scenario I was describing, any port would be free to come forward and seek designation. It is not something that would be handed out on the basis of any partiality; rather, it would be done by examining the cases made by those ports. The point is that whereas in the past we may have concluded that there was no basis for introducing such a distortion into our economic activity, if and when UK ports are principally having to compete in international trade with other European ports, we may conclude that it is not a distortion to trade inside the United Kingdom. Actually, it is an aid to competitiveness for the United Kingdom in relation to ports elsewhere in Europe. I beg to move.
Lord Bates
My Lords, I thank my noble friend Lord Lansley for moving this amendment. He has managed to get on to prime time in this territory. I once represented a seat on Teesside, which is very close to my heart. The idea has been advocated by the excellent mayor there, Ben Houchen, and by some of the local MPs, such as Simon Clarke and Rishi Sunak.
To reassure my noble friend, the Customs and Excise Management Act 1979—CEMA—allows for the designation of free zones, as he mentioned. The Taxation (Cross-border Trade) Act, which the Government passed through your Lordships’ House last September, allows HMRC to make regulations regarding goods kept in a free zone. Under CEMA, operators are free to apply to become a free zone. The Government are open to any ideas that might deliver economic advantages for the UK and will continue to examine the role that free zones may play as part of this. Assuming that we will have an independent trade policy, we will be able to have these types of examinations and innovations.
Existing customs facilitations in the UK offer the same benefits as free zones, but are not geographically limited and can be accessed anywhere across the country, thereby potentially having more widespread benefits for the UK as a whole. For example, a manufacturer could import materials for its products and store them in a customs warehouse anywhere else in the country, without duties being paid on them. The manufacturer or its supply chain could then use those materials in its manufacturing process under inward processing relief and could export the finished goods without any UK customs duty ever having to be paid. Those existing facilitations, therefore, avoid the distortions to which the noble Lord, Lord Davies, referred, which can arise from free zones where a manufacturer or its supply chain would be required to locate on the same site to benefit.
The UK’s ability to formulate a free zone that diverges from the Union customs code will depend on the future relationship with the European Union. The Government have also been clear that it is a commercial decision for operators to make on whether they want to apply for designation of an area as a free zone, and we will review any applications made. I am not able to be more helpful than that to my noble friend at this point, much as I may wish to be.
Lord Lansley
Since there is no recent substantial experience of free zones, does my noble friend not think it would be helpful—if we arrive at the point where we exit the Union customs code—for the Government at least to initiate a consultation to look at the criteria that would be applied in examining the designation of free-zone status?
Lord Bates
My noble friend will be aware that “consultation” has a specific meaning now in legal terms, which is quite an onerous responsibility of the process. We could seek ways to discuss—perhaps with BEIS as part of the industrial strategy—or to engage with others who are interested. He mentioned Humberside, Teesside and others, and I think we could look at ways in which that could be done. I am very happy to take that thought back to the Treasury and write to him further on that.
Lord Lansley
Once again, I am grateful to my noble friend and that is a very welcome comment. I look forward to further discussion about that but, on that basis, I beg leave to withdraw the amendment.
“Trade agreement with the EU: mobility framework
It shall be the objective of the Secretary of State to take all necessary steps to secure an international trade agreement with the European Union which includes a mobility framework that enables all UK and EU citizens to exercise the same reciprocal rights to work, live and study for the purpose of the provision of trade in goods or services.”
Lord Fox (LD)
My Lords, we have come to the fourth day of Committee on the Bill. Before the noble Lord, Lord Liddle, became herald to this issue, we really had not talked about people. Trade is about people—it is about people who make and sell things, people who sell their services abroad, and people who come to this country to sell their services and goods to us. There are strong arguments for the preservation of free movement in any future treaty. Amendment 66 requires the UK to negotiate with the EU an international trade agreement that allows UK and EU citizens to continue to work, live and study abroad.
Free movement is good for the economy: it boosts efficiency and innovation. Meanwhile, its impacts on public services, crime and unemployment are generally positive—I will come back to those points shortly. There is a cultural and societal benefit which comes with the opportunity to work, live and study in other cultures and develop mutual understanding and friendships. These are often set to one side and referred to as “soft power” in a way which suggests that they are somehow less useful than hard power. However, these are important things, to do with the influence of our country in the rest of Europe. I will focus on the first two elements of the benefits from free movement.
In no small measure, we have a Prime Minister who is obsessive about the need to end free movement; this is reflected fully in the political declaration and the way we are moving forward. As the Minister set out, there is some outline in the political declaration, but of course, as the noble Lord, Lord Kerr, pointed out, it is merely a wish and not a reality. The political declaration says that free movement of people will end—we know that that is what the Prime Minister set out to achieve. The UK and the EU will provide visa-free travel, but only for short-term visits; both parties will consider visa conditions for research, study, training and youth exchanges; both parties will consider addressing social security co-ordination; both parties will consider measures to minimise border checks; both parties will seek to co-operate on parental responsibility measures; and there will be a framework to enable people to travel temporarily to the other territory for business purposes. The exception to this is the common travel area within Ireland, which will be unaffected. However, the rest of the immigration process, just like the rest of Brexit, is left hanging.
I am interested in what the Minister can say; clearly, he may not be able to say it directly. Those bullet points are interesting, and are clearly a result of a joint discussion between the European Union and the United Kingdom. Which of those points arose from the United Kingdom’s point of view and wish list, and which of them came from the European Union? In other words, what was the thinking of the two parties going forward?
Before we look at the trade influences specifically, I want to make the point clearly that ending the free movement of people in and to this country is a stupid idea. I shall take as my text to prove this the Migration Advisory Committee’s report of 18 September. When it comes to the impact of economic migrants from the EEA, the committee finds that, overall, there is,
“no evidence that EEA migration has reduced employment opportunities for UK-born people on average”,
and that overall there is,
“no evidence that EEA migration has reduced wages for UK-born workers on average”.
The committee notes that there is:
“Evidence that immigration has, on average, a positive impact on productivity”,
and:
“High-skilled immigrants increase innovation”.
I remind your Lordships that those two issues of innovation and productivity are key objectives of the Government’s Industrial Strategy. The committee also notes that EEA migrants,
“make a larger contribution both in terms of money and work to the NHS than they receive in health services”,
and that there is:
“No evidence that migration has reduced the quality of healthcare”.
Quite the contrary, I would say. Indeed, it is clear that the social care sector struggles to recruit sufficient people. With the current freedom of movement calling that into question, what will happen in the future?
The House of Commons Library estimates that in 2017 there were 10,705 doctors, 20,276 nurses, and 14,247 clinical support staff in the NHS who were EU nationals. It estimates that in the last two years the net number of nurses and midwives who were EU nationals, for example, has fallen by over 5,000. We heard in today’s Question Time about the struggle that the NHS is having to recruit future doctors. There were 41,000 nursing vacancies in England, and the Royal College of Nursing estimates that this will rise to 48,000 by 2023 as fewer start nursing degrees each year. In social care, things are much worse, with about 110,000 vacancies.
The Migration Advisory Committee found no evidence that migration has reduced parental choice at schools. Nor has it reduced attainment, and there is no evidence that it has an effect on the overall level of crime. The committee noted that EEA migrants pay more in taxes than they receive in benefits for public services. However, and tellingly, the committee is also not convinced that sufficient attention is paid to ensuring that the extra resources that have come in from those migrants is being spent in the areas where they live. That is a very important point.
Housing raises another important nuance. In pointing out that only a very small fraction of migrants occupy social housing, the committee also pointed out that, given that virtually no new social housing was being built, any migrant in social housing is excluding a UK-born tenant. The committee also found that migration has increased housing prices. It then went on to note that the housing issue cannot be taken in isolation from other government policy. “Hear, hear”, I say to that. For my part, it is clear that the woeful performance in housebuilding by successive Governments is a much larger irritant on the housing issue in this country than migrants. The evidence points to the need not to stop the beneficial flow of economic migrants but for targeted government investment in the communities that have generally been termed to have been left behind.
As the noble Lord, Lord Heseltine, so eloquently put it in his speech during our debate before Christmas, these communities will not be benefited by making Britain poorer, and one way to make the UK poorer is to end free movement.
It is fair to say that there is a huge cognitive dissonance between the published evidence of the Migration Advisory Committee and the political declaration and immigration White Paper. Her Majesty’s Government are seeking to exclude a group of people who contribute positively to our national life. Worse than that, in justifying their policies, they vilify that group for issues that are caused by government mistakes and mismanagement.
The immigration White Paper makes clear distinctions between what are termed skilled and unskilled workers—here we come to the point raised just now by the noble Lord, Lord Liddle. It uses the existing salary threshold of £30,000 to differentiate between those two groups of future employees. Yes, it makes the process of applying for tier 2 visas easier by proposing to abolish the 270,000 annual cap and the resident labour market test, which was a heavy administrative burden on businesses trying to hire from overseas. However, the salary cap is a fundamentally wrong proposal, because it conflates salary with skill. There are many jobs, not least in research and development, where experts are paid below that cap. They still have fabulous skills to offer this country, but they earn less than a £30,000 salary. The White Paper itself estimates that, overall, those restrictions would reduce the net inflow of EEA long-term workers by about 80% in the first five years. This would result in GDP being up to 0.9% lower in 2025.
So-called unskilled workers will not be offered a route into the UK in the long term, according to current proposals. In the interim, the Government will allow unskilled workers to apply for temporary, 12-month visas. This fails the logic test. High-skilled workers may be contributing more in tax, but lower skilled migrants are offering a huge contribution in the services they offer to this country. The Migration Advisory Committee report makes that clear.
There is also a tacit admission in the Government’s own words when they allude to work-related schemes. Once we start looking for sectors that might need such schemes, frankly, we can include the vast majority of the UK economy, but given that agriculture and the hospitality industry are two important parts of our international trade, perhaps the Minister can explain what volume of work-related immigrants the Government anticipate being admitted and how that equates to the stated needs of those two industries.
I am also anxious to learn the Government’s view on how self-employed people or freelancers will trade across the EU-UK border. Here I declare an interest, as I have at least one family member who is a freelancer. Self-employed people are vital to our service industry and dominate in particular sectors. I know that my noble friend Lord Clement-Jones will speak on their role in the tech and creative sectors, for example. How will self-employed people be able to contribute, going forward?
Lord Framlingham (Con)
I am listening very carefully to the noble Lord. Does he accept or acknowledge that there are any problems at all with the freedom of movement?
Lord Fox
If the noble Lord reviews what I said in Hansard, he will see that I talked about two particular issues highlighted by the Migration Advisory Committee.
In addition to listening for the reaction of the Labour Front Bench in this House, from the Government I am listening for the Minister to publicly acknowledge the benefits that EEA migrants have brought to the lives of all of us in the UK. More than that, I hope to hear the Minister confirm that Her Majesty’s Government understand that trade is intrinsically about people, whether working alone or in companies and organisations, and—as previous speakers have brought out—that this is even more important in an economy centred on services, such as ours. Therefore, the more they can move and trade, the better it is for the United Kingdom’s economy. I wish to hear that the Government understand that to restrain the trade of EEA nationals in the UK will not only forfeit the benefits they bring but materially restrain hundreds of thousands—if not more—UK people trading in the EU 27. I would like the Minister to rule out the use of this as a bargaining chip in negotiations. That is why I would like to write this into the Bill. I beg to move.
Lord Clement-Jones (LD)
My Lords, my noble friend Lord Fox has introduced his amendment extremely eloquently and convincingly. In supporting it, I highlight the fact that without the right deal on movement of talent and skills, our creative industries will face major challenges. Some 5.7% of the UK workforce is made up of EU 27 nationals. However, 6.1% of the creative industries workforce is made up of EU 27 nationals. More than that, 10% of the design, publishing and advertising workforce are EU 27 nationals. Some 25% of our visual effects in film—VFX—workforce is from the EU, and that rises to 30% in gaming. We are highly dependent, in those areas of the creative industries, on EU 27 nationals.
Take the music industry, for example. Some £2.5 billion was generated by music in export revenue. Germany, France and Sweden are among our top export markets, and are major destinations for our musicians. In the recent ISM survey of musicians, 39% said that they travel to the EU more than five times a year; 12% travel to the EU more than 20 times a year. More than one in eight performers had fewer than seven days’ notice between being offered work and having to take it, and more than a third of musicians said they received at least half their income from working in the EU 27. There are warnings from these musicians from their experience with the rest of the world. More than a third of musicians had experienced difficulties with visas when travelling outside the EU. In fact, of those experiencing difficulties, 79% identified visas as the source of those difficulties. Musicians in particular rely on being able to work and tour in Europe freely, easily and often with little notice.
It is equally important that the other people vital to touring, such as roadies and technical staff, are able to travel on the same basis. It is also vital that instruments and equipment can be moved around easily, and this must be a reciprocal arrangement. On touring, the Government have said that the UK will look to reach an agreement allowing musicians and museums to tour major events with their equipment and goods. What is considered a major event is not clarified and there are few details on what an agreement would look like.
The Government propose that the new immigration system will preserve the current rules for employing non-visa nationals for short-term work to join a UK production. This allows them to work for up to three months without a visa, requiring only a certificate of sponsorship from their employer, which is cheaper and easier to obtain. For periods longer than three months, the Government are reaffirming that the current tier 5 creative and sporting route, which caters for creative workers such as musicians, actors or artists who are working and touring in the UK, will continue. This is welcome but, again, without the right reciprocal provisions, Brexit is likely to make touring much more difficult for musicians and crews to move across Europe. Increased red tape will make it harder to promote music overseas.
Then, if the withdrawal agreement is agreed, from January 2021 non-visa nationals looking to take up permanent employment in the UK, such as VFX workers, will need to obtain a tier 2 visa. This requires sponsorship from an employer, which must pay a skills charge to make the recruitment. Workers must meet a minimum salary requirement to be eligible for a tier 2 visa. Like my noble friend, I welcome that the Government now plan to consult on the appropriate level for this requirement in the coming year, but the Migration Advisory Committee—MAC—has recommended that it stays at £30,000. There will need to be considerable changes to these proposals if the Government are to ensure that sectors such as the creative industries continue to thrive post Brexit. As the Creative Industries Federation has said,
“high skills do not always command a high salary”.
There is still a huge lack of clarity. The UK Screen Alliance has criticised the plans for a post-Brexit visa system. It says the Bill’s proposed visa system will “severely limit” the VFX and animation industries’ access to international talent. It also says that expensive new EU visas will add significantly to operating costs and impact on the sector’s competitiveness in the global market. Alan Bishop, the chief executive of the Creative Industries Federation, said about the White Paper:
“Unfortunately there is very little in this white paper which will give creative businesses and freelancers in the UK any confidence for the future … government has failed to recognise the challenges freelancers face within the current immigration system—a significant challenge for the Creative Industries Federation where 35% of creative workers are self-employed. Freedom of movement has given British businesses access to the best and brightest freelancers from the EU, presenting those businesses with opportunities to grow and contribute to the continuing health of the UK economy. For international non-EEA freelancers however, the current immigration system provides no long-term route. This is why the Federation has called for the introduction of a freelance visa”.
Those are the words of two significant organisations in this field.
The Government have had plenty of time to consider all these issues and have had plenty of sound advice, not least from quarters such as the July report of the House of Lords European Union Committee, Brexit: Movement of People in the Cultural Sector. That is why this amendment is so important, and I very much hope that the Minister will reflect in his response that the Government fully understand the needs of the creative sector.
Lord Stevenson of Balmacara
My Lords, a powerful case has been made by the party to my left. My sadness is that the framing of the amendment before us deals largely with how any future trade agreement with the EU should have a relaxed approach to the mobility framework and, picking up the point of our earlier debate, tries to insert in some measure the fourth pillar of the GATS process, which allows for individuals to travel in support of goods and services.
The case we heard, and the emotion it raises, are about the much broader ideas of freedom of movement and the ability to transfer skills, particularly in the creative industries. Although it was not specifically mentioned, presumably it seeks to try to loosen the way in which the Government currently treat overseas students. There is a wider, richer, deeper and more important argument about the need for mobility, its importance for any modern nation state and the contribution it can make to our economy and our culture. That needs to be answered, but it is not picked up particularly by this amendment.
We too discovered this problem when tabling amendments. The title of the Bill means that we can not have as broad a discussion as we would wish. However, there is an immigration Bill coming, and others in your Lordships’ House will want to pick up many of the points made here and raise them in the context of a much wider and more appropriate set of immigration conditions and arrangements, which will satisfy much of the discussions we have heard this afternoon.
On the narrow question of where we move, it would be wrong to try to seek a broader solution to the problems identified through a generic approach. There is no doubt that what appeared to be—and it was appearance rather than reality—unbridled immigration was a factor in the referendum that led to the formation of the Brexit arrangements. We would be stupid to ignore that. There are probably answers and solutions that would be satisfactory to all concerned, but not in this amendment. Nevertheless, I will listen carefully to what the Minister says in response to this point. This issue will not go away and we look forward to returning to it at a future stage.
Lord Bates
I am grateful to the noble Lord, Lord Fox, for introducing this amendment, which deals with an important area already touched on this afternoon. It will of course be pored over in some detail as the immigration Bill makes its way to your Lordships’ House.
There is no dodging the key line in the political declaration. At paragraph 56, I think, it makes it clear that free movement will end as the UK leaves the EU. The noble Lord is passionate in his advocacy of free movement, and he has expressed his view that it is a stupid idea—I think I quote him correctly—to get rid of it. But, as the noble Lord, Lord Stevenson, identified, this issue is more complex. To use his term, unbridled immigration was an issue, and we would be stupid to ignore that. Therefore, there is a difference of views here but, as the noble Lord invites me to set out the Government’s position, I will put it on the record if I can.
I appreciate the desire to ensure that businesses and individuals who trade in services and goods between the UK and the EU will have the ability to move across borders to do so. The Government are committed to securing the best deal for UK businesses. We have set out a clear proposal for an ambitious future relationship with the European Union, including a reciprocal framework for mobility. This was reflected in the political declaration on our future relationship. The detail will be discussed in the next phase of our negotiations.
The Earl of Clancarty (CB)
My Lords, earlier the Minister mentioned crossing borders. Would that include onward movement, which is a particular concern of not only individuals and self-employed people in this country but British people living in Europe? Time and again, I have heard that that is a particular concern.
Lord Bates
I may not be able to get a categorical answer on that, but I am happy to undertake to write to the noble Earl ahead of Report to clarify that point.
Lord Purvis of Tweed
The Minister said that perhaps this amendment would be better placed elsewhere, but I wondered why, in the sequence of events, the UK did not agree a temporary arrangement with Switzerland on continuity, for example, in the case that I raised earlier in Committee. Instead, the Government have agreed a permanent relationship arrangement with the Swiss for free movement of people for three months a year if they are providing services. Clearly, the Government thought it was not sufficient to wait until we debated the Immigration Bill, when we could have considered that aspect of our relationship with Switzerland and others. But the Government have made a decision. So as my noble friend Lord Fox indicated, it is right that we press the Government much more. Why did the Government make a case for giving Swiss nationals a permanent right of visa-free travel and work for three months a year, but are taking a distinct approach to other countries, including our EU partners?
Lord Bates
Obviously, those are discussions that will have to be concluded in the future framework. On the specific point about Switzerland, however, the noble Lord suggested that the services elements were additional to the Government’s policy on immigration as set out in the Immigration Bill. That is not correct; it is not inconsistent with the provisions in that Bill.
On the point made by the noble Earl, Lord Clancarty, on onward movement for EU nationals, the UK pushed strongly for the inclusion of onward movement rights during the first phase of negotiations on citizens’ rights in the withdrawal agreement but the EU was not ready to include them at that time. I made that point about reciprocity earlier. We recognise that onward movement opportunities are an important issue for UK nationals in the EU and we remain committed to raising this during detailed discussions on our future relationship. That is the latest position we have at the present.
Lord Stoddart of Swindon (Ind Lab)
There has been a lot of concern in the past that the position of the Commonwealth, relative to that of the EU, has been bad—that EU citizens and EU goods can come to this country without let or hindrance, whereas people and goods from the Commonwealth are unable to do so and have to take their place with the rest of the world. As I understand it, following our departure from the EU, our Commonwealth will be in the same position as people from the EU, and indeed the rest of the world. Can we be assured that the Government’s future policy in relation to the Commonwealth will ensure that it will have equal access?
Lord Bates
I listened very carefully to the final words that the noble Lord used when he talked about “equal access”, and I draw back from that a little. But on the broad principle, when we talk about the scheme of preferences and economic partnership agreements that we have with Commonwealth countries, if we have an independent trade policy, of course we will be able to take that into account. We would be free to do that. Similarly, if we are not part of free movement within the EU and have our independent immigration policy, we are in a position to set out the terms on which we want to admit people to work in this country. I hope that is helpful to the noble Lord.
Lord Fox
My Lords, I thank noble Lords for the minimal debate that we have had around this. I will look closely at Hansard, but I did not hear the Minister refer to the £30,000 threshold issue and the false dichotomy between skilled and unskilled. Between now and Report, I would like the Minister to come back to that, and I apologise if he did indeed raise it.
Lord Bates
Before the noble Lord sits down—I have always wanted to say that—I did have some notes on that. Perhaps I could intrude on the noble Lord’s wind-up to say that the Government are committed to ensuring that the future immigration system works in the international interests of all the UK. The Migration Advisory Committee advised that the £30,000 salary threshold should still apply. The Home Office is undertaking an extensive programme of engagement on its White Paper proposals and will discuss with business and a variety of other sectors, including the creative industries, what a suitable threshold should be. If a skilled job is considered to be in shortage in the UK, a lower threshold is likely apply. I hope that helps the Committee and the noble Lord.
Lord Fox
It helps somewhat, and I urge the Government to consult extensively with the care and food service sectors. Hygiene skills, for example, benefit the food sector a lot. I am sure most employees there earn less than the scheduled threshold. There is also the issue of freelancers and self-employed people. I will not get the Minister up again but I will be looking for a response on that. I also did not hear from Her Majesty’s loyal Opposition anything other than what I would call a very weak response. It was, frankly, disappointing. With that proviso, I beg leave to withdraw.
Lord Lea of Crondall
“UK membership of EFTA and the European Economic Area
It shall be the objective of an appropriate authority to achieve before exit day the implementation of an international agreement to enable the United Kingdom to become a member of the European Free Trade Association and continue as a signatory to the EEA Agreement.”
Lord Lea of Crondall (Lab)
My Lords, I will begin by reading the amendment to set out what I am trying to do here:
“It shall be the objective of an appropriate authority to achieve before exit day the implementation of an international agreement to enable the United Kingdom to become a member of the European Free Trade Association and continue as a signatory to the EEA Agreement”.
It will be recalled from last summer that this policy had—has, I guess—the support of this House. I now wish to scrutinise some of the practical issues of attaining it. Given that all the other ideas seem to have fallen by the wayside, one after the other, like dominoes, I think this is the only one standing. It now has even more steam behind it.
Before I come to the main issue, I should like to make a point about Nissan and Sunderland. This is central to why we need to stay in the single market and customs union. Reading between the lines, Nissan is saying almost as much in those terms. There is a slow-burn catastrophe of collapsing foreign direct investment in Britain. I made a speech a year ago saying that the plans—not forecasts but plans—were down 80%. I was talking to the FDI people around a table. This is now exemplified by the huge Nissan setback. By the way, many Members here, in their previous incarnations, have worked very hard to secure that work. On this occasion, no one is blaming the workers or their trade unions. That is a change, is it not? They blame those who play to the gallery. Boris Johnson and his press acolytes spring to mind, with their self-serving and grossly misleading propaganda two years ago and since. They ought to be ashamed of themselves.
Even now, on the options before us, Her Majesty’s Government are still in denial about the vital requirement to enhance and protect our world market share of investment and trade by staying part of the customs union and the single market/common market. That, in turn, is the secret of Europe’s world market share vis-à-vis the USA and China, as well as Japan and other parts of Asia, as a preferred production location. The same applies to many services.
Lord Stoddart of Swindon (Ind Lab)
My Lords, I really had to get to my feet since I was referred to by the noble Lord, Lord Lea of Crondall, to tell him that it was not puzzlement on my part. It was thinking about what he was saying about the Social Chapter, because the Labour Government at the time opted out of it. What I am concerned about—
Lord Monks (Lab)
Just to correct that statement, it was John Major’s Government who negotiated an opt-out from the Social Chapter in the context of the Maastricht treaty.
Lord Stoddart of Swindon
As soon as I said that, I knew it was wrong, but in fact Mr Blair continued that way and did not introduce the Social Chapter. What I find strange about the noble Lord, Lord Lea, and others, is that they do not seem to understand that once we are an independent nation we can make the rules that we want, which may be better than the rules that 27 other member states—or 28 with ourselves—make in relation to the rights, privileges and wages of workers in this country.
Lord Lea of Crondall
That is the central point. The reason we could not do it at national level, whether in Europe or the wider world, is that our employer would say we will be uncompetitive. However, in a big bloc like the EU where we negotiated at Brussels level under the Social Chapter, they cannot say that—at least for the most part within the family of the European Union. That is the point that the noble Lord, Lord Stoddart, has not answered.
Lord Stoddart of Swindon
That, of course, is a matter of opinion. There are others who say that because we are members of the EU we cannot make the laws that we want in this country, which would benefit the whole country including the workforce. People should have more confidence in this country, the way it is governed and those who can govern it.
The noble Lord, Lord Lea, blamed—or seemed to blame—Brexit for Nissan reneging on its agreement to make its new model in this country. However, Nissan itself has said that the world decline in demand for vehicles, particularly diesel vehicles, was the main reason it wished to save money by developing the vehicle in Japan. We ought to be careful that we do not blame Brexit for everything that goes on in the world and this country. I hope that the noble Lord understands that I was not puzzled about what he was saying—I was merely thinking about what he was saying. Of course he will realise that I was actually listening to him, as I always do.
Lord Finkelstein (Con)
I thank the noble Lord for his compelling and persuasive speech. For those of us who are determined that we should not leave the European Union without any deal whatever, it is important to think about the points that he has raised. We are at the stage now where someone like me needs some guidance. There is no point haring off after something that it is not going to happen. We had a discussion in this House on these very questions, and when we had plenty of time to implement this solution, Labour Benches decided to vote against it and therefore implied that they were not in favour of it at that point, and probably that they would not be in favour of it at any point. I suspect that is still the case.
Before we get ourselves embroiled in Norway-plus as an alternative, I would certainly find it useful to know whether it is the noble Lord’s view that the Labour Party Front Bench is ever likely to support this proposal—
Lord Lea of Crondall
I can help the noble Lord on that. In the six months since the summer, Jeremy Corbyn—whether you think his policy is that of a snail or a crab—has moved to say that we in the Labour Party are in favour of staying in the customs union and a/the single market. That is Front-Bench Labour Party policy.
Lord Finkelstein
I think it is access to the single market, and we are both aware of the difference between those two things. Also, it is “a” customs union; I noticed that the noble Lord referred to “the” customs union. That is also something different, so his view is not quite that.
There is a second question: whether if the Labour Party decides it is going to move to this position—either as a snail or a crab; those were the noble Lord’s chosen animals—that it would then support the withdrawal agreement, which would be needed in order to pave the way for this. If it is not going to, that is significantly less attractive to someone like me looking to ensure that we do not leave without a deal. These questions are not put as a challenge—they are a genuine dilemma for those of us who are now looking at what the solutions are, who are not persuaded after the Brady amendment that we are going to get very big changes from the European Union, and who want to be sure that we can all agree on something.
Lord Lea of Crondall
If the protocol of the House allows me, I will answer questions as they come in this way. The proposal I made at the end of a negotiation involving the EU as well as EFTA is one way of getting out from under the dilemma that some future for Britain within the common market and the customs union could be found. It would not simply be “the” withdrawal agreement; it would be the withdrawal agreement/going along with EFTA under the EEA umbrella agreement, with an understanding between the 27 and us. That is my proposal.
Lord Finkelstein
It is a credible proposal, but only if it has some sort of political support. The questions I put are merely a matter of guidance to me—and I am sure to lots of other people like me—and I am hoping that we will get a little bit of illumination from both Front Benches that will help us along the way.
Viscount Trenchard (Con)
My Lords, against the framework of what the future relationship will be, I do not think that the proposal of the noble Lord, Lord Lea, that we do not follow the procedure set by Article 50 for withdrawal but instead combine a withdrawal agreement-plus with seeking to accede or re-accede to EFTA would find much support among our European friends and partners. They would say that that is not what Article 50 says.
The noble Lord has made clear on many occasions his view that the UK should seek the softest possible Brexit, and his amendment would achieve that. If we were to become a member of EFTA—I think that Norway, for one, has not expressed any enthusiasm for our accession or re-accession—it is true that we would escape the jurisdiction of the ECJ and instead be subject to the EFTA Court, but that court follows closely ECJ judgments.
The leader of Norway’s European Movement has stated clearly that it is in neither Norway’s nor the UK’s interest for the UK to become again a member of EFTA. Continued membership of the EEA would require us to accept future EU rules and regulations, but without a seat at the table and with a greatly reduced voice in the formulation of those rules and regulations. It would also prevent the UK having its own trade policy and remove the raison d’être of my noble friend the Minister and the Department for International Trade. We would not be able to enter new free trade agreements with other countries or accede to broader free trade partnerships such as the CPTPP, which includes Japan, an enormously important trade and investment partner, and leading Commonwealth countries such as Australia, Canada and New Zealand, whose trading regulations, policy and law share origins with our own.
The EEA/EFTA proposal would make this Bill redundant, because we would have no need to novate existing EU FTAs and it would negate the whole upside of Brexit, leaving us as effectively a vassal state of the EU. That is not what the people voted for and your Lordships’ House would not be serving the nation’s interest by supporting the amendment.
Lord Stevenson of Balmacara
I hesitate to become too involved in this debate, which seems rather above the level at which I am accustomed to operating, but one or two things came to mind. As the noble Lord, Lord Lea, explained to me and as came through in his address, the purpose of the amendment is to make sure that we explore all possible options before coming to a conclusion on the many difficult issues before us today. He has done that clearly and it will be interesting to hear what the Minister has to say in response.
It would probably defeat any prospect for active negotiation to play the card that has been played in this amendment at this point, but it is worth bearing in mind the issues that it raises and the much broader point that the noble Lord, Lord Finkelstein, was keen to explore: so many strands to our positioning are being coalesced into a single deal/no deal debate, squeezing out our opportunities for further, richer and more flexible solutions to the long-term problems that we have all recognised and debated today. At this point, it would be best to hear from the Minister what the official line is and then see whether there are issues that we need to come back to on Report.
Lord Bates
I thank the noble Lord, Lord Lea, for setting out the rationale for his amendment. He was sincere in his attempt to persuade us and very thorough, as I would expect of a distinguished economist, in setting out in some detail his thoughts on where this option might go. Whether it is plan B, C, D or E, the reality is that it is a proposal that the Government take seriously and I want to respond to it in that manner.
As my noble friends Lord Finkelstein and Lord Trenchard have mentioned, the very topic of EEA membership was debated in another place in relation to the EU withdrawal Act on 13 June last year and again in relation to this Bill on 17 July. The outcome was clear: the EEA is not the right model for the UK.
Membership of EFTA and the EEA would mean accepting the continued free movement of people, which both Conservative and Labour manifestos pledged to end at the last election—which I suspect is why the noble Lord, Lord Stevenson, suggested that this might be a debate that the Labour Front Bench wished to sidestep; of course, on the Government Bench we do not have that luxury.
Lord Lea of Crondall
I thank the Minister for that very courteous reply. I do indeed believe that he has taken the points very seriously, as I would have expected of him. Neither of us is Wittgenstein. I say that because I fear that Wittgenstein would not have been very happy with some of the logic that has been heard in the last 20 minutes, which tends to be along the lines of, “We can’t do X because that is governed by Y”, as though that were the end of the argument, when in fact I dealt with that proviso in what I was putting forward. It is very difficult across the Chamber, if not impossible, to untangle the tortuous web we weave, but that is what I have been endeavouring to do. I would add that the EEA Council would undoubtedly be able to open a discussion with us: who is going to tell it that it cannot do that? Whether, technically, at that moment, Britain is a third party is a separate question, I would have thought. The agenda is, first, what can we do to avoid tripping over each other in sequential negotiations with the EEA and EFTA? That is a serious problem, given the asymmetry between the technical questions affecting the single market and the customs union.
British pragmatism and common sense—not that there is much of that around these days—is the territory that I am trying to get into. I very much hope that, in the spirit of what a number of people have said, there is food for thought in what I have been saying and, in the two or three weeks before we come back on Report, who knows? A day is a long time in politics at the moment. I beg leave to withdraw the amendment.
Lord Purvis of Tweed
“(a)”
Lord Purvis of Tweed
My Lords, I shall speak also to Amendment 68. These are probing amendments the purpose of which is to seek clarity not only about the Government’s intentions towards negotiations on the future relationship with the EU, but about the Bill and Clause 6 in particular.
Since Committee started we have seen one tangible example of what leaving the European Union means, because it also means that many European Union institutions are leaving the United Kingdom. When the flags were lowered and folded at the EMA headquarters last week, the director of the Wellcome Trust said that it was:
“A very sad day for the UK, a great day for the Netherlands”,
where the EMA will now have its temporary headquarters. I am fully aware that, in advance of our discussing this amendment today, many decisions have already been made at the EMA. I am also aware that, if we are leaving the European Union, our membership of EU institutions gives rise to significant complexities. However, that does not alter the fact that membership of the EMA is imperative to the United Kingdom’s medicines industry, our patients and consumers of pharmaceuticals.
The EMA is essential to the functioning of the single market for medicines in the EU, and the UK played a pivotal role in that process, not just in hosting the EMA for 23 years but also through the contribution of our scientists and researchers and our regulatory expertise. The agency’s work is vital and will continue to be so, providing EU citizens with effective, safe and high-quality medicines and maintaining a regulatory environment that fosters innovation and development of new medicines. It is vital that the UK continues to have a relationship, and my amendments seek clarity on how the Government see that relationship. We know that we are no longer able to engage as co-rapporteurs for new marketing authorisations applications—this will end regardless of what happens on 29 March 2019, agreement or no agreement. The only way we can stop this is if we continue our membership of the European Union, which is by far the most preferable of all the options, but on the basis that that will not happen, we also know that from March onwards the UK’s position will be considerably weaker.
Last April, the EU 27 completed the redistribution of the UK’s portfolio of more than 370 centrally authorised products to rapporteurs from the EU 27 plus Iceland and Norway. We know that significant damage has already been done. To put this in context, more than 40 million pharmaceutical packages are exported from the UK to the European Union every month, and more than 30 million are imported into the UK from the European Union. The UK pharmaceutical industry is integrated into the regulatory regime of the European Union, and separating this out has been a very painful process. The question remains: what will the relationship be going forward?
Paragraph 24 of the political declaration states—assuming this is still the Government’s position—the following:
“The Parties will also explore the possibility of cooperation of United Kingdom authorities with Union agencies such as the European Medicines Agency (EMA), the European Chemicals Agency (ECA), and the European Aviation Safety Agency (EASA)”.
What do the Government mean by co-operation? The Bill says—at the moment—that the Government should,
“take all necessary steps … to fully participate … in the European medicines regulatory network”.
It is for the Government to explain the disparity between the two. Why does the political declaration say simply,
“explore the possibility of cooperation”,
when the Bill says that the Government’s objective is full participation in the regulatory network? Why the disparity in language? Was this on the insistence of the European Union, or because the Government did not do what the House of Commons instructed it to do, taking a much stronger position in the Bill, with full participation as their intention?
Lord Lansley
My Lords, I just want to say a word on this. I will not add much, because the noble Lord, Lord Purvis of Tweed, has illustrated the nature of the issues here very well. I would just emphasise that, if the Government are looking to vary Clause 6 as it came from the other place, it is important for them to do so while recognising the importance of seeking to maintain and maximise our co-operation and partnership on medicines and clinical matters across Europe. There are issues such as European reference networks for rare diseases, which are valuable mechanisms for co-operation; there is work together on clinical trials and the implementation of the clinical trials directive.
As far as the European Medicines Agency is concerned, none of us realistically expects that, if we leave the European Union, we will have mutual recognition of authorisations between the Medicines and Healthcare products Regulatory Agency in this country on the one hand and the EU on the other. Even if we were to offer to recognise European Medicines Agency authorisations in this country, I do not think that will be offered, because the European Union will not contemplate a third country providing what it regards as the equivalent of its own authorisations with its own control of data and jurisdiction under the European Court of Justice. That is not going to happen.
However, from early on in the negotiations it was clear that we should aim, if possible, for the scientific evaluations presently carried out by the Medicines and Healthcare products Regulatory Agency, prior to the authorisation process, to continue to be done by the MHRA. That is not presently anticipated by the European Medicines Agency, and that is one of the reasons why the Dutch, Germans, French and others are gearing up their medicines regulatory authorities to do much more of this work. They recognise that—to give perhaps the maximum illustration—over 40% of the work on the authorisation of medical devices across Europe is done by the MHRA, and an even higher percentage for the more complex and significant medical devices. It is far from the case that this can be readily adopted and delivered in other EU member states. It is in their interests and ours to continue to work together—something like 80% of the total work is in the scientific evaluation rather than in the subsequent authorisation process.
I know Ministers are continuing to think about how we can achieve this level of co-operation, and I hope that, in that spirit, even if Clause 6 does not end up providing this mandatory structure for the negotiations, Ministers will be forthcoming none the less about how we might make progress in the direction that the noble Lord in his amendment is aiming for.
Viscount Younger of Leckie (Con)
My Lords, I start by thanking my noble friend Lord Lansley, who has paved the way quite well for some of the remarks I will make on this issue. This amendment, spoken to by the noble Lord, Lord Purvis, raises an important issue which the Government are committed to addressing, and that is our future relationship with the European Medicines Agency.
Medicines regulation is inextricably linked to the UK’s fantastic life sciences sector. The UK has one of the most productive health and life sciences sectors in the world. The sector is critical to the UK’s health and economy, contributing over £70 billion a year and 240,000 jobs across the country.
We have been clear since the referendum result that our overarching aim for medicines and medical device regulation is underpinned by three clear principles: first, that patients should not be disadvantaged; secondly, that innovators should be able to get products to the UK market as quickly and simply as possible; and, thirdly, that the UK should continue to play a leading role in promoting public health. This is why the Government, in their White Paper The Future Relationship between the United Kingdom and the European Union, set out their aim to secure active participation in the EMA. The noble Lord, Lord Purvis, used the word “imperative”, and that is very much noted on this side.
However, the clause binds our hands ahead of negotiations with the EU on our future relationship. We have always been clear that continuing to share our skills and expertise is the best outcome for UK and EU patients. The noble Lord, Lord Purvis, cited part of the political declaration; that declaration underlines the UK and EU’s mutual commitment to working together in the future on medicines regulation, and to negotiating the UK’s ongoing co-operation with the EMA. That particular area was raised by my noble friend Lord Lansley, but I will go slightly further, because the noble Lord, Lord Purvis, picked up on the word “co-operation”. I say again that we want to retain a close working partnership with the EU to ensure that patients continue to have timely access to safe medicines and medical devices. The political declaration explicitly makes allowance for a spectrum of outcomes and commits both the UK and the EU to exploring the UK’s relationship with the EMA.
The Government, as I said earlier, set out their ambitions for the future relationship in the July White Paper, making it clear, again, that we are seeking participation in the EMA. I can provide the Committee with some additional detail, however, some of which has been alluded to by my noble friend Lord Lansley. The UK is seeking an agreement that will allow the UK regulator to be able to conduct technical work, including acting as a “leading authority” for the assessment of medicines, and participating in other activities, such as ongoing safety monitoring and the incoming clinical trials framework.
I hope these brief comments provide enough reassurance to the Committee. Given that continued EMA participation is already a negotiating objective of ours, we do not believe that this amendment is necessary. The Government are already committed to ensuring that, after we leave the EU, UK patients can access new medicines at the same rate as they do now.
The Duke of Montrose (Con)
I am most grateful to the Minister for giving way. A case in point that my noble friend Lord Lansley was talking about is not just medicines but vaccines. Apparently, in this country we no longer make any vaccines for human use, but all the European vaccines from all around the world are vetted by the Moredun Research Institute in Edinburgh. It will no longer be able to vet vaccines, and it has been told to destroy all its cultures if a no-deal Brexit goes through.
Viscount Younger of Leckie
I very much take note of what my noble friend has said. I have no doubt that that point, and so many others, will be taken into account when these negotiations commence.
I wanted just to clarify one point that the noble Lord, Lord Purvis, raised on the issue of “all necessary steps”, which is engrained in the clause to which his amendment refers. It is a point that the Government are reflecting on, but I absolutely reaffirm our objective of as close a relationship as possible with the EU in this particular subject. I hope the noble Lord will withdraw his amendment on the basis of those remarks.
Lord Purvis of Tweed
I am grateful to the Minister for his characteristically thorough response, except that we still have Clause 6 in limbo to some extent. I am not sure how long the Government can reflect on the language of their Bill, which the Government brought to the House without stating whether they intend to bring forward amendments on Report to change it. I think the noble Lord, Lord Lansley, made a very good point: this is a very significant issue that requires a degree of forewarning on what the Government’s intentions will be. I suspect we may just have to wait; we have pressed the Government enough at this stage with regards to getting some clarity on that point. It is frustrating that we still have some question marks that are being raised over the language of the Government’s legislation.
On the second point, I understand what the Minister says. There will not necessarily be any easy answers to this, but my point was that there can well be a marked difference between co-operation with, and participation in, European institutions—I think this is the point the noble Lord, Lord Lansley, was making, and I share his view. The European Union has been clear on that in the past. Indeed, on the previous day of Committee, my noble friend Lord Foster took part in the debate on communications and the regulatory bodies in the European Union for that. More recently, the European Union has changed its position to make it even harder for third countries to participate in the European agencies. Our bodies co-operate with the Food and Drug Administration in the United States. We have co-operation which is very deep, but when it comes to the key elements of whether medicines or vaccines are licensed, whether the research will be accepted on a reciprocal basis, and whether data is shared and can be legally shared between the two regulatory bodies, there are still issues that need to be identified.
It is reassuring to know that it is the Government’s intent, from the White Paper onwards, that we would have active participation, but at the moment it seems as if the political statement trumps that because it is more recent. However, the Government have reissued their position on active participation and, in advance of waiting to see what they bring forward on Report—if, indeed, they do so—I beg leave to withdraw my amendment.
“Objective to reform WTO procedures
(1) It shall be an objective of an appropriate authority representing the United Kingdom in meetings of the World Trade Organisation to ensure that the World Trade Organisation modifies its procedures in a way which secures the supremacy of international treaties arrived at under the auspices of the United Nations over trade agreements not arrived at under the auspices of the United Nations.(2) The Secretary of State must lay before each House of Parliament at least once in each calendar year following the commencement of this section a report on any progress made in achieving the objective under subsection (1).”
Baroness Jones of Moulsecoomb (GP)
My Lords, I shall try to keep this brief, so I will not read out my amendment. We have heard a lot about the WTO over recent months; it is becoming the lazy answer to a lot of complex questions about how we withdraw from the EU. Some people are using the phrase “WTO terms” as if they are magic words that will solve all our problems. I was relieved to see the International Trade Secretary pouring cold water on those fantasies this weekend and I hope the Minister will take this opportunity to reinforce these statements in her response to my amendment.
For people such as me, who have spent most of their lives extremely sceptical of unaccountable, international governance structures, WTO terms are not the answer to our problems—they never have been. In fact, they are part of a global giant which undermines democracy and restricts the sovereignty of nations to implement their own policies. I find it hard to comprehend how anyone can complain about the EU being undemocratic and then champion the WTO as our saviour, using WTO terms to justify the most destructive and damaging route out of our current political stalemate. Many Greens, environmentalists and social justice campaigners have rallied against the WTO for decades and my amendment asks our Government to work towards adding some accountability to the WTO for reasons I will outline.
After the Second World War, there were two parallel, somewhat competing, initiatives which sought to establish an international system of rules and norms. One of these strands of thought gave rise to the United Nations, which has pursued peace, social development, environmental action and anti-colonialism as some of its fundamental aims. The opposing project established the Bretton Woods agreement, birthing the World Bank, the International Monetary Fund, and the General Agreement on Tariffs and Trade, which later became the WTO. This second strand of international co-operation placed the economic interests of the West, particularly the United States, far above the demands of developing countries, which were represented in the United Nations. Empires were dismantled but international institutions continue the exploitation of former colonies and the extraction of their precious resources. It is in this context that the WTO and the UN can be seen as somewhat at odds with one another.
More recently, the WTO has protected international economic management and trade from the environmental and social initiatives of the UN. I do not want to overstate the point because there are some WTO rules that allow environmental and other pressing needs to be addressed, but the WTO’s overarching purpose remains promoting international trade and eliminating barriers to trade. There are a number of examples of WTO rulings that interfere with environmental initiatives. The WTO intervened in an initiative of the Indian Government to rapidly increase the country’s production of solar panels and create a strong climate policy. Other WTO decisions have prevented companies adopting conservation rules that would protect endangered and declining species, such as dolphins, sea turtles and tuna.
There are many more examples of the WTO interfering with national sovereignty and international co-operation. The WTO has recognised that there are conflicts between itself and multilateral environmental treaties. It has identified 20 international environmental treaties that it considers could affect trade, such as banning trade in certain species or products—perhaps ivory, for example. The WTO notes on its website that no formal trade disputes have been brought with regard to these multilateral treaties, but I suggest that it is only a matter of time and must be playing on policymakers’ minds when making decisions.
The unique and complex problems posed by climate change, environmental damage and species loss, are not restricted to national borders. These issues are more important than trade. We know that there are now only—I was going to say 12 years—11 years and eight months to make fundamental changes to our economies if we are to have any hope of avoiding catastrophic climate change and ecological collapse. The fact that the WTO itself recognises that there is conflict between its rules and the multilateral treaties designed to avoid environmental disaster is proof that urgent reform is needed.
Our Government talk a good talk on the environment, but at some point they must deliver. That is why, with my amendment, I am asking the Government to negotiate to ensure that UN treaties are given priority and not undermined by the WTO. I hope that this amendment will be supported by everyone who recognises the urgency of the issues facing our planet and the need to reform global governance in response. I beg to move.
The Minister of State, Department for International Trade (Baroness Fairhead) (Con)
My Lords, I thank the noble Baroness, Lady Jones, for providing this opportunity to discuss these issues by tabling her amendment.
With regard to the World Trade Organization, we operate under WTO terms if we are not in a free trade agreement—that is, if we are not a part of the EU or currently part of an FTA. For example, WTO terms operate for most of our current trade with the US. On the noble Baroness’s point about how we do not wish to leave without a deal and move exclusively on to WTO terms, that is the subject of a future amendment, to be discussed later this evening. I stress once more that that is not the Government’s priority, which is to secure a deal.
I will touch on the reform of the WTO. This is a key global priority, which was highlighted in recent meetings of the G20 and mini-ministerial summits held in Canada last year, and at the annual meeting of the World Economic Forum in Davos. I agree with the noble Baroness that WTO reform is essential to address the functioning of the organisation, including the strengthening of its negotiating arm. Indeed, when I attended the OECD Ministerial Council Meeting in Paris last year as the UK Government’s representative, I emphasised the importance of, and the UK’s commitment to, advancing WTO reform discussions.
This is important, given that trade discussions relevant to some of the most critical global issues, such as climate change—which the noble Baroness so passionately commented on—are currently stalled. This House discussed the current state of the WTO’s environmental goods agreement in Committee the week before last. I restate that we are strongly in favour of seeing these negotiations restart and of playing a key role in them, given the important contribution this agreement would make to tackling climate change, which is a key priority for the Government and this country.
However, the UK cannot require the WTO to modify its procedures in a way that secures the supremacy of international treaties that were arrived at under the auspices of the UN over trade agreements that were not. The WTO and the UN, I am informed by our lawyers, are two distinct independent organisations, with two distinct bodies of international law. The WTO is not part of the UN system and exists independently in international law. That position is combined with the fact that there is an established principle of international law that there is no hierarchy of sources of international law. Reform of the WTO therefore requires reform of the WTO’s own treaties, which has nothing to do with UN law, nor can it. Trade agreements, too, whether they seek to reform the WTO, or are secured bilaterally, must comply with the relevant law, which is WTO law. They exist outside UN law. I hope I have provided clarity on the legal situation in this area.
Baroness Jones of Moulsecoomb
Does the Minister accept that climate risk has to be part of any sort of trade negotiations, in that it could disrupt all sorts of mechanisms worldwide—not only weather patterns but movement of peoples and so on?
Baroness Fairhead
My Lords, I think I have reiterated just how important climate change is to the Government’s priorities. The question is: what is the appropriate and most effective way to discuss climate change and to get rules put in place? There are differences of view over the most effective mechanisms, and many would say that trade agreements are not the right place. Others are more effective on that point. However, as we have tried to do and as the noble Baroness will have seen with our most recent trade agreements, such as CETA, we also include references to environmental standards.
Lord Stevenson of Balmacara
I am trying to help both sides come to an arrangement. I do not think that the noble Baroness whose amendment we are talking about is trying to set out a route map for the Government—if she is, she is doing it in a very gentle and responsive way. I think she is struggling, as we all are, with the question: if you want to make changes—which she so evidently does, and which a lot of us would support—what is the best way of doing that? Obviously, the noble Baroness has made it clear that you can do it on three levels. You can do it on a case-by-case basis as trade agreements come up, inserting the points you want to make. Alternatively, you can go through the United Nations, which is separate but still obviously influential as regards the wider tone and context in which these matters operate. But the central point, as the noble Baroness said, is that the WTO itself is in some difficulty. It may be all we have and the only way we can do it, but is the Minister seized of the arguments being made that the status quo is not satisfactory in so many ways that there needs to be some sort of movement around the whole issue, but presumably focusing on the WTO, and does she support that?
Baroness Fairhead
I thank the noble Lord for his intervention. Absolutely; I hope I restated that the WTO needs reform in areas such as digital, speed of processing and a number of others. We will continue to be an active participant in those discussions. Therefore, I can say yes to reform. On the particular area of climate change, we also have a clear objective: the Government want to improve the culture of climate change and the approach to it. It is about what is the best way to achieve that, and that is what we are focusing on. With those clarifications, I ask the noble Baroness to consider withdrawing her amendment.
Baroness Jones of Moulsecoomb
I thank the Minister for her answer and I thank the noble Lord, Lord Stevenson, for suggesting that I am in any way gentle; that is not a word normally applied to me, so I feel flattered.
I disagree so strongly with the government line that trade agreements are not the place to discuss, promote or encourage any sort of climate change mitigation measures. We cannot ignore any option for ameliorating what will be a climate crisis in a very short time. Therefore I very strongly disagree on that but, having made that disagreement clear, I beg leave to withdraw the amendment.
“Territories forming part of a customs union with UK: amendment to the Taxation (Cross-border Trade) Act 2018
(1) The Taxation (Cross-border Trade) Act 2018 is amended as follows.(2) Omit section 31(5) (customs union with UK: import duty).”
Lord Stevenson of Balmacara
Although this group of amendments points in different directions, the amendments have a common starting point, and it is therefore not inappropriate that they should be debated together. Amendment 77 is in my name, joined by other noble Lords, and others have put their names to Amendments 78, 79 and 80, to which I shall also speak.
The history is important, because it raises a wider point than we have recently discussed, although we have from time to time touched on it: the fact that the Taxation (Cross-border Trade) Act and this Bill are really two sides of the same coin. They deal with aspects of trade which need to be in place in the unfortunate event that we crash out of the EU, but they are also pointers towards how we would carry out our trade policy and activity in the event of either crashing out or, as the Government would wish, having an extended period during which various other agreements would be added to the withdrawal agreement and political declaration.
The question that underlies the amendments is: are we in a good place to take forward those future discussions, given the two pieces of legislation that we are looking at? Because of how the Taxation (Cross-border Trade) Bill was defined as it went through the other place, it came in a form expertly handled by the Minister but which allowed us only a limited degree of comment and an occasional question, which he was of course well able to answer but which did not allow us to either amend or question in any serious way how the Bill was framed or where it pointed.
In addition, at a very late stage in the process in the Commons, the Government accepted a group of amendments tabled by the rather quaintly named European Research Group which, to many people, were tabled very late, rather surprising and subject to little debate—they certainly did not go through Committee. So the Taxation (Cross-border Trade) Bill, unscrutinised by your Lordships’ House, was not even scrutinised to any great extent in the Commons after the later amendments arrived which changed its nature.
At the time, we felt that there were issues that could have been raised in debate, but we were unable to do so. Of course, the presence of the Trade Bill before your Lordships’ House and its ability to amend previous legislation opens up the opportunity to make some changes, if the House feels that to be an appropriate way forward.
In crude terms, Amendments 77 to 80 would reverse the late amendments made by the European Research Group to the Taxation (Cross-border Trade) Bill in the other place. In so doing, obviously one looks at the impact that those amendments had and tries to frame our amendments in relation to both the Bill and wider policy arrangements. Briefly, it is fair to say that the conclusion that we on this side have come to is that those amendments do not strengthen our position in general terms and that it should be the duty of this House carefully to consider whether they should be removed, because that would return the Bill to a much better place in terms of where we may require powers set out in the Taxation (Cross-border Trade) Act to be utilised.
For example, Amendment 77 removes the restriction in Section 31 on creating a customs union with the European Union by requiring a separate Act of Parliament to be passed before the designated powers could be used. We think that that should be amended because the restriction under the previous amendment will make it difficult for the Government to negotiate a customs union—or even the customs union—should that be the way that they wish to move in forthcoming discussions.
As it stands, the collection of taxes and duties on behalf of the European Union would be banned unless there are reciprocal arrangements, but Amendment 78 would change that. I think the debate has moved on here, and it could be argued that Amendment 78 is probably the least important of the group. Nevertheless, it was a change perhaps made in haste and, at leisure, the Government may come to the view that it is not the best way to try to open a negotiation if the possibilities one is offering are already restricted by the Act.
Amendment 79 would make it legal for the Government to enter into arrangements that would see Northern Ireland forming a separate customs territory from the rest of the UK. Although I gather that this has support from the DUP, it still makes it a very different situation and context for any discussion about the backstop arrangements. Other noble Lords may expand on that issue. As it stands, the Bill seems again to cut off an opportunity for future discussion and debate—which is even more important than when the amendments were tabled.
Amendment 80 concerns a rather significant change to the way in which VAT is charged in a customs union. It is perhaps of some interest to your Lordships’ House that we have not, within the duopoly of legislation with which we are currently dealing—the Taxation (Cross-border Trade) Act and the Trade Bill—dealt with the question of why the VAT rules that operate within the EU have not also been subject to attention. It will be interesting to hear the Minister’s response.
Of course, VAT is dealt with under separate rules under a separate agreement among the countries in the EU; it is not part of the EU as such, nor part of any other arrangements which normally interpose with trade. To that extent, the Schedule 8 arrangements in the Taxation (Cross-border Trade) Act are distinct and different. It is therefore important that we should have some response from the Government about how this should be taken forward.
The amendment proposed by the European Research Group and inserted into the Act is not the only story that needs to be told on this, but we may not wish to go all the way down that route, although expertise is available should we wish to do so. The Government should be very clear about how they intend to take this forward. I beg to move.
Lord Hannay of Chiswick (CB)
My Lords, I support the amendment in the names of the noble Lords, Lord Stevenson and Lord Purvis, and the noble Lord, Lord Bowness, who asked me to mention that he is unable to be here but that he continues to support the amendments. The noble Lord, Lord Stevenson, introduced the amendments admirably and explained very clearly why those parts of the Taxation (Cross-border Trade) Act which we seek to change are either unnecessary or damaging. He is absolutely right to say that the least important is probably the European Research Group amendment passed at a very late stage in the Commons, which we had no chance to intervene on effectively when it came through this House because it was a money Bill.
However, one part of it makes collection of customs duties possible only if the European Union collects customs duties and gives them to us. The original idea was that we would collect duties on behalf of the European Union; this was an essential part of the—now lost in the mists of time and buried deep under the soil—Chequers plan. The European Research Group amendment, frankly, neutered the Chequers plan, but as the European Union was never going to accept it anyway and made it clear at Salzburg and later that it would not accept it, there seems no point leaving it on the statute book.
The last point made by the noble Lord, Lord Stevenson, relating to Amendment 80 about VAT is actually extremely important. Anyone who seriously believes that preventing the British Government maintaining a VAT union, if you would like to call it that—a system that enables trade across borders between us and the European Union without the need for extremely elaborate VAT calculations, inspections, payments and so on—and doing away with that which exists now and going back to where we were before that existed will not put a huge amount of friction on our trade simply does not understand the realities. The VAT aspect is just as important as the tariff aspect and is separate from it. Unfortunately, the European Research Group—in its usual extraordinarily constructive way—has managed to insert something here that would be really damaging to our interests if it is sustained when we go into negotiations with the European Union about future trade arrangements. The only sensible thing to do—I hope the Government will give careful thought to this—is to get rid of this now and take it out of the Taxation (Cross-border Trade) Act.
We cannot be certain now what the Government and the European Union will do when negotiating our future trade arrangements. The Government are quite right to say they cannot guarantee how that will go. But they can remove this great ball and chain around their ankle, put there by the European Research Group, which would be really damaging to us if it ever came to be a central part of our future trade relationship. To say that relationship will be frictionless if the VAT aspect is not dealt with is just a bad joke, frankly, if you have to have VAT inspections, payments and all that sort of thing on goods that are passing. After all, the VAT levels are different in every member state, and the current system enables us to live with that without slowing down or impeding trade; that would go. So I really hope the Government—if not tonight, at least before Report—could say that they will take out that amendment, which should never have been allowed in. This is the single most important amendment in this group of four.
Lord Purvis of Tweed
My Lords, I am very happy to have my name attached to these amendments. It shows the Government there is a degree of cross-party consensus that it is important that these aspects—which, as the noble Lord, Lord Stevenson said, did not get the level of scrutiny they deserved in the Commons—get scrutiny in Parliament. This is after the event, because in effect we are scrutinising legislation, but there is no harm in a bit of post-legislative scrutiny of the taxation Act. In an exchange the Minister and I had during the very brief proceedings in this House on the Taxation (Cross-border Trade) Bill, the Minister said there would be ample opportunities for scrutiny, such as during the upcoming Trade Bill, so we are taking him at his word and offering the Government a chance to give a full-throated defence of the ERG amendments passed in the Commons.
As the noble Lord, Lord Hannay, said, there are perhaps some unintended consequences of these amendments that we now need to properly scrutinise. It is an extraordinary position we find ourselves in where Members of the Government’s party moved amendments to the Government’s Bill that would in effect render the Government’s then policy on the facilitated customs arrangement largely inoperable. Now those same Members are meeting the same Government today to breathe new life into the very systems of a facilitated customs arrangement that they themselves rendered largely inoperable by their amendments. I was struggling for an analogy on the way to the Chamber this afternoon. I could not find one as ridiculous as the position we now find ourselves in. If it is the purpose of the so-called alternative arrangements working group that is now meeting to try to find solutions to the problems that they themselves created, I do not think that any alternative arrangements will come out of this working group.
The ERG amendments now sit most uncomfortably with the process under way, so it is right that we give them proper scrutiny. The Government say one of the amendments they accepted—that there would need to be a stand-alone statute for any customs arrangement agreed with the European Union—is not necessary for any other trade agreements. If I understand it correctly, the positon of the Government is that the free trade agreement with the European Union would undergo a CRaG process, which is an affirmative process to be approved because there is a treaty, but a secondary customs arrangement that would come with that would have to have a stand-alone statute. Why? What is the Government’s rationale for that? In the Commons, the Government simply said they thought it would be appropriate that there would be a stand-alone statute. I do not understand why, so I hope the Government might be able to tell us why that would be the case.
Lord Hain (Lab)
My Lords, following the excellent speeches we have just listened to, beginning with my noble friend Lord Stevenson, I support this group of amendments and appeal to the Minister seriously to consider reversing the ERG amendments, not just for the detail and well-founded points and reasons that have already been made, but because the Government did not choose to accept them. They were foisted upon them, because of the arithmetic and politics of the situation, and wanting bigger fish to fry. As a result, we have a defective Bill, even by the Government’s own objectives. I ask the Minister seriously to consider on Report, rather than facing a possible vote and even defeat given the cross-party support that exists, getting the Bill back to where it was before the ERG plundered it.
Lord Lansley
My Lords, what connects this group of amendments is that they are European Research Group’s amendments in the Commons that were accepted by the Government. I do not think they should be treated by my noble friends on the Front Bench as if they all had the same merit or otherwise.
The single UK customs territory, which is now Section 55 in the Taxation (Cross-border Trade) Act, specifies that there should not be a separate customs territory between Northern Ireland and Great Britain. Frankly, I cannot see the circumstances in which this House or the other place would find this acceptable. That being the case, I cannot see any merit in this House seeking to ask the other place to think again about that issue. I do not think anybody in the other place is proposing to revisit it, so my suggestion is that we do not go down the path of thinking that Amendment 79 has merit.
I do not disagree about Amendment 80. I listened with care, but I would not like to try to explain it to somebody else and I am sure the noble Lord, Lord Hannay, is right about that.
I support Amendment 77 because I cannot see any good grounds for why legislation should require the Government to seek new primary legislation to have a customs union of any character with the European Union in the future. If, for example, we want to have a customs union with the United States of America, it could be done by an Order in Council. There is no basis for a distinction of that kind, other than the politics of the moment, and legislation should not be governed by the politics of the moment. If there is a proper process for the scrutiny and approval of a customs union, it should be set out in legislation and apply to any other country with which we establish a customs union and not discriminate and impose additional requirements specifically in relation to the European Union.
That just leaves Amendment 78. I confess I saw this being slightly of the moment, in that it was intended to entrench into statute the provisions in the Chequers White Paper relating to reciprocity in the collection of import duties on behalf of the European Union by the United Kingdom. But as I understood the White Paper, it did not necessarily mean that the European Union would collect import duties on our behalf. There was some suspicion on the part of our colleagues in another place that the negotiations might lead to such an eventuality, and that we would collect duties for the European Union but they would not collect duties for us, so they put this into the legislation. Frankly, that is not where the negotiations are now. We are either in a customs union or we are not; I do not think we are going to be in some sort of asymmetric customs arrangement of that kind. Nobody is debating that presently.
Amendments 77 and 80 have merit. I hope they are not going to be pressed at this point, but my noble friends should certainly think carefully about amending them when we come to Report to enable the other place to think again.
We discussed the customs union last Wednesday. That was the day before an interesting report was produced, principally by German economists at the Ifo Institute. I was encouraged by it, not least because I agree with it. It basically said that, to break the deadlock, both sides have to move from their red lines. In the United Kingdom’s case, that means no longer excluding the possibility of being in a customs union with the EU. In the European Union’s case, it means not treating such an arrangement necessarily to mean that the United Kingdom has to remain a member of the existing customs union or the Customs Union Code. They therefore propose the establishment of a European customs association, in which both the United Kingdom and the member states of the European Union would have voting rights. As a consequence, in the event that the European Commission operated as the representative of the European customs association, it would do so based on a mandate in which the United Kingdom continued to exercise the same kind of authority it presently exercises on the European Union’s customs arrangements.
This customs union would extend only as far as the present custom union applies inside the European Union. The document Hard Brexit Ahead: Breaking the Deadlock contains precisely the kind of discussion we have been having. It is not about whether we are in the customs union; it is what a customs union between the United Kingdom and the European Union might look like in the future.
It is doubly encouraging to see that not only put forward but put forward by prominent German economists. I hope that Ministers will continue to look at that in the time available before they have to come back and talk once more to the other place about what the next meaningful vote should be on.
Lord Kerr of Kinlochard
My Lords, I support Amendment 77 for the reason that the noble Lord, Lord Lansley, has just given, and I strongly support Amendment 80, for the reason that my noble friend Lord Hannay gave.
Amendment 78, however, is very strange. I support it, but we are in Alice in Wonderland territory here. It is an entirely academic interest, because it seems to me implausible that Mr Barclay and Mr Paterson, and their high-powered alternative arrangements group, would come back to this alternative arrangement—the Chequers proposal—given that they ambushed the Government to take it out by their amendment to the taxation Bill.
It was always rather a fanciful idea anyway. In its brief life, it had several forms. First, it was proposed as a reciprocal arrangement. The foreigners would have to clog up Rotterdam, Antwerp, Hamburg and Bremen collecting our tariffs and operating our quotas, segregating our goods from goods going to the EU, which would be charged EU tariffs and subject to EU quotas. Once segregated, in some magic way, our goods would then proceed to the United Kingdom, having paid UK tariffs at their first European port of entry. That was never going to happen.
The second form, once noises from Brussels had been heard, was that we would do it for EU goods but the EU would not be required to do it for our imports at its ports. It was that, I think, which provoked the ire of the ERG: why should we collect foreign tax? But there was no possibility of the EU at any stage agreeing that we should collect its tariffs at our ports.
There are several degrees of lunacy here, and we have this very strange prohibition on the statute book. I think that the statute book should not contain nonsenses, and so I support the amendment. However, it does not matter. The EU would never agree this proposal in any of its incarnations. Mr Paterson, Mr Barclay and these other trade experts are not going to come up with it as an idea in the alternative arrangements committee, because they were dead against it. Therefore, although I support the amendment, I do not think one need spend a lot of time on it.
Lord Bates
My Lords, I rise more in hope than expectation of being able to persuade your Lordships. I pick up the sense from the Committee that this is probably something that your Lordships will want to return to in more depth on Report. Perhaps the best service I can offer at this stage is to put on record the Government’s position, respond to some of the precise points and then await further developments as they may unfold between now and Report.
Amendments 77, 78, 79 and 80 relate to changes passed in the other place during the passage of the Taxation (Cross-border Trade) Act 2018. This Act is important legislation as the UK leaves the EU. It enables the Government to create a stand-alone customs regime by ensuring that the UK can charge customs duty on goods, set and vary the rates of custom duty, and suspend or relieve duty in certain circumstances.
I turn now to the substance of the original amendments to the Act, which these amendments seek to remove. Amendment 77 relates to Section 31(5), which requires further parliamentary scrutiny in the event that the power under Section 31(4) is used to implement a customs union with the EU. The Government support the principle of further parliamentary scrutiny in this case. My noble friend Lord Lansley suggested that this was perhaps reflective of the politics of the movement. As a distinguished former Leader of the House in another place, he will be very familiar with how that side of things works. However, as this House is aware, the Government have made it clear that they are not seeking to be in a customs union with the EU as part of our future economic partnership—I say that without wishing to reopen the many debates we have had on “a” and “the”.
It is important to reflect why the Government have taken this view and to consider what leaving the EU means. It means the ability to strike out on our own to forge new trade deals. In order to do this, one important element is to have the ability to set our own tariffs. Being in a customs union would deny the UK this ability and fundamentally undermine our capacity to negotiate new trade deals with old friends and new partners.
The noble Lord kindly outlined, as he saw it, the way in which Amendment 78 arrived, referencing first the Bill and then the amendment. The Government have been clear in their White Paper that the arrangement they are seeking will ensure that both the UK and the EU get their fair share of the revenues from the rest of world trade. Section 54 of the Taxation (Cross-border Trade) Act is in line with the proposals that the Government set out with a view to achieving just that.
Turning to Amendment 79, Section 55 of the Taxation (Cross-border Trade) Act 2018 requires a single UK customs territory. This is a statement of government policy and ensures that the Government will not act incompatibly with the commitments made in the joint report of December 2017, where they committed to protect the constitutional integrity of the UK.
Lord Purvis of Tweed
I apologise for interrupting the Minister. I want to add perhaps another degree of lunacy to the several mentioned by the noble Lord, Lord Kerr. New Section 31 of the taxation Act, which Amendment 77 seeks to rectify, contains the following phrase:
“In the case of a customs union between the United Kingdom and the European Union”.
The Government said that that would not apply because the customs territory they are seeking to have will not be a customs union. So even if just to make the legislation neater, it should be taken out.
On defining the scope of the single customs territory, which we are seeking to do, the Government’s Legal Position on the Withdrawal Agreement, command paper 9747, says it is that,
“under which the UK aligns itself with the Union’s external tariff and there can be no tariffs or quantitative restrictions on imports and exports between the UK and the EU. The single customs territory therefore constitutes a customs union for the purposes of GATT19, but it is not the EU’s customs union as defined in Article 28 TFEU”.
It can either be one thing or the other, but the Government’s own document on the legal position says that the customs territory will be a customs union.
Lord Bates
I will make some progress, but I will come back to that point—when inspiration arrives.
No UK Government, regardless of their political leanings, could ever accept such a carving up of the United Kingdom—I am referring here of course to the division between Northern Ireland and the Republic of Ireland. Indeed, on 15 October, in another place, the Prime Minister said:
“We have been clear that we cannot agree to anything that threatens the integrity of our United Kingdom, and I am sure that the whole House shares the Government’s view on this. Indeed, the House of Commons set out its view when agreeing unanimously to section 55 in … the Taxation (Cross-border Trade) Act 2018 on a single United Kingdom customs territory, which states: ‘It shall be unlawful for Her Majesty’s Government to enter into arrangements under which Northern Ireland forms part of a separate customs territory to Great Britain.’ So the message is clear not just from this Government but from the whole House”.—[Official Report, Commons, 15/10/18; col. 410.]
Turning to Amendment 80—before I come to some of the points raised during the debate—the Government’s position is that they will not seek to be in a customs union with the EU. We have debated this issue in this House and in the other place throughout the passage of this Bill—leaving aside the very clear response that is on its way to the noble Lord; he should be prepared for that. As has already been highlighted to the House, at Report stage in the Commons, MPs rejected an amendment seeking to keep the UK in a customs union with the EU.
On the specific points relating to import VAT, it is clear that the Government are highly cognisant of the concerns raised. I will deal with that point now because the noble Lord asked some very good questions on VAT treatment, and it is good to have an opportunity to put the position on the record. Goods from third countries are treated as imports, with VAT due accounted for on import or by the 15th of the following month as duty of customs. This means that, unlike acquisitions, there is a cash-flow impact because traders have to pay the import VAT and potentially recover it later when they submit their VAT returns. It also means that there needs to be an option to pay import VAT on the border, as not all businesses have the necessary guarantee to defer payment until the following month. Generally, import VAT is paid sooner on goods from non-EU countries than on goods from EU countries. This provides a cash-flow benefit to companies importing goods from the EU compared to businesses that import from non-EU countries. Without an UK-EU agreement to retain this treatment, goods entering the UK from the EU would be treated as imports and would be subject to the same rules as businesses moving goods from non-EU countries. This would mean businesses paying VAT on imports from the EU sooner, affecting their cash flow. The Government published a series of technical notices in August 2018 to help businesses prepare for the unlikely event of a no-deal scenario. The VAT technical notice, “VAT for businesses if there’s no Brexit deal”, announced that the Government will introduce postponed accounting for import VAT on goods brought into the UK.
The noble Lord, Lord Stevenson, asked why we accepted Section 54—originally New Clause 36—of the Taxation (Cross-border Trade) Act 2018. The Government did so because it was consistent with our position. It requires the Government to negotiate a reciprocal arrangement for the collection and remittance of VAT, customs and excise duties. The Government have been clear that both the UK and EU should agree a mechanism for the remittance of relevant revenue. The Government set out in their July White Paper that they propose a revenue formula that takes into account goods destined for the UK entering via the EU and goods destined for the EU entering via the UK.
The noble Lord, Lord Purvis, asked whether the customs territory is a customs union under GATT, and he deserves a full answer to his detailed question, so I commit to writing to him. That should be very clear to the noble Lord and all Members of the House—well worth waiting for.
Lord Berkeley of Knighton (CB)
I ask this question as someone who is not a politician and who therefore sometimes gets quite confused about the repetition of entrenched views, which have led us to the undoubted stalemate that we are in. This really concerns the point made by the noble Lord, Lord Lansley. I heard the Minister’s response, but it seems to me that everything I hear about Brexit suggests that the Northern Ireland backstop is a real sticking point. Is it not conceivable that, to get around that problem, the Government might have to consider some form of customs union?
Lord Bates
It is a challenge when someone with the noble Lord’s intellect begins a sentence by apologising for not being a politician and then asks for clarity at the present time. We are discussing this legislation, but we all know that we are in one of the most fast-moving, dynamic episodes of negotiation that this country has ever entered into. We are gradually working our way through. The White Paper was published at a moment when we were seeking to flesh out exactly what the Government’s position was in response to the Commission saying, “We don’t know what the UK’s position is; we don’t know what they want”. Therefore, the White Paper was introduced at that point. Then there was the clamour for clarity for business—what it would do in the event of no deal—so the technical notices were issued. Then, we got to the position where we reached an outline agreement with the European Commission in December, against many people’s expectations, along with heads of terms for what a future economic partnership might be. That was then presented to the other place and roundly rejected. Therefore, we have now begun another process, so I readily accept that if one wants to score points by stopping the clock at various stages along the process and pointing to certain inconsistencies in it, the Government are pretty easy fare for that.
Lord Kerr of Kinlochard
The Minister is making a very gallant effort and I applaud it. I enjoyed many of the things he said, particularly when he referred to a no-Brexit deal. I thought that was a very encouraging concept. I really cannot let him get away with where he is now, in this fast-moving situation he describes. Put yourself in the place of the EU 27: what are they supposed to think when the Prime Minister scuttles her own fleet? She orders her party to vote down the backstop in the treaty. The backstop is 21 articles, 10 annexes and 172 pages. The Prime Minister’s officials have negotiated that line by line, month by month and it is there because we asked for it. Then she decides that the best thing to do with it is to replace it with alternative arrangements, which are now being devised by Mr Owen Paterson and Mr Stephen Barclay. The Minister tells us that this is a fast-moving situation and it is quite hard to keep up with it, but there is nothing happening in Brussels but sheer astonishment at the failure of our system.
Lord Bates
That is the noble Lord’s position on this: the reality is that the Prime Minister is seeking an agreement that can command a majority in the other place and that requires compromise. That is what the agreement represents. The House made its view on the withdrawal agreement clear; she is now seeing whether that can be addressed with the Commission. Personally, I wish her well and every possible success, as opposed to my own mis-speaking. Lest it be on the record, I am sure that Sigmund Freud would have observed that perhaps I had momentarily let slip an inner feeling, which, of course, has nothing to do with the position of Her Majesty’s Government, which I consistently seek to put forward from this Dispatch Box and proudly support.
The noble Lord, Lord Purvis, asked about support for government amendments that preclude the facilitated customs arrangements. We would argue that there is nothing about the amendments made to the Taxation (Cross-border Trade) Act in the other place that is inconsistent with the draft political declaration that will inform the future relationship. On the point made by the noble Lords, Lord Hannay and Lord Stevenson, about insufficient focus on VAT implications, the Government have been clear that we are aware of the potential impact on businesses of any move away from the concept of acquisition VAT, but we have also set out that in any scenario we are seeking to avoid any adverse effects. Amendment 80 does not affect that in our view.
Lord Fox
On that last point, we keep talking about 29 March, but of course sales are already being made and shipping has already been arranged that may well arrive in this country or continental Europe after 29 March. The business decisions to invest, to make things and try to sell them have already been made, so minimising the impact is not possible. The impact has already started.
Lord Bates
Yes, there is a reason why we have brought back the agreement—to resolve the situation.
As for whether the amendments have been considered in the other place, the other place voted for two of the original amendments and had the opportunity to vote on another two but decided not to do so, so the other place made its view clear on that point.
Lord Hannay of Chiswick
On this point about VAT, I hope the Minister will forgive me for saying that he and I are probably slightly out of our depth on the detail of how this will work. From what he just said and from the guidance that he read out at some stage, it sounds as though the Government and HMRC understand that potential friction will come into our trade with the EU if we do not ensure that something like the present arrangements continue. Back in the 1980s, when I was involved in the matter, we avoided a perfectly appalling idea by Lord Cockfield of having a clearing house in Brussels into which everyone would pay all this VAT. We have a frictionless system and it sounds as though the Government understand that that should be preserved. But I rather doubt that that is consistent with the Taxation (Cross-border Trade) Act, because of the amendment on VAT that was put in by the ERG.
The best thing that we could ask of the Minister this evening is to go back and consider very carefully whether the Government should either accept Amendment 80 or give some fairly lengthy explanation of what they will do and how that is—if it is—consistent with the Act now on the statute book. That would be best. Then, when we return to this on Report, we will all have probably learned quite a lot.
Lord Bates
I am very happy to give an undertaking to the noble Lord that I will reflect with colleagues, particularly my noble friend Lady Fairhead, on the comments made on these amendments, notwithstanding the points that I have put on the record about the Government’s position. We can return to these on Report and I will seek to give some further information in the gap in between Committee and Report. I hope, in the meantime, that the noble Lord will feel able to withdraw his amendment.
Lord Stevenson of Balmacara
That was an interesting and enlivening evening. I have come up with a brilliant title for my forthcoming novel—Seven Degrees of Lunacy, or could it be eight? That might be easier, although I doubt it. I have speculated at length about whether we are in Alice in Wonderland, as was suggested, but my favourite suggestion is that we are in Gormenghast, because we seem to be trapped in structures not of our own making, with a design that is not of our wish and with an outcome that is very uncertain and probably leads to madness. But enough of that.
One unifying thought was summed up neatly by the Minister in his last remarks when he said that we needed to think a little harder about what the problem is. Everyone who has spoken, other than the Minister, took the view that these issues had a common theme—the reasons may be different but the theme is that they all have the potential to derail us later down the track. The Government should think about that issue rather than the particularities of these issues. If it is going to be problematic to get an agreement in both Houses on a Motion for an extension of a customs union, because of the argument made by the noble Lord, Lord Lansley, about the inherent asymmetry of one set of rules for the US and another for the EU, that may not be helpful. I do not think we are saying any more than that. There is an opportunity here to do something to ease the roadblocks that we can see down the track, whichever track we go down.
Amendment 78 was part of the Chequers arrangements but is now otiose and it is not beyond the wit of others to point out that it still exists in statute and might cause difficulty further down the line. Amendment 79, as my noble friend Lord Hain said, bears directly on the backstop. Is it really sensible to have this power hanging over us in another piece of legislation as we get to the later stages of that, if that is what is going to happen? On VAT, it is not really about the agreement that might be coming but a broader issue about VAT in general, because there might be a better way of collecting VAT that originates outside the UK. It is complicated and a short meeting might be a way to find the common ground that we want to take forward. I am grateful to the noble Lord for wading through that and having the doubtful honour of assigning his name to it in Hansard. It is useful to have it there and we will study it carefully.
I think there is time to have another look at this. Even if we disagree on some of the issues, it cannot be right for Parliament to pass legislation that it knows is not going to be of any use. I think that was the point the noble Lord, Lord Berkeley, was making. If this is where we are, why do we just not do it? We could do it differently and see if we can use the time to clear it up properly. That is the way I would like to see it go forward but it is not in my hands. I beg leave to withdraw the amendment.
Baroness McIntosh of Pickering
My Lords, I am grateful for this opportunity to debate whether Clause 9 and Schedule 4 should stand part of the Bill. I just want to raise one or two points that, as my noble friend the Minister will recall, arose during our meeting way back in October or November, for which I was extremely grateful.
I tabled my opposition to the clause and schedule immediately after Second Reading because a number of issues relating to the role and powers of the Trade Remedies Authority arise from the increasing threat from the volume of imported products. I am particularly concerned about bricks, tiles and ceramics due to my interest in, for example, the York brick company, which I had the honour to work with as the local MP. These products emanate from potentially unsustainable sources, often from developing countries, and they are having a negative impact on our domestic production, as seen through the latest retaliatory tariffs from the US and, subsequently, China. I have some general and some specific comments that I wish my noble friend to respond to. I am particularly grateful to the Law Society of Scotland for raising these issues.
Paragraph 12 of the report of the Select Committee on the Constitution sets out the concern that there is a singular lack of detail on the functions and powers of the Trade Remedies Authority and that enormous discretion is given to the Secretary of State in relation to the constitution of this body, the appointment of its members and its operations. In particular, I draw my noble friend’s attention to the committee’s conclusion that,
“in constitutional terms, creating and empowering an important public body in such a manner is inappropriate”.
In connection with Clause 9 and Schedule 4, can my noble friend indicate the length of appointment for members of the Trade Remedies Authority, and do the Government envisage these appointments being renewable and for a similar length of term? If we are inviting people to serve on this body, it is important that they are at least given security of tenure. That goes to the heart of their independence and impartiality, and it would detract somewhat from the ministerial discretion that currently lies with the Secretary of State. Under what conditions would the Government envisage the office of an official serving under the Trade Remedies Authority becoming inappropriate and how could it be removed? It would help the Committee to know that.
In addition, perhaps I may confirm with my noble friend that, in connection with the injury calculation which is the outcome of the Trade Remedies Authority’s conclusions, the regulation will be laid before the House by the affirmative rather than negative procedure.
I am sure that my noble friend does not need me to rehearse the importance of the bricks, tiles and ceramics industry. A total of 2.5 million people overall are employed in the UK manufacturing sector, and this is a very strong part of that industry. As regards ceramics covering tableware and tiles in particular, these have already been affected—or one could say protected—by the two EU trade remedies in place for ceramics. It is important to give a message to the industry this evening that we will create in the Bill similar provisions to those that exist in the European Union at present.
Can my noble friend the Minister confirm that the injury calculation will be by affirmative procedure and—as some of the Commons amendments did not cover this point on the economic interest and public interest tests—that the Government will put on record how these tests will be interpreted in court and by the authority going forward? This is purely intended as probing. I obviously wish Clause 9 and Schedule 4 to remain part of the Bill, but I wanted to make some of these general points before we go on to discuss the amendments in the next grouping.
Baroness Neville-Rolfe
My Lords, I have some sympathy with my noble friend Lady McIntosh of Pickering but for a quite different reason. As I said all those months ago at Second Reading, we need a highly professional team to look after the UK’s trade interests, but I am not convinced that we need a new authority separate from the trade department. I may be out of date, but my recollection is that the work in Brussels is done by the Directorate-General for Trade, not by a special agency—and it seems to get along very well, as we keep hearing.
I might not be able to convince my noble friend the Minister, but I emphasise that the proposed body must be of a very special type. The agency, if we must have it, should be run by people who are independent-minded with Civil Service values, not representatives of any particular stakeholder sector. Such people must be able to stand up to the vested interests who will approach them in the way that they approach Brussels under the current arrangements. I remember lobbying DG Trade on bra quotas in Brussels. I have to say that I was one of many very fluent stakeholders interested in the cargos that were sitting on the sea and not arriving in the shops in Britain.
Lord Stevenson of Balmacara
My Lords, we are dealing with a clause stand part amendment in the name of the noble Baroness, Lady McIntosh. But she and the noble Baroness, Lady Neville-Rolfe, have raised a number of points that actually come in the next group. I wonder if for the convenience of the House we should merge these groups and hear now the speech by my noble friend Lord McNicol, which I have had the privilege of seeing. It covers much the same ground as that covered by the noble Baroness, Lady McIntosh, and the noble Baroness, Lady Brown, will probably come in on the ceramics aspects. It might be easier to finish this group together, so I suggest that my noble friend Lord McNicol speaks next.
Baroness McIntosh of Pickering
I am grateful to the noble Lord and will be content as long as my noble friend the Minister can answer my specific questions. My only concern is that they do not get lost in the general wash of the next grouping, as they are very specific.
Lord McNicol of West Kilbride (Lab)
My Lords, my noble friend Lord Stevenson talked about a speech, but I think he might have overemphasised what we are going to go through. I have pulled together a few comments and was looking to move Amendment 83, but many of the issues overlap with the last two speeches so I will weave in some of the themes.
The group beginning with Amendment 83 deals largely with the setting up and running, as has been touched on, of the Trade Remedies Authority. I will deal with some of the specific amendments and work through them quite quickly because we have another two groups to work through this evening. Many of them are probing amendments to solicit further clarity and details from the Minister on the running and formation of the TRA.
Amendment 83 itself touches on consumers and would add a third subsection to Clause 10(2) not just looking at countries, exporters or producers but adding a further consideration—the consumer. That is a sensible consideration that the TRA should be asked to look at when making any decisions.
Amendment 84 touches on the annual reports that the TRA needs to prepare and sets out a bit more detail about those, looking at any of the guidance, advice or assistance that is given to the Secretary of State. Probably most important is the final part of it regarding the laying of the report in front of Parliament. That is not touched on in detail in the Bill just now, and this adds in that little bit extra.
The noble Baroness, Lady Brown, and others will touch on Amendment 101A, but suffice to say that including and involving UK producers and trade unions is obviously a sensible way forward. It would not tie the hands of the Minister, the chair or the chief executive, but would bring in organisations and individuals who could bring wide and independent knowledge to the formation of the TRA.
Amendment 102 seeks that the chair be vetted by the International Trade Committee of the other place, which is just sensible good practice and happens already with many other bodies of similar stature to the TRA.
Amendment 104 touches on non-renewable terms. The reason for tabling it is that, all too often, individuals who have been appointed to boards have an eye on the reappointment that is coming at the end of their time. Single-term appointments are becoming more common on boards, which means that those individuals can be far sharper and clearer, not tied up in any considerations about the next set of appointments.
Amendment 105 and 106 tie together quite neatly and delve a little more into the detailed knowledge and expertise that we would expect members of the TRA to have. The Bill itself does not go into any specific detail on this so the amendments would put in a little more detail about the individuals and their having knowledge and expertise. God forbid that someone would be appointed to a board for a political reason by the Secretary of State. The amendment would just add a little more depth and weight to those individuals.
Amendment 106 again touches on the criteria, looking at consumers, producers, trade unions and workers being involved with that.
Amendment 107 brings more detail in the clause regarding individuals, going back to the earlier question about how you set what “unfit” is. The Bill itself is quite bland on this; this amendment just brings a little bit more clarity and detail to it. Sub-paragraphs (a), (b) and (c) have been used by many other boards for the ability to exclude individual members if they fall below the expected standard.
Lord Lansley
My Lords, if we are going to anticipate the longer group of amendments, which impact on Schedule 4, I will say a word about Amendments 103A and 107A, which are in my name.
I shared, I confess, the view of my noble friend Lady Neville-Rolfe for quite a long time. The conclusion I came to is that we pretty much have to accept the structure which says that we have an independent Trade Remedies Authority, rather than one integral to the Department for International Trade. The analogy is with competition activity. The European Commission runs its own competition regime from a directorate-general of the Commission, with a commissioner in charge. We may think that is right or wrong, but the point is that it is internationally recognised that in that respect, the Commission operates at a significant remove from the day-to-day political pressures in a single country. In this country, we do not operate on the basis that we have a government department providing the competition authority; we do it independently. There is a better analogy there. There is also the analogy of the International Trade Commission in Washington, which is recognised as operating independently of the day-to-day political pressures that otherwise might be exercised in the US Administration or if it were subject directly to Congress. There are analogies that cut both ways, but I am persuaded that having a separate Trade Remedies Authority is best.
It is tricky, because we do not have that many people who are very good at managing trade remedies. We are going to end up with one set of them in the Trade Remedies Authority and another set sometimes in the Department for International Trade having to judge the recommendations being made by the Trade Remedies Authority. I am not quite sure that we shall have enough people to do all those tasks. I hope we do, but it will not be immediately obvious.
Paragraph 2 of Schedule 4 states that a chief executive of the Trade Remedies Authority is to be,
“appointed by the Chair with the approval of the Secretary of State or, if the first Chair has not been appointed, by the Secretary of State”.
My Amendment 107A would simply leave out paragraphs 17 to 23, which all relate to the circumstances where a chief executive is appointed by the Secretary of State. We do not want to leave in statute for the longer term that the Secretary of State may appoint the chief executive. It should be the responsibility of the board. That is generally true for most other independent bodies of this kind. I do not see any reason why we should trespass across that if the independence of the Trade Remedies Authority is integral to its function.
All this seems to have been written in the expectation that it would become law at about the same time as the Taxation (Cross-border Trade) Bill did back in September. Back then, there was not a chair-designate of the Trade Remedies Authority, nor was there a chief executive-designate. We now have both. There is no practical reason why the chair cannot be appointed alongside other members of the board, so that they can take responsibility for the appointment of the chief executive. I see no grounds for leaving in the Bill this statutory provision compromising the body’s independence.
My Amendment 103A would specify that, when the Secretary of State came to approve the appointment of a chief executive as proposed by the chair of the board, that should be subject to a report from the International Trade Committee of the House of Commons. I looked at the January 2019 updated guidance from the Cabinet Office on the 50 leading appointments made with pre-appointment hearings by Select Committees. Back in 2008, when I was Secretary of State in the Department of Health, we had seven such appointments, which I think was the largest number of any single department. The Department for International Trade has no such appointments—it is quite a new department—but this is its principal body. In so far as the Select Committee on International Trade is to have a view, it seems that it should have a view about the chief executive and the chair of the Trade Remedies Authority. To be honest, I may have got the amendment wrong; it may be that it is better that the chair be appointed by the Secretary of State following a report by the International Trade Committee—forgive me if I have got it in the wrong place—as the chair is more likely to be the person who should be the subject of scrutiny by the committee. I may reserve that point, as distinct from what is written in Amendment 103A.
I cannot see a good reason why there should not be such scrutiny. The criteria seem threefold: is it important, does it have impact, and does it require independence? All three seem to apply in the case of the Trade Remedies Authority. The amendment would not require the approval of the Select Committee; it would simply require a hearing to take place and a view to be expressed. We know from precedent that on nine occasions Select Committees have made a negative report on appointments proposed by Ministers. In six of those cases, Ministers have proceeded in any case. The amendment is not to prevent Ministers making the appointment that they wish to make; it is to give the Select Committee in another place an opportunity to make a report on the proposed appointment of a chair.
Baroness Brown of Cambridge (CB)
My Lords, I shall speak to Amendments 101A and 103B in my name. I thank my noble friend Lord Kinnoull for adding his name to both amendments and the noble Baroness, Lady McIntosh of Pickering, for supporting 101A. I have two further amendments in the next group—do not worry, I am not suggesting that we amalgamate these, but I will provide some common background that applies to all four amendments before I speak briefly and specifically to Amendments 101A and 103B.
Materials are very important to us. I happen to be a materials scientist, so I would say that. They are important economically and strategically: obviously, they are the start of the supply chain for anything we manufacture. Advances in materials underpin the technologies and devices we depend on, from the structures and blades of wind turbines, to batteries for electric vehicles, to materials which allow the slow release of drugs in the body, to materials that enable faster communication of data—do not worry, I shall not give a long list. While we have world-leading academic expertise in materials, many of our materials industries are under pressure, as the noble Baroness, Lady McIntosh of Pickering, highlighted. Many of these industries share some common features and it is these common features that make the Trade Remedies Authority so important for them.
Many, such as steel and ceramics, are energy-intensive, so as we decarbonise our economy they will increasingly need to invest in new technologies, such as carbon capture and storage, hydrogen-fired kilns and things to drastically reduce or eliminate their CO2 emissions. They are affected by our very necessary requirements for high environmental standards. Many are located in economically vulnerable parts of the country and, as the noble Baroness, Lady McIntosh, mentioned, many have experienced serious problems in the past arising from dumping and subsidy by overseas Governments. Current world trade issues, such as the US-China trade dispute, resulting in overproduction in many areas in China, and Brexit, are understandably causing concern.
So our materials producers, along with many other industry sectors, welcome the establishment of the Trade Remedies Authority in the Bill. They think the UK needs a strong and independent authority to investigate alleged dumping and subsidy cases and to recommend remedies. Producers need to know that the TRA will be a body that understands the impacts of dumping and subsidy on UK companies, to give them the confidence to continue with their investment programmes—investment that will be critical to delivering the Government’s clean growth strategy. We have already heard a bit about the definition of the membership of the TRA and its governance. Both Clause 10 and Schedule 4 make the independence of the TRA a very clear objective. However we have already heard that this does not sit entirely comfortably with the chair and non-executives being appointed entirely at the discretion of the Secretary of State. By contrast, the TRA will have wide discretion in the way it conducts trade remedy investigations, which is clearly crucial for its independence.
However, in combination, these factors build a degree of uncertainty into the system for manufacturers. A strong message about the composition of the TRA board, giving assurance that individuals with current experience in the manufacturing industry, from both a management and worker perspective, would be there alongside trade remedy experts, economists, academics, legal experts and people with other relevant skills would help remove uncertainty and risk for UK producers. Indeed, as the noble Lord, Lord Lansley, reminded us, because trade remedies have been a Brussels competence, trade remedy expertise is likely to be in somewhat short supply in the UK. It is critical that the TRA board is not made up mainly of theoretical modellers and economists but has a real balance of theory, analysis and practical, hands-on experience. The recent move by the Government to accept the principle of involving those most affected by trade policy in its development—for example, through the recruitment of a diverse stakeholder strategic trade advisory group—is very welcome. Trade remedies should be no exception, with both producers and trade unions involved.
Amendments 101A and 103B would ensure that both manufacturing and trade union experience are present on the TRA board, and that there is consultation with stakeholders before appointments are made. I hope the Minister will be able to confirm that the Government recognise the benefits of this broad approach for the TRA membership.
Lord Fox
My Lords, I am struggling, because I fear we are mixing our drinks a little. On the one hand, we have had some debate—particularly from the noble Lords, Lord McNicol and Lord Lansley—on the mechanics of a TRA. That is, what sort of people do we want, and how will they be governed? We clearly want competent people, which is to some extent going to be a tough ask—not because people are not clever enough, but because they have not practised this particular activity. On the other hand, the noble Baronesses, Lady McIntosh and Lady Brown, are talking about the politics and economics of trade remedy. In a sense, the noble Lord, Lord Lansley, alluded to the nexus between that decision—the politics of trade—and the role of the TRA. This debate is not unpicking those two activities.
We talk about having a wholly independent TRA, but as a country there seems to be some political convergence around the idea that we have an industrial strategy. Are the Government going to run one independently of the other? I am not sure that Germany does that. Even though Germany is beholden to Brussels, I am pretty sure that its trade policy—the way in which it works through Brussels—is very much beholden to its industrial strategy. Further homework is required for all of us.
I sympathise with the speech of the noble Baroness, Lady McIntosh, on the ceramics industry. That industry benefited in this country from the political clout of Spain and other countries which have similar problems. If we leave the European Union, that support and clout will be gone. That will be true for many industries in this country, not just ceramics—agriculture is a huge loser in terms of lobbying in a post-Brexit world.
The question to ask ourselves is how much clout this TRA will have, when you have got the United States, the European Union and China. Let us say that this is a steel-dumping question. Does it matter what the TRA will do in the face of those challenges? We are arguing all sorts of important things, but by coming out of the European Union, we are reducing any kind of clout we will have in future trade decisions.
The Earl of Kinnoull (CB)
My Lords, I rise briefly in support of the noble Baroness, Lady Brown, and associate myself with all her remarks. I also associate myself with the noble Baroness, Lady McIntosh—I agreed very much with what she had to say.
Amendments 101A and 103B are probing in nature, and I will address a few thoughts to this TRA membership question. In Schedule 4, the TRA is proudly declared to be independent. That is important in trade, because, as one goes through Article 6 of GATT, and the 1994 associated agreement on that article, one sees that the whole idea behind trade remedy processes is that they are fair and are not being used as political weapons by the countries wielding them. That independence is therefore philosophically important to preserve. And yet, in Schedule 4 we find that the Secretary of State will appoint all the non-executives. In addition, the non-executives will always be in the majority, and the Secretary of State can fire all of them. To add icing to the cake, the Secretary of State has the power to issue guidance, and the TRA must “have regard” to it. That does not look to me like a recipe for independence. It would mean that the TRA would begin life with a bad image, and it would be difficult for it to appear a useful, independent tool internationally.
I worry that, if another body had a similar structure which might have political interference—although I do not think we would actually operate it badly—we could be on the wrong end of something. We would not be able to criticise, because it would have the same structure. I join other noble Lords in very much looking forward to what the Minister has to say about the independence of the TRA, and about the points that I and others have made.
Baroness McIntosh of Pickering
My Lords, I shall speak to Amendment 101A and, without rehearsing the points, I entirely endorse what the noble Baroness, Lady Brown, and the noble Earl, Lord Kinnoull, said in speaking to the amendment. The Minister was kind enough to have a meeting with the team and myself, but I have this awful feeling that she will not support this amendment. I would like to give her a bit of bottle this evening and say why she must adopt the amendments, particularly Amendment 101A. A similar amendment was not carried in the House of Commons but by a very narrow margin and it goes to this point that a number of noble Lords have said this evening—the process must be, and be seen to be, fair in appointing and sustaining members of the TRA, and they must operate independently and impartially. I make this plea to the Minister: the Government must be seen to rein in some of the powers of the Secretary of State, which will be pretty broad if we let the Bill go to its final stages without making these points.
I entirely support what my noble friend Lord Lansley said about why an independent Trade Remedies Authority is required, and I should have declared an interest: I spent a very enjoyable six months in 1978 when I was very young, very keen, and very green, with the EU Commission—DG IV, now known as DG Comp. We did important things, such as read the Financial Times, which was amazing because a number of companies were announcing they were merging without having told the European Commission or the UK home authority, so it is absolutely vital that we have an independent authority such as the Trade Remedies Authority.
To respond to the point made by the noble Lord, Lord Fox, we need to give the businesses in this country the knowledge that there will be a remedy which replicates the remedies that are currently available. I entirely support his point that it will not be EU-wide, but we do need some anti-dumping and retaliatory measures at our disposal in this country.
Baroness McIntosh of Pickering
It will be hard, but I do not think we can let the matter go. That is why Amendment 101A should be on the Marshalled List and not consigned to room 101.
Lord Purvis of Tweed
My Lords, I wish to make two brief points in this large but important grouping. The first is in response to the point made by the noble Baroness and my noble friend Lord Fox. When the Secretary of State spoke at Second Reading of this Bill in the other place, he indicated that the Government’s position on the anti-dumping remedies regime would be public long before we considered this Bill. We are, to some extent, debating blind in not knowing what the Government’s proposals are. That is regrettable, so if the Minister can give some clarification, that would be very helpful.
The second point is really stimulated by the noble Earl, Lord Kinnoull, and the noble Lord, Lord Lansley: why are the Government continuing with Schedule 4 as it is currently drafted? As the noble Lord, Lord Lansley, said, the proposal would have been that the Secretary of State would appoint the chair of the TRA and then the chair would appoint the chief executive —that is in Schedule 4(2)(1)(a) and Schedule 4(2)(1)(c). If no chair had been appointed, the Secretary of State would appoint. In the Government’s Statement on 26 October, they announced the appointment of both the chair designate and the chief executive designate at the same time. I do not know how that interacts with this legislation, and on what basis the chief executive designate was appointed. I am not questioning those two individuals. If the intention was to have a truly independent body, the fact that the first chair had been the UK Trade & Investment representative raises some questions. I am not questioning the quality of the appointments. However, I am not sure how the fact that the announcement of both appointments was made on the same day interacts with the Bill, and on what basis both the chair and the chief executive were appointed as designate at the same time. As the noble Lord, Lord Lansley, said, either that is not consistent with the Bill, so the Government acted beyond how they said they would act, or perhaps we should just delete this aspect in its entirety for the sake of neatness.
Baroness Neville-Rolfe
On Amendment 101A, I agree with proposed new subsection 1(c), where you have,
“a chief executive appointed by the Chair with the approval of the Secretary of State or, if the first Chair has not been appointed, by the Secretary of State”.
The latter has already happened, so, as the noble Lord said, that becomes redundant. However, I am not convinced that all the executive members should be appointed by the chair without reference to Ministers. I have been involved in lots of appointments in different bodies over time, and the fact of the matter is that normally appointments are put forward and are approved ministerially, and this helps make the appointments sensible, enduring and independent.
For the same reason, I do not agree with the suggestion of the noble Baroness, Lady Brown, that we should require representatives of different groups. I can see exactly what she is trying to achieve, which is to have good, sensible people who would care about economics, people and devolved Administrations. However, my own experience is that if you restrain yourself in this way, you find that you are looking for somebody who has to be in a specific category, maybe there is nobody of quality at that time—especially as the pay rates in quangos are quite low compared with other opportunities for these people—and you get yourself into difficulty. I would favour simplicity, and independence achieved by having a separate agency, whatever my views may be on that.
Baroness Fairhead
My Lords, I thank all noble Lords for their contributions to this debate. In particular, I thank my noble friend Lady McIntosh for the first grouping, and the noble Lord, Lord McNicol, for the second. I confess that I was grateful to the noble Lord, Lord Stevenson, for helping me merge these two groupings, but I was probably even more grateful to the noble Baroness, Lady Brown, for saying that she would not extend that to the next grouping as well.
I will try to address these as best I can, given the significant number of elements that were raised. Clearly, a key priority of the Government is to help businesses expand their global presence. However, while we work to help increase exports, we must ensure—I hear complete agreement on this around the Committee—that our domestic industries are shielded from the damaging effects of unfair trading practices and unexpected surges in imports. That is exactly why the Government are setting up the new Trade Remedies Authority—TRA—to give that safety net to businesses, which is provided for by Clause 9 and Schedules 4 and 5.
My noble friend Lady McIntosh of Pickering asked how this related to the Constitution Committee’s report. I can confirm that the Government have responded to that report. The main functions and powers of the TRA are set out in the Taxation (Cross-border Trade) Act, and setting up the body, as we are doing in this Trade Bill, is normal practice.
Free trade does not mean trade without rules. The WTO allows its members to provide a safety net, which we are doing. This safety net usually takes the form of an increase of duty on imports of specific goods following an investigation. Trade remedies, as these increased duties are known, are vital to level the playing field and restore our competitive balance. That is critical in areas such as ceramics, steel, and a number of other sectors. Failing to put the trade remedy function in place would have a damaging effect on those industries and the UK economy more widely, and we cannot let that happen.
As several noble Lords have mentioned, this is currently an EU competence. Investigations, decisions and monitoring are carried out by the EU Commission on behalf of EU member states. Once the UK leaves the EU, the European Commission will no longer perform those functions. That is why we are creating the TRA. This will ensure that we can continue to provide that safety net and help protect the 2.5 million people who work in the ceramics industry, for example. The framework for our trade remedy system is set out in the Taxation (Cross-border Trade) Act 2018. My officials worked with UK industry, including the ceramics and steel industries, during the development of that framework.
My noble friend Lady McIntosh asked about secondary legislation on injury calculations. The detail of the technical assessments of the TRA will be set out in secondary legislation under the Taxation (Cross-border Trade) Act. This has already been passed by the other place, which agreed that the negative procedure is the appropriate scrutiny mechanism.
Baroness McIntosh of Pickering
This is a new procedure, but presumably it is open to an individual Member of your Lordships’ House to intervene to say that they do not agree with the negative procedure and switch it to the affirmative if they made the right case to do so.
Baroness Fairhead
I confess that I am unaware of the protocol in this regard. It is a ways and supplies Act and was deemed by the Speaker to be such, but I will leave that point to those who are more au fait with protocol.
Lord Stevenson of Balmacara
I am not sure that this will help very much, but a negative procedure is a negative procedure. It can be questioned, but the way to do so is by tabling an amendment within the requisite period after the order has been laid that would be fatal to it. That is normally described as the nuclear option, which suggests that it does not happen very often—in fact, it has happened only once in the past five years, I think; and we on this side of the House are certainly chary about doing it. The affirmative procedure is actually not that much more effective: you still need the nuclear option, but at least there is a requirement on the Government to bring it to the House, so it will be debated, irrespective of their wishes.
Baroness Fairhead
I thank the noble Lord for that clarification.
My noble friend also raised the economic interest and public interest tests and how they would be interpreted by the courts. The economic interest test will be based on the list of economic criteria set out in the Taxation (Cross-border Trade) Act—I think I will call it the TCBTA for brevity. The TRA must take all of those into account, and so must the courts. With regard to the public interest, as part of the final decision-making, the Secretary of State will have an opportunity to intervene where there are circumstances in which the imposition of trade remedy measures are not, in his or her view, in the public interest. This could include national security considerations, for instance, but other examples may arise in individual cases, so it is important that the Secretary of State has a degree of discretion in this area such that all wider public interest considerations are taken into account. The ability of Ministers to undertake a final sense check in this way is a common feature in many comparable regimes, such as Australia and Canada.
Stakeholders have expressed their support for the establishment of the TRA. The CBI said that it strongly supported the initiative to set it up, and the British Ceramic Confederation called for the Government to prioritise the TRA to ensure that it will be fully operational by the March 2019 deadline, and this must include appointing the board.
The final area raised by my noble friend was about whether poor social and environmental standards would be taken into account. We recognise that the EU has recently introduced reform to take poor social and environmental standards into account. The UK plays an active role in upholding labour and environmental standards across the world both as a member of the ILO and by actively promoting human rights. However, our view is that trade remedy cases are not an appropriate vehicle for such issues, and these factors are not referred to in the WTO. We want to ensure that economic growth, development and environmental protection go hand in hand. We are exploring all options in the design of future plurilateral and bilateral trade and investment agreements, including with regard to human rights and environmental and labour protections. In practice, any cost advantages enjoyed by an exporting country as a result of low labour or environmental standards or costs will be reflected in its export prices and hence will already be taken into account when calculating the injury margin.
I turn now to Amendment 82, tabled by the noble Lord, Lord Purvis, and Amendment 83, tabled by the noble Lord, Lord Stevenson. I assure the Committee that Clause 10(1)(b) already allows the Secretary of State to seek,
“advice, support and assistance … in connection with the … functions of the Secretary of State relating to trade”.
This could include the conduct of trade within a customs union and the impact of third-country trade remedy measures on UK consumers. Were we to accept this amendment, it could undermine the intended non-exhaustive nature of the current drafting and potentially make it less effective.
On Amendment 84, tabled by the noble Lord, Lord McNicol, we appreciate the need for the TRA’s activities to be transparent. Paragraph 31 of Schedule 4 already requires the TRA to report annually on the exercise of its functions. We would therefore expect the TRA to record any requests from the Secretary of State for advice, support and assistance in its annual report. This is because this would be considered part of the TRA’s statutory functions. We therefore do not feel that this amendment is required.
Turning to Amendments 101A and 103B, tabled by the noble Baroness, Lady Brown, whom I met last week, I confirm that we are committed to supporting UK manufacturers and producers. That is why we have engaged so extensively with industry during the establishment of the TRA. However, we do not believe that representatives of any specific organisation should be on the TRA board. It is vital that it is, and is seen to be, wholly impartial, and for the membership to be based on securing the right blend of skills and expertise. That said, I assure the Committee that the TRA chair job description makes it clear that they will be expected to maintain effective relationships with stakeholders—including manufacturers, trade unions and the devolved Administrations—and to incorporate their perspective into board discussions where appropriate. We will also ensure that the appropriate terms on working with stakeholders are included in the terms of the TRA chair’s contract. Some of the TRA’s wider senior leadership, including its non-executives, may have experience in a particular sector, devolved nation or region. However, that alone must not be why they were chosen. The noble Baroness, Lady Brown, also asked whether we could have specific representatives. We believe that could possibly undermine the TRA’s independence and impartiality, and we want to make sure that the TRA’s expertise is complete by allowing the board members to be appointed not on the basis of where they are from but because they have the right skills and expertise for the blend of skills required on the TRA.
On Amendment 102, I assure the Committee that we are committed to ensuring the independence, impartiality and expertise of the board. That is why the Secretary of State has requested that the Commissioner for Public Appointments regulates all public appointments to the TRA.
My noble friend Lady Neville-Rolfe asked why we were setting up a new body rather than just exercising the function within government. I agree entirely that the important thing is that the board has to be independently minded. Decisions on these cases can have a profound impact on the markets. That is why we need an objective and independent investigation process that businesses can trust. The TRA will be responsible for carrying out detailed technical investigations and delivering impartial recommendations on trade remedies to the Secretary of State. The Secretary of State will then be responsible for making a final determination on whether to accept or reject recommendations to impose measures.
We have also been asked—again, by my noble friends Lady Neville-Rolfe and Lord Lansley—why we have not established the TRA as an executive agency. We looked at best-practice comparable agencies across the world, and we are trying to ensure the right balance between independent, impartial, objective investigations that our businesses and trading partners can trust and accountability. That is the critical thing that we looked at.
The Commissioner for Public Appointments will be responsible for providing independent assurance that the Secretary of State follows the Governance Code on Public Appointments when appointing TRA non-executives. He or she will be required to comply with the governance code, which outlines rules around term lengths and renewing the appointments of non-executive members. Executive members will be TRA public servant staff, whose recruitment will be made in compliance with the usual public sector rules. The governance code makes it clear that:
“The ultimate responsibility for appointments … rests with Ministers”.
It states that there is an important role for Parliament in ensuring Ministers are held,
“accountable … for their decisions and actions”.
However, this scrutiny should not extend to approving or vetoing their appointments. This would be an expansion of standard Select Committee powers.
Amendment 103, tabled by the noble Baroness, Lady Jones, concerns maintaining safety and public confidence in the food we eat. She is not here, so all I can do is confirm that this Government will remain committed to environmental protection standards once we have left the EU.
Amendments 103A and 107A were tabled by my noble friend Lord Lansley. I reassure noble Lords that this power is intended simply as an operational contingency measure in the TRA. As such, it can be used only before the first chair has been appointed. My noble friend and other noble Lords asked whether that still makes sense given we now have a chair-designate. I will definitely reflect on that, because it is a good point. On appointing the chair, as I said, the chief executive will be a public servant and, as my noble friend Lord Lansley agreed, it would not be appropriate for a Select Committee to be involved in their recruitment. I assure the Committee that the chief executive-designate has been recruited on merit following a fair and open competition, in line with the Civil Service Commission Recruitment Principles. All future TRA chief executives will be appointed on the same principles.
My noble friend Lord Lansley and the noble Lord, Lord McNicol, asked whether the ITC should conduct pre-appointment scrutiny. It is the view of officials in the department that the TRA chair role does not meet the Cabinet Office’s criteria for determining whether public appointments should be subject to Select Committee pre-appointment scrutiny. However, we are committed to ensuring that appointments are conducted in the right way, consistent with standard practice across government. The governance code states:
“Ministers when making appointments should act solely in terms of the public interest”,
and, likewise:
“All public appointments should be governed by the principle of appointment on merit”.
We therefore feel that there is already sufficient oversight and scrutiny of that process in place.
Lord Stevenson of Balmacara
I will intervene before the noble Lord, Lord Lansley, does—I am sure he was just about to. I do not want to extend this, but the noble Baroness has just spent slightly longer than three or four minutes playing up how important this role is and how crucial the new body will be to the future of our trading policy. She explained, in some detail, the difficult position, the reason it is independent and everything else. She cannot also then argue that it does not fulfil the very clear lines given by the noble Lord, Lord Lansley, on the important need for independence and for it to be seen to have the trust of all concerned, including Parliament. Will she take that back?
Baroness Fairhead
I am happy to take that back. I have heard the point. I asked whether there was a practice and was advised that this was the view we had arrived at, but I will certainly reflect on what the noble Lord said and take it back for further consideration.
On Amendment 104, tabled by the noble Lord, Lord McNicol, it is important that the Secretary of State has the ability to ensure that the TRA has the right leadership in place. Again, I reassure the noble Lord that the practices and procedures will be followed.
My noble friend Lord Lansley speculated on whether we could use an existing arm’s-length body rather than create a new one. There are two reasons why we believe we need to create a new non-departmental public body. First, no existing NDPB possesses the required pool of talent and expertise, or, secondly, offers the right balance of independence and ministerial oversight, to deliver the trade remedies framework as set out in the TCBT Act. I can confirm that we reached that decision following a thorough review of the arm’s-length bodies landscape.
Amendments 105 and 106 refer to the Secretary of State, rather than the chair, appointing executive members of the TRA board, and would therefore expand the Secretary of State’s appointment powers. We believe that might undermine the TRA’s independence. It would also be undesirable to include a statutory requirement to have regard to this set of criteria, as it might be unnecessarily restrictive. My noble friend Lady Neville-Rolfe has great expertise in this area. As she knows, it is important to have the right skills and the right blend on a board. For example, it may be important for some executive members to have HR or finance experience to ensure the TRA’s smooth operation. This would be a decision for the TRA chair.
Turning to Amendment 107, under paragraphs 9 and 10 of Schedule 4, the TRA chair is able to remove an executive member of the TRA board, and the Secretary of State a non-executive member, if they consider that person,
“unable or unfit to carry out the functions of the office”.
This already allows the TRA chair and the Secretary of State to determine whether to remove board members in the event that they become insolvent, receive a criminal conviction or are otherwise deemed unsuitable. We therefore do not believe that this amendment is necessary. In addition, all members of the TRA will be required to comply with the Cabinet Office’s Code of Conduct for Board Members of Public Bodies, which sets out the seven principles of public life that should govern the behaviour of public officeholders.
Turning to Amendment 108, let me assure noble Lords that the TRA will be required to follow the relevant provisions in Managing Public Money, which sets out that arm’s-length bodies must maintain a register of gifts. We would also expect the TRA to record in its annual report any gifts it receives.
I thank the noble Lord, Lord Stevenson, for tabling Amendment 109. We welcome the devolved Administrations’ interest in the TRA and understand the need to ensure that they are able to engage with it in the right way. I can confirm that the Secretary of State has committed to sharing the TRA’s annual report with the devolved Administrations once he has received it. I can also confirm that we have been in contact with, and will shortly be writing to, the devolved Administrations setting out further commitments.
On Amendment 110, tabled by the noble Lord, Lord McNicol, there are certain situations where the Secretary of State will need to issue guidance to the TRA. That is why it would not be appropriate to set out certain detail in legislation. Issuing guidance instead of legislation would give the TRA the operational flexibility it needs to be able to decide how to deal with matters on a case-by-case basis. However, to protect the TRA’s independence, and to ensure that this power is used only in appropriate circumstances, we have placed clear statutory restrictions on the Secretary of State’s ability to issue that guidance.
I am aware that I possibly have not fully answered the question from the noble Baroness, Lady Brown of Cambridge. We recognise the critical role played by producers and manufacturers: that is exactly why we have put a system in place and engaged extensively. We look forward to continuing to do so.
My noble friend Lady McIntosh suggested that it was not adequate that the Secretary of State was required only to have regard to the independence, impartiality and expertise of the TRA. The imposition of a duty on the Secretary of State is a common approach and can be found in other relevant legislation. For example, the Higher Education and Research Act 2017 requires the Secretary of State to have regard to the need to protect the institutional autonomy of English higher education providers when issuing guidance to the Office for Students. These are statutory requirements and cannot be ignored.
Lord Purvis of Tweed
I do not wish to make a glib point, but the Minister has referred to the Office for Students. The episode in relation to that office should remind us why we take seriously these aspects about the recruitment of those who will be the most senior in the TRA office. The Office for Students should be a good example for the Government of how an appointment process, while it might be prescribed in legislation, can be conducted very badly in practice. We are trying to avoid a repeat of what happened with the Office for Students.
Baroness Fairhead
I am grateful for that clarification, but that is one example that was just plucked out and it has a clear statutory requirement.
On the basis of the information I have given and my commitment to take some of these points back for reflection, I ask noble Lords not to press their amendments.
Baroness McIntosh of Pickering
I am most grateful to the Minister for her full response. Picking up the mood of the Committee, I think there are a number of issues here on all sides that were reflected in the other place. We do not wish to delay the debate this evening, but we will return to this issue on Report. That is no reflection on my noble friend’s views, but perhaps on the intransigence of her department.
“Appeals against decisions by the TRA and Secretary of State
(1) This section applies to the following decisions—(a) a decision by the TRA under provision made by or under Schedule 4 to the Taxation (Cross-border Trade) Act 2018,(b) a decision by the Secretary of State under provision made by or under Schedule 4 to the Taxation (Cross-border Trade) Act 2018.(2) A person affected by a decision to which this section applies may appeal against it to the Upper Tribunal.(3) The means of making an appeal is by sending the Tribunal a notice of appeal in accordance with Tribunal rules.(4) The notice of appeal must be sent within the period specified, in relation to the decision appealed against, in those rules.(5) The notice of appeal must set out—(a) the provision under which the decision appealed against was taken; and(b) the grounds of appeal.(6) The grounds of appeal must be set out in sufficient detail to indicate—(a) to what extent (if any) the appellant contends that the decision appealed against was based on an error of fact or was wrong in law or both; and(b) to what extent (if any) the appellant is appealing against the exercise of a discretion by the TRA, by the Secretary of State or by another person.(7) In this section references to a decision under Schedule 4 to the Taxation (Cross-border Trade) Act 2018 includes a decision not to use an action available under the powers in that Schedule.(8) For the purposes of this section a decision to which effect is given by the exercise or performance of a power or duty conferred or imposed by or under an enactment shall be treated, except where provision is made for the making of that decision at a different time, as made at the time when the power is exercised or the duty performed.”
Lord Stevenson of Balmacara
We can be relatively brief on these amendments; they are substantial in their drafting, and the points have been made so we do not need to repeat them. We have been dealing until now with the procedures and set-up of the new body. These are proposals for guidance on some of the ways in which future policy might be developed and taken forward. Having said that, Amendment 85 follows an exchange in the other place, where it was confirmed that there would be an appeals mechanism, but there is still no reference to that in the Bill, as far as I can see. This is a suggestion for a way in which the appeals mechanism—which should be there or, as agreed in principle, will be there—against decisions by the TRA and the Secretary of State might be set out. I offer it to the Government for their consideration.
Lord Lansley
I am not clear. Is the noble Lord’s intention behind the amendment that the Upper Tribunal would look at the merits of the decision or simply at the processes? Are we simply talking about a judicial review process?
Lord Stevenson of Balmacara
I read that a few moments ago and now I have lost it. I think it is on the merits and on the process. To that extent, because this is a probing amendment, I will not push this too hard and it is for the Government to decide. In my limited experience in your Lordships’ House, every time that I have led on a Bill we have come up against this question of what an appeal actually means. I have detected that the Government have gradually been moving away from merits-based appeals, because they seem to take up an awful lot of time, and argue that appeals done simply on a JR basis are becoming increasingly softer-edged, rather than being simply about the process. Therefore, the two come together and the legislation has tended towards being purely on the procedural elements.
I retain the rather purer view that there should always be an appeal system in some way, in which case it should not simply be limited to the procedures because that just restarts the clock. It should also include merits. But that is a matter for the Government to consider. The question was: if, in the other place, the Secretary of State has confirmed that there would be an appeal system, what is it and can we please have it clearly explained before we get to Report?
Baroness Neville-Rolfe
Has the noble Lord considered whether one could have an appeal to the courts? Of course, on the EU model that we were discussing earlier, the appeal is to the ECJ.
Lord Stevenson of Balmacara
I will get through this very quickly and then questions can flow in. Amendment 85, which has already been accepted, therefore sets out an appeals process for the Government to respond to. Amendment 86 relates to how these are disposed of and the procedures for that. The two go together and will be difficult to separate, but again the Government must take that forward.
We have already had reference to how recommendations from the TRA for action or no action would be based on two issues—an economic interest test and a public interest test—but we do not have any definition of those. They are obviously good ideas and sensible approaches, around which decisions can be placed, but the narrow question of what they constitute and, more importantly, how they would be kept in scope with how people’s views change over time, is not dealt with in the Bill. Therefore, Amendment 87, which deals with the public interest test, and Amendment 88, which deals with the economic interest test, set out not so much the detail of what they consist of but the process under which they might be organised.
Lord Lansley
I agree that the public interest test is not defined anywhere, but is the economic interest test not defined in paragraph 23 of Schedule 5 to the Taxation (Cross-border Trade) Act?
Lord Stevenson of Balmacara
I am grateful to the noble Lord for his interventions, which are always helpful, but I was going on to say that the economic interest test is different from the public interest test because some aspects of it are fleshed out. But the intention of Amendment 88 is to extend that slightly to ensure that two things happen. The first is that there should be a consultation about what the economic interest test is among those whose interests might be affected by it. Those involved in,
“employment, economic health and prosperity, and productivity”,
which includes trade unions, businesses and consumers, should be consulted on how one constitutes the economic test.
Secondly, it is important that the test must reach not just for a national economic view but down to a regional, or even sub-regional, point of view. The suggestion would be for the devolved Administrations and for the various regions of England to be parts of a group that could respond on things. Clearly, an economic test dealing with a small aspect of the ceramics industry based in a particular area will be different from one dealing with a major national employment issue.
Again, these amendments are not meant to be accepted as written, but they are probing suggestions to get the Government to flesh out in more detail their thinking behind this.
We always talk about what is in the public interest but never define what that means. I am not trying to define it. I am saying that it would be useful to have a process under which, from time to time, a Secretary of State who wished to employ that as part of the process for the TRA had to consult and then come forward with proposals through Parliament for what that constituted. That is what these amendments are all about.
Finally, Amendment 89 in my name suggests that TRA investigations can be considered complete only when they involve the devolved Administrations and the devolved authorities. I hope that will also commend itself to the Government. I beg to move.
Baroness Brown of Cambridge
My Lords, I will speak briefly to Amendments 90A and 90B in my name. Again, I thank my noble friend Lord Kinnoull for adding his name to both amendments.
As we have heard, the Taxation (Cross-border Trade) Act sets the overarching rules under which the UK’s new Trade Remedies Authority will operate. The Act states that trade remedy measures do not need to be adopted if the TRA or the Secretary of State decides that they do not meet the economic interest test, as we have heard. When applying the EU’s equivalent—the Union interest test—special consideration must be given to the need to remove the injurious practice, that is the dumping or subsidy by another country, and restore competition. It is this special consideration that gives the EU test a presumption in favour of the adoption of measures. The materials industry, in particular, is concerned that this consideration is absent in the UK Act.
I appreciate that government amendments at Report stage of the Taxation (Cross-border Trade) Act improved the wording around the economic interest test and Ministers have assured manufacturers that the intention is that there is a presumption in favour of adoption. However, the words contained in the Act fall short of such a presumption. Amendment 90A would give clearer direction to the TRA in exercising its duty to conduct an economic interest test. The intent is to establish firmly a presumption in favour of adoption of measures and hence to continue the protections that UK manufacturers currently benefit from while we are members of the EU. I recognise that the Government have indicated that the presumption in favour of adoption is their intent and that there may be other ways to strengthen this message to support and assure our manufacturers. I look forward to the Minister’s response as to how this might be addressed.
I think we have probably already discussed Amendment 90B. The noble Baroness, Lady McIntosh of Pickering, already highlighted the issue of rules about the operation of trade remedies coming through secondary legislation as a result of the provisions of the Taxation (Cross-border Trade) Act. I will not go on for much longer about it because we have already heard the Minister’s response. But I would like to take the chance to emphasise again that these are hugely important rules that will have a profound impact on UK manufacturers’ ability to get a level playing field when overseas competitors are not playing by the rules. I also emphasise my strong conviction that these statutory instruments should be affirmative ones, approved by resolution of both Houses.
The Earl of Kinnoull
My Lords, I do not want to comment on the two amendments I have signed. I want to urge some support for the noble Lord, Lord Stevenson of Balmacara. I have in front of me Article 13 of the 1994 agreement which supplements Article VI of GATT. Entitled “Judicial Review”, it says:
“Each Member whose national legislation contains provisions on anti-dumping measures shall maintain judicial, arbitral or administrative tribunals or procedures for the purpose, inter alia, of the prompt review of administrative actions relating to final determinations and reviews of determinations within the meaning of Article 11”.
It then goes on to say that the tribunal must be independent of the authorities that have made the determination. It is an international obligation for there to be exactly what the noble Lord, Lord Stevenson, proposes in his amendments. I think we need to pick that up and put it in the Bill.
Baroness Neville-Rolfe
My Lords, I apologise to the noble Lord, Lord Stevenson, for interrupting him. Of course, there is a requirement to have proper appeals, as has just been elegantly explained by the noble Earl, Lord Kinnoull, but I was interested in whether they had to be the subject of special tribunals or whether they could in fact be fitted into the existing court system. My main concern as a former business person is with speed. Sometimes tribunals, public interest tests and so on can be a field day for lawyers and the whole thing can take a very long time. That is not what we want. We want to be able to make sure that the interests of our industries and other players are properly protected.
Lord Lansley
The noble Lord, Lord Stevenson, is absolutely right that the economic interest test is present in both Schedules 4 and 5 to the Taxation (Cross-border Trade) Act. As set out there, the test seems to me to be capable of being, and is required under the legislation to be, taken down to the level of individual industries, looking specifically at affected industries and consumers and the likely impact on particular geographic areas or particular groups. It seems to me that the economic interest test is already capable of being disaggregated in the ways that the noble Lord is calling for.
The noble Lord and I have joined together on the issue of the public interest test in the past. I am not sure that you can define it in advance—that is the difficulty with it. Trying to write down what public interest the Secretary of State has to weigh up seems to be intensely difficult, as distinct from the economic interest test. It might include defence industries and security interests, and we see that coming through in relation to competition. We also see it in broadcasting and competition regimes. There are a range of competition-specific public interests, and I do not think that we are necessarily looking to restrict the test in that way in this legislation. Frankly, we might be better off simply looking at it and, if there are particular public interests that have to be protected as time goes on, we should perhaps have the power to add to them by way of regulation, as is the case with competition legislation.
Baroness Fairhead
My Lords, I thank the noble Lords, Lord Stevenson and Lord McNicol, and the noble Baroness, Lady Brown, for tabling these amendments. I take the opportunity to clarify initially that the Trade Bill does not set out the policy framework that the TRA will be responsible for operating. These provisions are already set out in the TCBT Act 2018, including the economic interest test, which places a requirement on the TRA to consider the wider economic impacts of imposing measures on other affected groups, such as downstream users and consumers.
The economic interest test provides continuity from the Union interest test in the current EU system. However, we listened carefully to concerns that the Union interest test is, for example, too opaque and does not set out how different interests are to be considered. Therefore, as my noble friend Lord Lansley correctly stated, the Act specifies the economic factors which must be considered under the test, and that will provide businesses with greater clarity over how the test is applied. That is what business has asked us to do. In terms of the public interest test, I can only endorse what my noble friend Lord Lansley said.
In addition, there is an explicit presumption in the Act that, where injury is caused by dumped or subsidised goods, the TRA will make a recommendation to the Secretary of State for the imposition of measures. The Government amended the legislation during its passage to make that absolutely clear. The burden of proof rests on the TRA to show that measures will be detrimental to the wider economic interest; otherwise it must make a recommendation, and any failure to do so will be subject to appeal. I assure your Lordships—particularly the noble Baroness, Lady Brown, who raised this matter—that this presumption will have the effect of ensuring that special consideration is given to the injury caused to UK industry by imports of dumped or subsidised goods. I wanted to say that explicitly in Committee here because I know of some of the concerns in the ceramics industry.
The Act also places the same presumption for the imposition of measures on the Secretary of State and makes clear that the Secretary of State can only reject the TRA’s recommendations for measures on public interest grounds, or where he determines that the economic interest test is one the TRA could not reasonably have made. Any such decision can be appealed by interested parties and must be explained in a Statement to the other place.
With respect to Amendment 87, tabled by the noble Lord, Lord Stevenson, I remind the Committee that we are committed to ensuring that our industry receives protection. That is why we will transition those EU measures that matter to UK industry, including on steel, ceramics and chemicals, into our system once we have our own, independent trade policy. We will monitor the effectiveness of the trade remedies system and, if we find that it is not working as it should, we will of course make any changes necessary.
As I mentioned before, I am sure that the Committee will understand that the public interest issue is not something we can review or consult on. What constitutes public interest will change depending on the economic and geopolitical circumstances of the day, and the Government must have the flexibility to respond to such changes. This is a power that we expect to be used in rare cases and, when it is, again the Secretary of State will be required to lay a Statement before the other place justifying its use.
Your Lordships have raised rightful questions on the role of the devolved Administrations in relation to trade remedies. Importantly, the economic interest test mandates that account must be taken of particular geographic areas, as well as other economic matters that may be considered relevant. This will ensure that the impacts of measures on different regions—including Scotland, Wales, Northern Ireland and regions of England—are given due consideration where appropriate and will include any information that is shared, or issues that are raised, by the devolved Administrations.
Further, regarding Amendment 89, tabled by the noble Lord, Lord Stevenson, I reassure the Committee that any party not defined as an interested party may register its interest in a particular case with the TRA and will then become a contributor. This will include the devolved Administrations. Contributors will be invited by the TRA to submit relevant information, which it will be obliged to take into account in the investigation as appropriate. My officials will advise the devolved Administrations when an investigation is opened by the TRA, which will alert them to the need to take a decision on whether or not to register.
Where the TRA terminates an investigation without recommending the imposition of measures, it is required to publish details of its recommendations and decisions. Contributor status will mean that DAs will automatically be notified by the TRA of actions it has taken. But I recognise that they will also—rightly, in their capacity as devolved government—have an interest in the decision made by the Secretary of State, including in having an opportunity to offer views on relevant public interest considerations which he should take into account when arriving at a decision. I can confirm that my officials will work with their colleagues in the devolved Administrations to put appropriate arrangements in place.
I turn now to Amendment 90B and thank the noble Baroness, Lady Brown, for tabling this amendment. As I have explained, the Taxation (Cross-border Trade) Act has already been considered, and passed, by the other place, which has accepted that the negative procedure is the appropriate scrutiny mechanism, as we discussed earlier.
With regards to Amendments 85 and 86, the noble Lord, Lord McNicol, is right that there should be an appeals process; indeed, this is necessary to be compliant with our WTO obligations. We do not support the amendment, but I assure noble Lords that there are already powers in the Taxation (Cross-border Trade) Act to establish an appeals system for the UK’s trade remedies system, and my officials have been working closely with the MoJ to develop a clear, transparent process. I completely accept the point made by the noble Earl, Lord Kinnoull, about how critical this is. I also agree with my noble friend Lady Neville-Rolfe that speed matters to companies too.
There will be an initial consideration when an appeal is raised by the TRA, followed by a right of appeal to the Upper Tribunal. This ensures that basic administrative errors can be resolved more quickly and effectively than moving straight to the tribunal, so limiting those cases to more substantial issues of law. It combines independence, as required by WTO law, with the advantages of a proportionate and efficient system. As the Secretary of State informed the International Trade Select Committee in his letter of 14 January, the judicial route for appeals will be to the tax chamber of the Upper Tribunal. The Tribunal Procedure Committee, the responsible statutory body, has recently completed a consultation on the rule changes required to allow the Upper Tribunal to hear trade remedy cases. Once that process has been fully completed, the necessary appeals statutory instrument will be laid in due course and scrutinised in the normal way.
Our proposed regime draws on international best practice from comparable WTO members. Its measures provide for the assessment of whether there was an error in law based on the evidence that was available to the decision-maker at the time, and some include processes akin to the TRA’s reconsideration.
I hope my responses have provided reassurance to your Lordships and that the noble Lord feels able to withdraw his amendment.
Lord Stevenson of Balmacara
I am very grateful to the Minister for that very full response. I think she covered most of the points that I raised. I am very happy to read Hansard but I am sure I will be satisfied when it comes to it.
The only issue that I would like to leave with her and her team is that she said, with particular reference to the operation of the public interest test and the economic interest test, that if they were not working they would be changed. Obviously learning from experience must be right, but my question is: are there powers in the existing draft legislation to allow that? If not, would it not be sensible to take them at this stage? We would be happy to co-operate on that in those circumstances. With that, I beg leave to withdraw the amendment.
“Conditions of commencement
The provisions in Parts 1 to 3 of this Act may only come into force if—(a) a withdrawal agreement and a framework for the future relationship have been approved by a resolution of the House of Commons on a motion moved by a Minister of the Crown for the purposes of section 13(1)(b) of the European Union (Withdrawal) Act 2018, or(b) the House of Commons has passed a motion “That this House approves of the United Kingdom leaving the European Union without a withdrawal agreement and a framework for the future relationship”.”
Lord Stevenson of Balmacara
By this stage of the proceedings the Minister is usually tearing up her notes and packing her bag while the team are leaving the Box, and the Committee is allowed to descend into a sort of torpidity at the end of a long and heavy day—day four, in this case—while we heave a sigh of relief. However, I have always wanted to table an amendment about the commencement of a Bill because it is something that we always forget to look at.
I was mulling this over a few weeks ago and thinking about what aspects of commencement one could look at. It is all very straightforward, although Clause 7(1) has a strange thing where it says:
“Regulations under section 1(1) or 2(1) may … make transitional, transitory or saving provision”.
I was wondering what on earth they were and thinking about a suitable probing amendment when I happened to run into the noble Lord, Lord Hannay, who said, “I’ve been thinking about commencement and we ought to do something about it”. Out of that we hatched this wonderful amendment, which is the last one that we are going to move tonight, and I hope the Committee will accept it as it stands. It provides a sensible and clear exposition about what position Ministers should be in before they begin to implement these procedures. It is very simple, inserting a new clause further to Clause 15(2), which says that the powers that would otherwise,
“come into force on such day as a Minister of the Crown may by regulations made by statutory instrument appoint; and different days may be appointed for different purposes”,
Those are two quite clear conditions that have to be met. I beg to move.
Lord Purvis of Tweed
My Lords, I am happy to contribute to the successful realisation of the noble Lord’s ambition to have an amendment on commencement.
I want to make two final comments because I know the Committee has been working hard in offering scrutiny to the Bill, but before I do so I wish to thank the Ministers, and indeed the whole team, who have tried to answer on what was on some occasions an impossible situation. Earlier the noble Lord, Lord Bates, aptly commented on how fast things have been moving, and I think the Ministers have had a degree of sympathy from the Committee. However, this is serious. As the noble Baroness, Lady Neville-Rolfe, said, businesses need urgency as they operate. They need urgency in their day-to-day practices but also when it comes to knowing what the Government’s position is.
In advance of the next stage, if there is one, it is helpful that all the usual channels are here. I do not think the Committee needs any reminding of the decision of this House, very clearly stated, that greater information is needed on both the Government’s policy and intentions on how it sees trade agreements being put in place, as well as the relationship with the devolved Administrations. If that is not forthcoming, the House has sent a clear signal that there will not be a Report stage. However, on the basis that there will be, the information that is needed on the current position on the intended trade agreements needs to be forthcoming. There also needs to be clarity on—if we are going to be crashing out on WTO rules—the position of operating on non-certified WTO rules.
The relationship with the devolved Administrations, while a little clearer, needs more fleshing out. This is not just about constitutional courtesies with the Scottish and Welsh Parliaments and Northern Ireland authorities. Trade agreements could disproportionately affect parts of the United Kingdom, which will affect livelihoods and public services in those areas. They need to be not just consulted, but involved. Contrary to the Government simply wanting continuity agreements for trading relationships, we also want to see the rolling over of the same amount of parliamentary scrutiny that the European Parliament would afford trade agreements, which this Parliament will be denied unless this Bill is amended.
Finally, we need to be looking forward to the future. The noble Lord, Lord Lansley, and others, have made very constructive contributions. If we are to have a customs arrangement—which, if it covers the majority of our trade with our biggest market, will be a customs union—then the clarity about how that will be conducted will be important. While we are at the end of the Committee stage, I hope that the Minister has received strong signals that there are still questions that need to be answered. Those answers need to be forthcoming before this House will consider the Report stage.
Lord Hannay of Chiswick
My Lords, I am not sure that the noble Lord, Lord Stevenson, did me a great favour by alleging that I had partial paternity of this amendment, but I will leave that to one side. It is a very simple amendment, setting in statute the view that has been expressed twice by this House, by massive majorities, and once in the House of Commons last week: that leaving the European Union on 29 March by default without an agreement should be excluded. That is what this amendment proposes to do. It does not prevent this Act, as it would be, coming into effect in the event of the meaningful process being successfully completed in the other place. Nor does it do so if the other place should, in the extraordinarily unlikely circumstances, actually decide that we should leave without a deal. However, it rules out leaving by default as a condition for the entry into force of the provisions in this Act. No more needs to be said, and I have a feeling that we may wish to debate that rather more decisively on Report.
Lord Lansley
My Lords, I am speaking on behalf of my noble friend Lady Altmann, who is unable to be here and asked me to extend her apologies. I think she would have shared the view of the noble Lord, Lord Hannay, that Amendment 98 would not prevent our exit without an agreement, which is the default situation under the statute law as it remains, but it would certainly enable one to put into the equation consideration of the damage and chaos that would result if one were to leave by default without an agreement and without the statute book and continuity agreements being in place. Both Houses would have to think hard about that. It is a contest between different visions of what kind of chaos might ensue. Unfortunately, that is essentially where we are.
My noble friends on the Front Bench have done a grand job, not least in keeping us on track, wherever possible, in understanding the importance of getting this legislation into the right structure rather than being distracted too often and too far into discussion of Brexit. I think we agreed at Second Reading that the Bill is occasioned by Brexit but is not really about it; nor, technically, is it about the future processes and structures of free trade agreements. Their approach has enabled us to have what I think will be some interesting, positive and constructive discussions on Report, arising out of this Committee, when we can really focus on one or two specifics. My noble friends will have been given an indication of what kinds of considerations will be important to the House in thinking about free trade agreements as they come along.
Lord Hain
My Lords, I realise that the hour is late, but I rise to support Amendment 98, which would make it much more difficult for the Government to preside over a default no-deal Brexit, and to encourage the development of alternative strategies.
Due to the failure of the Government to develop a credible Brexit strategy, there is now a grave danger of the UK crashing out of the European Union on 29 March—in just over 50 days’ time—as the default option. This would have truly devastating consequences. However, because of the Brexit-related legislation already on the statute book defining exit day as 29 March 2019, it is possible that Parliament will not have the powers to stop it happening.
The amendment would therefore put a limitation on the commencement of the Trade Bill and provide that Clause 2(1), which gives the Government powers to implement international free trade agreements, can be implemented only on the condition that either: Parliament has approved a negotiated deal; the Government have requested an extension of Article 50; Parliament has approved a no-deal departure; or Parliament has voted for a second referendum. It would also offer your Lordships’ House a chance firmly to reject the possibility of the UK crashing out of the EU in a no-deal scenario.
The hard Brexiteers of the European Research Group, who assert that no deal would be an acceptable option, argue that Britain’s trade outside the EU is increasing at a much faster rate than trade with EU countries. However, this ignores the fact that measuring growth starting from a much lower base is always higher in percentage terms. They also fail to mention that trade with non-EU countries is not a binary choice and has been boosted by the EU’s own trade agreements with those countries, from which the UK benefits as an EU member—witness Germany’s spectacular trade increases with China, for instance. If noble Lords have any doubt about this, they should look at the website of the Department for International Trade. In the case of the recent trade agreement between the European Union and Canada, we read:
“UK trade with Canada up 14% since new free trade agreement introduced”.
This is a reference to CETA, the Comprehensive Economic and Trade Agreement between the EU and Canada, which was signed in 2017 after seven years of negotiations. EU free trade agreements with non-EU countries such as Canada, South Korea and Japan were negotiated with the leverage and weight of the 500 million-strong market of the whole EU, which the UK will lose after Brexit. Brexiteer fantasies about WTO rules ignore the complexity of the necessary reallocation of the UK’s share of EU tariffs and quota schedules, which will require difficult negotiations. They also disregard the application of rules of origin to UK goods trying to enter the EU market, which the Government have previously estimated could cost firms between 4% and 15%.
Baroness Fairhead
My Lords, I am delighted to allow the noble Lord, Lord Stevenson, to realise his ambition, but I also agree with the noble Lord, Lord Purvis, that this is important. Therefore, no torpidity is allowed, even at this late stage.
As this is the last group of amendments, I hope the Committee will indulge me with a short concluding comment, allowing me to record my appreciation to noble Lords who have taken part in all the debates. The quality and constructive nature of the engagement has been incredibly valuable—not just in the Chamber, but outside in meetings. I particularly thank the noble Lords, Lord Stevenson, Lord McNicol and Lord Purvis. On a personal level, I also thank the Bill team for some tremendous work, and my valiant and true noble friends Lord Bates and Lord Younger.
The Committee has provided us with a valuable opportunity to probe the detail of the Bill. It has also allowed all sides to listen to other noble Lords’ sometimes conflicting points of view. We now have some time in which to reflect on the views we have heard in these debates. We shall be using that time carefully, and I look forward to debating the Bill further on Report.
Before addressing the specifics of the amendment moved by the noble Lord, Lord Stevenson, it is important to outline the Government’s approach to leaving the European Union in the light of recent events in the other place. As this House is aware, the other place rejected the proposed withdrawal agreement and political declaration, with just 202 MPs voting in favour. However, following the debate last week, a majority of MPs have now said they would support a deal with changes to the backstop.
Combined with measures to address concerns over Parliament’s role in the negotiation of the future relationships and commitments on workers’ rights, the Government are now confident that there is a route that can secure a majority in Parliament for leaving the EU with a deal. The Government will now take this mandate forward and seek to obtain legally binding changes to the withdrawal agreement that deal with concerns on the backstop, while guaranteeing no return to a hard border between Northern Ireland and Ireland.
As the Prime Minister said, we acknowledge that there is limited appetite for change in the EU, and negotiating it will not be easy. However, in contrast to a fortnight ago, Parliament has made it clear what it needs to approve the withdrawal agreement. Tuesday’s vote shows that Parliament does not want to leave the EU without a deal, and the Government are therefore working hard to achieve one. The noble Lord, Lord Hain, eloquently talked of the importance of the EU trade deal.
However, simply opposing no deal is not enough to stop it, and the Government must now redouble its efforts to get a deal that Parliament can support. The Prime Minister has agreed to discuss the best way the Government can deliver what I would call the Spelman amendment.
The amendment to the Trade Bill here today would not prevent a no deal. The only ways to prevent a no-deal outcome are either with a deal or by revoking or extending Article 50, which is not government policy. The Trade Bill cannot therefore be used as a sort of proxy to prevent the UK leaving the EU without a deal. This amendment, or other tweaks, will not stop a no deal, but will simply increase the risks of a worse outcome in a no-deal scenario. We are clear that the very best way to leave the EU is with a deal and an implementation period, and that is absolutely the aim of this Government.
I also repeat that, although leaving with a deal which ensures an implementation period is our clear aim, any responsible Government must also develop contingency measures in case of no deal.
I turn to Amendment 98, tabled by the noble Lords, Lord Stevenson, Lord Hannay and Lord Purvis, and my noble friend Lady Altmann. I have welcomed the debate and your Lordships’ scrutiny of the Bill, which really underlines the value of this House. The challenge has been constructive, extremely helpful and underpinned by the genuine knowledge of so many noble Lords. The Government will reflect carefully on the points; we have committed to come back with proposals and will do so before Report. Having gone through Committee, I hope the whole Committee will acknowledge the importance of the provisions in the Trade Bill, and the need for any responsible Government to bring forward these provisions whether or not there is a deal with the EU.
As the Committee will be aware, the Trade Bill covers four important and essential areas to ensure continuity for consumers, businesses and our international trading partners. The purpose, as we said—I was trying to keep the number of repetitions low—is continuity. The Bill provides: powers needed for the UK to implement the GPA, maintaining the access of UK companies to some £1.3 trillion-worth of business, and to ensure that we get the best deal for taxpayers; powers to enable the UK to transition trade agreements that currently exist between the EU and other countries, and to which we are currently a signatory via our membership of the EU to prevent any disruption to UK businesses or our consumers; critical powers to establish a new UK Trade Remedies Authority to provide that critical safety net to protect domestic industries from unfair practices; and powers to collect and share data on trade. This will help us build a richer picture of UK trading patterns to help the Government identify new opportunities, and provide data to support TRA investigations. I hope the Committee will recognise that these are sensible measures and that any reasonable Government would be legislating in these areas in the light of our exit from the EU.
Last week’s vote in the other place shows us that Parliament does not want to leave the EU without a withdrawal agreement and future framework. Although I recognise the position of many in this House is not to leave without a deal, as I said at the start, this mandate from Parliament is not enough on its own to stop no deal. That is why the Government will now redouble their efforts to get a deal that Parliament can support. It is for those reasons that I urge the noble Lord to withdraw his amendment.
Lord Stevenson of Balmacara
I am grateful to the Minister for her kind words and the way in which she turned down our hope of a late but well-deserved goal. I always say to my colleagues that they must stop using sporting metaphors because they do not work for half the population of the House but here I am, about to refer to the second half. I am sorry about that.
In her thanks, the Minister should have also recognised herself; I will do it for her because I am sure she is too embarrassed to do it. It is almost impossible to believe that this is the Minister’s first Bill. She has handled us with considerable assurance and a wonderful sense of calm. Every time she rises it is a great balm to those who might otherwise want to cause trouble and do terrible things in a House which is noted for its civility and gentility. I do not know what the word is for sororal approaches—I will probably get in trouble for that as well. It has been a very good experience so far; we look forward to the second half—sorry about that. We think we can work together and there are things here we can work together on, and we should try to hammer out such agreements that we have. There may be differences—quite principled ones which we need to address—but I do not think we should worry about that; the House should be asked for its views on a number of points that we have covered in Committee. It has been a good experience and I am happy to withdraw the amendment.
Trade Bill
Wednesday 6th March 2019
(5 years, 8 months ago)
Lords ChamberRead Full debate Trade Bill 2017-19 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 127-R-I(Rev) Revised marshalled list for Report (PDF) - (5 Mar 2019)
19:44 - Division on Amendment 12 - Ayes: 215 / Noes: 168 - Amendment 12 agreed.
20:27 - Division on Amendment 13 - Ayes: 207 / Noes: 141 - Amendment 13 agreed.
The Minister of State, Department for International Trade (Baroness Fairhead) (Con)
My Lords, this House has debated many issues during the passage of the Trade Bill, none more important than the scrutiny of future free trade agreements. That was the subject of the Motion tabled by the noble Baroness, Lady Smith, seeking further details of the Government’s intentions in this respect. In response, last Thursday we published a Command Paper setting out further proposals for the parliamentary scrutiny of future FTAs. Those proposals drew heavily on the views put forward by Members of this House.
Noble Lords raised questions about Parliament’s role in future FTAs, the role of the devolved Administrations and legislatures, and public transparency. We listened, we considered carefully and we have acted. In particular, we hear concerns about transparency and scrutiny of negotiating objectives, transparency over negotiations themselves and the desire for Parliament to be involved at every stage of the negotiations and not just at the ratification stage. As a result, we have brought forward comprehensive proposals on public transparency and the role of Parliament and the devolved Administrations. I will not go into detail on those proposals now, as we will debate them fully during Report, but they give Parliament, and this House in particular, the reassurance that this Government are fully committed to effective parliamentary scrutiny and public transparency.
It is often said that no legislation passes the scrutiny of this House without being improved. From my perspective, this is unquestionably true here. Equally, it should be recognised that this House can and does influence and improve thinking beyond the strict confines of the Bills that pass through it. The Trade Bill focuses on continuity of existing trade agreements, but throughout its passage we have touched on issues of great importance outside of the scope of the legislative provisions before us and, as I said, none is more important than the scrutiny of future FTAs. It is perhaps not often that the Government welcome a Motion tabled by the Opposition on one of their Bills, but in this instance I can say that the Motion tabled by the noble Baroness, Lady Smith, served our common objective of ensuring that the scrutiny arrangements for future FTAs are robust, effective and informed by the passionate and expert Members of your Lordships’ House.
This Bill is essential to providing continuity and certainty for UK businesses as we leave the EU. I look forward to making progress on the Bill this afternoon and I beg to move.
Lord Stevenson of Balmacara (Lab)
My Lords, first, I thank the Minister for her efforts to meet the requirements of the Motion in the name of my noble friend Lady Smith of Basildon, who is unfortunately indisposed at the moment. I know that my noble friend keeps a beady eye on everything that goes on here, so she will have noticed the welcome given to her Motion, even though it was not quite so well received on the Government Benches at the time. Nevertheless, we are where we are and we have made some progress. It cannot have been easy for the Minister or the Government as a whole to get a White Paper prepared and laid in an atmosphere that is probably best not gone into and in the very short time available. It is a major achievement and we appreciate it. It is also clear that the Government’s thinking has progressed in recent weeks and we welcome much of the analysis set out in the White Paper.
As we all know, trade negotiations are complex and difficult. They should engage civil society and feed in the views of consumers, trade unions and companies. The negotiations require a proper and effective system, involving this Parliament and the devolved Administrations, in relation to the negotiating mandate, and feedback on the negotiations as they progress and the final agreements. We think that requires underpinning with a statutory framework so, in the absence of any government amendments covering these points on Report, and in view of the assertion in the White Paper that no legislation is needed to deliver the Government’s proposals, we have tabled an amendment setting out a possible scheme. It is on that basis that we are happy to agree with the Motion moved by the noble Baroness and proceed to Report.
Lord Purvis of Tweed (LD)
My Lords, like the noble Lord, Lord Stevenson, we welcome the Minister’s comments from the Dispatch Box. This is an occasion when parliamentary persistence has proved effective. We started this process when the Government had indicated that the Bill would be about only the existing continuity agreements and we made a very strong case, across all parts of the House, that it should also signal a direction of travel which, in many respects, would create precedent. It is on that basis that we on these Benches welcome the Command Paper that the Minister has published and her willingness to engage with and meet opposition parties and Members from across the House.
One reason this has been so important is that it has been a consistent practice of this Government, in relation to continuity trade agreements or starting discussions with countries about future trading relationships, to delude themselves that it will be easy, then deny that there is a problem when it is highlighted that they are difficult. Then they demur when frustrated officials leak information that allows us to glean the reality from the media. Then, unfortunately, on occasions, they deflect the problem, saying that is not their problem or responsibility; it is other countries that are not lifting the burden, or the European Union that is not being forthcoming with its position on a future relationship. We want to be in a position where we can put all that behind us and move on to a platform where we have much greater clarity as to what the trading relationships, and the role of Parliament and the devolved Administrations in their oversight and approval, will be. I welcome the Command Paper as the start of that.
To quote the noble Baroness, Lady Manzoor, from Question Time, this can be only the start of the process, and this is the platform on which we will seek to build. This is not the end. In that spirit, I hope the Government will be very favourable to Amendment 12 later today to ensure that that platform can be built on in the most constructive manner. On that basis, I look forward to hearing the Minister’s comments.
Lord Hannay of Chiswick (CB)
My Lords, as one of those who supported the amendment of the noble Baroness, Lady Smith, I thank the Minister for her efforts in the meantime and for the publication of the Command Paper, which is a useful production and provides greater clarity on the Government’s intentions.
I shall make two small points. First, this legislation really matters. It could be—I hope it will not be—that within three weeks we will have left the European Union without a deal, in which case the Bill, by then perhaps an Act, will be the basis for Britain’s future independent trade policy. So we need to get it right. On the issue of parliamentary oversight, mandating and scrutiny, the Bill currently before your Lordships’ House on Report contains not one word added in that respect to the version we saw in Committee. The problem is the Government’s unwillingness to put in the Bill the provisions described in the Command Paper. That is at the heart of the debate we will have on Amendment 12.
Baroness Fairhead
My Lords, with the indulgence of the House I should like to welcome the start of Report. A number of points were made on the preceding Motion, but I believe that they will be picked up in our discussions on further amendments over the course of the day.
I have listened carefully to the thoughtful contributions that this House has made on the Bill so far—not just in our debates, but in meetings I have had with a great number of noble Lords over the past few weeks. I look forward to continuing to benefit from the experience, expertise and knowledge of your Lordships, and the continuation of the constructive dialogue we have had so far.
Lord Kerr of Kinlochard (CB)
I would like to ask one question of the Minister. I welcome the White Paper; it is full of commitments to transparency. What will be the tariff regime of the United Kingdom for imports on 30 March if we have left the European Union on 29 March with no deal? We know what the European Union’s tariff will be against us—it is the one we are currently applying—and we know that two months ago the European Union sent out instructions to the member states on how to apply the common external tariff against United Kingdom goods in the event of a no-deal Brexit. As far as I know, however, we know nothing apart from rumour about the regime that British importers will pay. Could the Minister enlighten us?
Baroness Fairhead
As the noble Lord will be aware, the Government’s aim is to achieve a deal. As this House will also be aware, we seek to achieve some important agreements on or before 12 March. We are therefore not planning for no deal, which is not our preferred option. If and when that occurs, that would be the appropriate time to publish those schedules, but as I have said before on the Floor of this House our objective is to achieve an agreement, at which point we will move into the implementation period.
Lord Kerr of Kinlochard
I understand that that is the Government’s aim, but it is also the case that the Government have deliberately kept no deal on the table. British importers, businesses and farmers do not know what no deal means for them. Is that fair?
Baroness Fairhead
I understand the point that the noble Lord is making. As we have always said, we will seek to balance the protection of our consumers and downstream users from the possible price impact of no deal. The tariff regime will be subject to the approval of the House, and secondary legislation to give effect to the tariff will be laid in line with the Taxation (Cross-border Trade) Act 2018. The Government aim to secure a deal, so we hope that that announcement will not be required.
Lord Lansley (Con)
Before my noble friend sits down, I draw the attention of the House to Amendment 10, in my name and that of the noble Lord, Lord Stevenson, which relates to tariffs. It permits a debate of the kind that I think the noble Lord, Lord Kerr, was hinting that he wanted. It seems to me that we do not start on 29 March without a schedule. We have notified a schedule to the WTO, and it is in line with the EU’s external tariff. On that basis, we should talk about it later rather than now. We know where we start from. The issue is to what extent we might vary—that is, apply a rate of duty lower than the EU’s external tariff at some point after 29 March were we to leave without a deal.
Baroness Fairhead
I thank my noble friend for his clarification. That is indeed true but I think he will also accept that, if we were aiming to have a deal, we would not need to publish. If we got to a stage where no deal looked likely, clearly we would have to provide the information that he and the noble Lord, Lord Kerr, mentioned.
Baroness McIntosh of Pickering (Con)
My noble friend will be aware that the Secretary of State for Agriculture promised, at the NFU Conference more than two weeks ago, that the tariffs would be published. It would be immensely helpful for the House to have that information before us for the purposes of the Bill today. I wonder if there is a reason why the tariffs have not been published now.
Baroness Fairhead
I hope I have addressed that. Should no deal appear to be what is happening, they will be published. We are focusing very much on achieving a deal, so we do not feel that this is the right time to publish.
I thank all the noble Lords for their additional contributions. I look forward to debating these and other issues as we progress through Report.
Baroness Fairhead
Baroness Fairhead
My Lords, as this amendment touches on the GPA, I inform the House that the UK has formally received an invitation to accede to the GPA. This was agreed by the GPA committee at a meeting in Geneva on 27 February, and I am sure that the House welcomes that news.
Government Amendments 1 and 2 have been tabled to clarify that the powers in the Trade Bill may be used to modify retained direct principal European Union legislation. These amendments are very simple in nature. They make it clear that the regulations made under either Clauses 1 or 2 may, like the powers conferred under the European Union (Withdrawal) Act, modify retained direct principal EU legislation. This will allow qualifications to be made which make retained direct principal EU legislation workable in the context of a UK outside the EU.
Baroness McIntosh of Pickering
My Lords, perhaps there is a report from the Constitution Committee that would answer the question I am about to ask, but what is the concept of direct principal European legislation? I do not recall it being referred to—perhaps I should. Is it the main pieces of legislation? Could my noble friend be more specific?
Baroness Fairhead
My Lords, the concept of retained direct principal EU legislation is that of EU legislation that will come into UK law upon leaving the EU. This amendment will make a clarification to ensure that the same wording is used as in the withdrawal Act. Just for further clarification, because I asked it myself, saying “retained direct principal EU legislation” includes minor legislation.
Baroness Fairhead
“(5A) Regulations under subsection (1) may not be used to make provision which will have the effect of reducing standards in comparison to those applying immediately before exit day.(5B) Standards in subsection (5A) include, but are not limited to, those relating to—(a) marketing of agricultural products,(b) animal health, hygiene or welfare,(c) environmental protection,(d) food safety,(e) public health,(f) employment and labour,(g) human rights.”
Baroness Jones of Moulsecoomb (GP)
My Lords, I will also speak in support of Amendment 4, which I have put my name to.
I thank the Minister and her civil servants for meeting me to discuss my amendment outside this Chamber. She has been incredibly generous with her time, and I very much appreciate that. It is thanks to the meeting with the Minister and the constructive criticism from noble Lords in Committee that I have tabled this much refined amendment on Report.
The sole purpose of my amendment is to give legislative effect to the Government’s own policy, which, as I understand it, is that the Bill will be used only to roll over existing free trade agreements that we enjoy as a member of the EU so that we can continue to enjoy them after we leave. Rolling over means no renegotiation, changes in terms or reduction in standards. My amendment is a way of giving effect to the Government’s own policy. I am not looking to cause trouble here, nor to undermine the Government—for a change.
The problem with the Bill as it currently stands is that it does not give effect to this policy. The Clause 2 powers are much broader than they need to be, and would allow for a significant undermining of precious protections for our environment, workers’ rights, food safety and a whole host of other provisions. Clause 2(1) allows an appropriate authority to,
“make such provision as the authority considers appropriate for the purpose of implementing an international trade agreement”.
Clause 2(2) and (3) restrict the regulation-making power only to implement agreements with signatories which are already signatory to a trade agreement with the EU, but that is the only limit on the power. There is nothing to say that the terms of an agreement have to be the same or similar to the existing EU trade agreements. There is no reference to protecting standards and no limit on renegotiation, nor on implementing a totally new trade agreement. There is not even a time limit, or sunset clause, on how long into the future these powers can be used. Hundreds of years from now, a Government could implement a completely new trade agreement on the sole condition that the partner country had a deal with the EU before Brexit. If this sounds ridiculous, it is because it is. Clause 2 grants Ministers an incredibly broad, almost uncurtailed power to enact whatever trade agreements they negotiate.
At Question Time today, chlorinated chicken was mentioned with regard to trading with the USA. A Bryan Smith got in touch with me to say, “As a microbiologist, I can tell you for sure that washing chicken carcasses in bleach does not kill all salmonella. It forces the bacteria to form cysts which can hatch later. It is much harder to detect in this form, so it hides the problem”. I used to joke that it was just as well that chickens were chlorinated because at least they were clean. In fact, they do not now use a chlorinated wash; they use other substances—for example, peracetic acid. This is an organic peroxide—a colourless liquid—and it can be highly corrosive. The practice is not dangerous in itself but it might hide poor farming hygiene practices. Other animal welfare issues are very concerning, such as stocking density, sow stalls, animal transport, antibiotic use, veal crates, battery cages, debeaking, tail docking and castration. We could be subjecting our food to these practices and people to whom I talk outside this House are absolutely horrified.
The Minister told the Committee that none of this mattered because the European Union (Withdrawal) Act brought all European standards and rules into UK law. They say that everything is fine; everything is protected. This is completely undermined by Clause 2(5)(a) which allows the Minister, by regulations, to modify,
“retained direct EU legislation or primary legislation that is retained EU law”.
So the Government, having incorporated all EU law into the withdrawal Act, would have the unrestricted power to tear it all up in order to implement whatever terms they agreed in these trade deals. The Government’s assertion that the withdrawal Act resolves all my concerns could be correct only if Clause 2(5)(a) were removed from the Bill or curtailed by restrictions, such as those in my amendment.
The truth is that we are not protected by retained EU law at all because the Bill allows the Government to scrap it in the interests of trade. The only protection left is the assertion from the Government that they will not use the powers in the Bill to undermine our prevailing standards. This is not good enough. If the Government are not going to use the powers, as they have promised they will not, my amendment will not make the slightest difference. It would cause a problem for Ministers only if they go against their promises and try to undermine prevailing standards when incorporating a trade agreement. We must not allow this to even be an option.
I have tried to draft my amendment in the simplest possible terms. This is for my own reference and not because this House in any way lacks understanding. The amendment uses as reference all the standards which apply immediately before exit day—the existing standards on which current trade deals operate. Some trade deals might have higher standards than others, so my amendment is designed to allow whatever level exists in each specific trade deal to be rolled over. The Government have a problem only if there is any reduction in standards in the rolling-over process. This is a much more restricted approach than I would have liked. Amendment 4 expands on it and could be much more powerful. I have gone to great lengths to develop an approach that can be supported by noble Lords across your Lordships’ House, and even be accepted by the Government. Personally, I should like much higher standards, but I am compromising here, which is not easy.
The Bill gives far too much freedom to Ministers to change the law and undermine our precious standards on a whole range of issues. The Government’s promises and ambitions will easily give way to the harsh reality of trade negotiations. By that point, it will be too late for Parliament to reject whatever deals are made. Your Lordships’ House must put a backstop on the Government’s promises, so that these trade deals cannot be renegotiated in a way which would undermine any of our prevailing standards. My amendment will achieve this. I beg to move.
Baroness Henig (Lab)
My Lords, I have put my name to Amendments 3 and 4 and speak in support of the noble Baroness, Lady Jones. We had a wide-ranging debate in Committee about standards and Members from across the House argued that we should not allow standards to fall in a whole range of important areas, as outlined in the amendment. The Government’s reply was to agree in principle. The Minister said at the time that the Government were committed to high standards and that they were the right policy for the country, but that they should not be written in the Bill. When asked why not, she was unable to give a convincing reply.
It is essential that we take this opportunity to ensure that existing standards in a number of areas cannot be lowered as a result of the Bill and that that is made explicit in the Bill. One reason for that comes down to the issue of trust. In 2017, the Trade Secretary promised that the United Kingdom would not lower the standards. He said:
“We have made very clear we are not going to see reductions in our standards as we move forward, partly because British consumers wouldn’t stand for it”.
But at the same time, the self-same Trade Secretary has prioritised a trade deal with the United States. It is no secret that the prime aim on the United States’ side will be to negotiate lower food standards with the United Kingdom to enable their food products to flood in to the UK. There is no secret that that is their ambition.
Asked about this last weekend, when asked about food standards, the Trade Secretary replied:
“The question is not about safety”.
This is a bigger issue than the safety or not of a way of preparing food, which is also subject to rules at the World Trade Organization: it is about the decisions we make between the EU and United States approach to regulation. It is about the barriers to trade that that may impose, the impact on our producers and, most of all, the level of trust over trade policy.
The absolute worst way to make significant changes would be through the power under the Bill, because that would cause huge resentment and distrust of United Kingdom trade policy, which would damage our long-term prospects of achieving consensus and wide support for trade deals in future. As the noble Baroness, Lady Jones, points out, under the Bill, the Government could make any change they liked to any regulations as long as it was relevant to implementing a trade agreement and that tariff changes are handled by another piece of legislation. Let us take the much cited chlorinated chicken, which she mentioned, beloved of the United States.
Lord Lansley
My Lords, surely the point is that the Bill relates only to agreements in place before exit day. There is no agreement on chlorinated chicken or with the United States, so any such argument is irrelevant to the Bill.
Baroness Henig
The noble Lord is clearly prescient, because I am just about to cover the very point he raises. As I said, let us take the question of chlorinated chicken. There is nothing to stop Ministers making that change in implementing existing trade agreements. For example, perhaps Mexico would want us to declare that we will accept chlorinated chicken in return for continuing our trade agreement. There is nothing to stop a country with which we have an existing agreement asking for that in future as a part of the rollover, which is what I think he was asking about. Slightly more far-fetched, perhaps, there may be a change of Minister. Perhaps the current Secretary of State for Transport takes over at trade and makes the change by mistake. Who knows?
That is why it is so important to agree the amendment. Major changes in standards in all these important areas should not be covered under the Bill: they need to be fully discussed in terms of our future trade relationship with the United States and the EU in the light of the terms under which we depart from the European Union and with the involvement of a wide range of businesses, trade associations, producers, consumers and local communities. The Bill should not allow a departure from standards, and that is why I put my name to the amendments.
Baroness McIntosh of Pickering
I am delighted to follow the noble Baroness, Lady Henig, and thank her, the noble Baroness, Lady Jones of Moulsecoomb, and the noble Baroness, Lady Brown of Cambridge, for their support for the amendment in my name. Since we last met in Committee, there have been two positive developments. One is the fact that the Government have published their report on the implications of no deal for business and trade. The second is the promise to publish the tariffs.
Lord Purvis of Tweed
My Lords, we now know for a fact that only a tiny fraction of those rolled-over trade agreements to which we are a party and will have ratified before exit day will be considered continuity agreements. The reality is that within a short period of time—a number of weeks, in fact—we will not be able to rely on the fact that our existing trade agreements will be considered as continuity agreements. The noble Baroness, Lady Henig, is absolutely right that, for the vast majority of the agreements we enter into prior to exit day, there will have to be a degree of certainty as to the underpinning, replicating or agreement of standards after exit day.
In many respects, the only continuity agreements that will exist are those we will have ratified before exit day, which is a tiny fraction of those that exist. Everything else will be, in effect, a trade deal. The concern is that the Government may choose to use the regulatory framework in this Bill rather than the CRaG procedure in making treaties. It is absolutely right that in this Bill we should have a degree of legal underpinning of the standards to which we are now a party and which we wish to see continued after exit day.
In Committee there were a number of amendments from me, my colleagues on these Benches, the noble Lord, Lord Stevenson, the noble Baronesses, Lady Henig and Lady McIntosh, and others. I am happy that this has coalesced around a cross-party amendment and I look forward to the Government’s response. On exit, we are looking to baseline the standards that already exist. It is necessary to maintain these standards in any of the agreements now that we are likely to carry forward—which can be permanent. Regulations made under this Bill would last for three years, but could be extended for a further three years and then a further three years. The lifetime of the regulations could become very long indeed.
As much as the Government say there is no difference in them as they are simply continuity and will not include any of the contents, that is merely a statement of policy. As we just heard on tariff policy, we know what schedules have been submitted to Geneva. However, we now know that if there is a likelihood of no deal, potentially there will be a revision to the schedules put forward by the Government. We cannot rely simply on the policy of the Government: we must rely on the legislation being clear.
We already know through the EU Select Committee of this House that there are some differences in the agreements that have already been signed beyond legal terminology. We know that interpretation of text can sometimes be as important as the text itself when it comes to trading relationships. That is why I have lodged Motions to debate each of the three deals that have so far been agreed, so that the Chamber has an opportunity to look at them. The noble Baroness, Lady McIntosh, and others will, I am sure, want to take part in a debate on the Faroe Islands agreement and others. I have had to lodge the Motions to debate those agreements because the Government did not intend to do so. The EU Select Committee report said it was “bizarre” that the Government chose not to bring those agreements at least for consideration in the Chamber. However, they will be debated because I have ensured that. The Minister, who has expressed openness and transparency all along, was seemingly content for there to be no debate on those agreements—the only ones that we are likely to have, with the addition of Switzerland in the next week or so. That is regrettable.
With regard to the amendment, the Minister may say that she has difficulty with the words “reducing”, “standards” and, in particular, “animal … welfare”. Proposed new paragraphs (a) to (g) are reasonable areas in which we have current regulatory standards as a baseline that we wish to protect. The Government should have no problem in accepting proposed new paragraph (f) on labour rights. The Prime Minister seems to have accepted it as regards guaranteeing employment and labour rights, and I would be surprised—putting it lightly—if, the day after the Government said a “lock” would be put in place to guarantee the future of these standards, they opposed an amendment that secured those standards’ continuity.
If the Minister says that she is concerned about the word “reducing”, she need not be. We have well-established systems of oversight through the courts to consider whether the current regulatory regime for standards is being upheld. The Government seem content with their approach on migrating such existing laws into domestic law so it should not pose problems for civil society groups or any interested parties to consider whether or not standards are being reduced. In the amendment, we are stating that they should be upheld in the implementation of any new agreements by virtue of the continuity agreements being new treaties. That is reasonable.
The Minister should also be content with the use of the word “standards”, as this is commonplace. Indeed, that is clear in, for example, the Air Quality Standards (Amendment) Regulations 2016, which this Government brought forward and Parliament passed. None of those areas should pose them any difficulties.
The Government also seem to have been opaque in recent days about animal health, hygiene and welfare—the point made by the noble Baroness, Lady Henig—and whether it is necessary to continue these approaches when we engage in trade agreements. In many respects, this is the litmus test for how the Government will approach the discussions. The Secretary of State’s rather glib comparison on television at the weekend between the process of surface-washing salads with chlorine prior to packaging and its use as a decontaminant in the United States as a replacement for good hygiene practice at farm level and in slaughterhouses, thereby directly masking poorer hygienic practices, was utterly misleading. He should not have said that. The EU, with full UK support, has made it clear that good hygiene practice is a prerequisite to the application of hazard-based controls, and that these are an essential element in any discussion on market access for such animal products.
Lord Lilley (Con)
I am grateful to the noble Lord for pointing out the distinction between whether chlorine washing is bad for our health or masks the different treatment of animals during their lives. Is he saying that chlorine washing is not bad for our health, whether it is used on fruit from the EU or animals from the US? He and others have been using the issue as a scare to make us think that our health would be put at risk by having things rendered salmonella-free by this kind of treatment, whether by the EU or the US.
Lord Purvis of Tweed
It is a shame that processes do not allow interventions on interventions. When have I said that this is a health risk? When has the noble Lord heard me say that? He intervened on me and said “he”, as in “me”.
Lord Purvis of Tweed
I am grateful for that. The point I am making is that the EU, with full UK support, has had a consistent position on the use of chlorine on chickens—that it should not be used to mask the lack of hygiene on farms and in slaughterhouses. The separate issue of the effect of its use on public health is, and always has been, a moot point which the European Union has always recognised, and that is why it has consistently commissioned a number of reports. The final conclusion from those reports, which the EU and the UK have relied upon, has come from the World Health Organization, which has said that, as far as the use of chlorine in agriculture is concerned, the current position is the one to be maintained, because the primacy is that the United States, as a policy, uses it to mask poor hygiene practices in farms and slaughterhouses. When it comes to trade and the trading of goods, that is the critical aspect, and that would be reflected in a trade agreement.
Lord Garnier (Con)
What else does the noble Lord have in mind in proposed new subsection (5B) when he uses the expression,
“but are not limited to”?
Lord Purvis of Tweed
As the noble Lord will know, we have engaged in a number of legislative standards across all the different aspects of the British economy. If they are not captured in proposed new paragraphs (a) to (g), which we believe to be comprehensive, and if there are some elements of the economy where legislative standards currently exist and we would consider them to be of equal status, there is a requirement for them to be protected. That is why these are baseline standards. If areas are excluded, they will be captured by “not limited to”. The list of standards is not necessarily designed to be open-ended; these are meant to be the existing legislative standards that are already on the statute book that we wish not to be impacted by any of the regulations that could be made through this legislation.
Lord Stevenson of Balmacara
My Lords, we have had a very good debate on an important and long-lasting topic which we need to draw to some form of conclusion. We have before us two amendments that cover the ground very admirably, although their approaches are rather different. Indeed, the essence of what we are trying to get at may become a little masked in the timing. That last exchange is a good example of the way in which aspiration, interests and enthusiasm can sometimes lead us to a position where the drafting does not support where we are trying to go to.
We should be clear that there is support around the House for putting into the Bill at an appropriate place a clear and unambiguous statement which reiterates what the Government have said on a number of occasions—and we will probably hear again in a few minutes when the Minister responds—that they are committed to not lowering domestic standards in the EU agreements that are transitioning into bilateral agreements or in any future trade agreements that they wish us to enter into. If we can hold on to that and find the appropriate words rather than the ones before us, which need to be merged if we are to get the best out of this, we might make a way forward. I hope the Minister will give us hope that there will be the opportunity for further meetings and discussions on this issue. It is worth trying to go the extra mile to get us to a point where, by Third Reading, we have an agreed procedure.
The noble Lord, Lord Purvis, was right to try to drill down into some of the points that may need to be bottomed out. I will not repeat where there are difficulties but simply acknowledge that we need to be clear about whose standards we are talking about, where they are to be found in current statute, how they apply to UK interests and how they are limited in what they might say to any future Government about third-party Government arrangements, which are clearly not right.
Another point is to pick up how the WTO and other international agreements and treaties that we make covering the list in subsection (5B)(a) to (g) would fit best in a statutory form. That is the way that we need to go. I therefore hope that all parties will accept that this is not the time to force through either of these amendments but to come forward with an agreed position, if we can, in time for Third Reading.
Baroness Fairhead
My Lords, I appreciate the attention that this House has paid to the vitally important issue of standards at each of the Bill’s stages, and for the amendments tabled by the noble Baronesses, Lady Jones of Moulsecoomb, Lady Henig, Lady McIntosh of Pickering, Lady Brown of Cambridge, and by the noble Lords, Lord Stevenson of Balmacara and Lord Purvis of Tweed. I also thank their Lordships for the productive meetings that we have had on the subject.
The Government, like your Lordships, do not want and do not intend the strong environmental protection, food safety, and animal welfare standards that the UK is proud of to be lowered once we leave the EU. As I mentioned in Committee, the Prime Minister and Ministers from across government, including Defra and DIT, have made public commitments to the maintenance of the current protections and offered many assurances that we will not lower these rigorous levels of protection in order to secure trade deals.
Let us not forget that, first and foremost, our policy is one of continuity. We seek to carry over the effect of the existing EU agreements. Our trade continuity programme is rooted in our desire to deliver consistency to businesses and consumers as we leave the EU. This approach has been widely endorsed by partner countries, businesses and Parliament. The International Trade Select Committee report in March 2018, for example, stated:
“Almost no one who contributed to our inquiry suggested that the Government’s policy objective of seeking continuity was the wrong one”.
In relation to standards, I can confirm that, under the provisions of the EU withdrawal Act, we will start at a point of maintaining the high standards that we have benefited from as an EU member. This provides us with a strong basis to build on in future. This includes those provisions that the House will be aware of on chlorinated chicken or hormone-treated beef, which will not be able to enter the UK market. The UK has already transposed the relevant EU Council directive into UK law prohibiting the use of artificial growth hormones in both domestic production and imported products. This is now UK law. No products, other than potable water, are approved in the EU to decontaminate poultry carcasses, and this will still be the case in the UK when we leave the EU. EU food safety provisions will come across through the European Union (Withdrawal) Act 2018, where they will be enshrined in UK law.
The noble Baroness, Lady Jones, raised an issue about the unlimited duration of this clause. I would just like to clarify that there is a sunset clause for this power: unless it is extended by both Houses of Parliament, it will expire three years after exit day. That is set out in Clause 2(7).
I turn to the issue of reducing standards in future trade agreements. Our future trade agreements provide us with the greatest opportunities for the UK to develop its global trading position. The demand for UK goods, as I have seen first-hand, is based heavily on our outstanding reputation for quality and the British mark of excellence. The Government have no intention of harming this reputation. Indeed, we intend, as a minimum, to maintain the standards that we currently have, which are set out in our primary and subordinate legislation, and the high standards that we have led on maintaining as a member of the EU. We will continue to retain these as part of the retention of EU legislation, as we exit the EU, through the EU withdrawal Act. The desire to maintain the high levels of standards that we enjoy in the UK is therefore at the heart of the Government of this country and, more than not planning to reduce those standards, we have a strong policy of ensuring that those standards are maintained.
The noble Lord, Lord Purvis, raised a point about the WTO schedules and the fact that we are already suggesting that we might change them. I want to clarify that our WTO schedules will not change. These set out the maximum tariffs that the UK would impose. The UK, like any country, remains free to impose lower tariffs than those set down if it so chooses.
On Amendment 3, I thank the noble Lords for their amendment and for my conversations with them on this important issue. I fully understand the sentiment with which the amendment is laid and have already reiterated in my response the Government’s strong commitment to maintaining standards as we leave the EU. However, we feel that the amendment as currently drafted is problematic for a number of reasons.
First, the amendment comes with some uncertainties as to its scope. The term “standards” does not have a single legal definition which can easily be called upon. Any legislative commitment not to lower standards would need to make crystal clear what regulations are in scope. This amendment does not, and instead requires the Government to report against an open-ended list of potentially relevant standards, as my noble and learned friend Lord Garnier highlighted. This would require the establishment of a process to determine what constitutes “standards”, not only in each of the listed groups of standards but beyond. Outcomes of this process could then be easily questioned in a court and, until a court ruled on the matter, they would simply be the Government’s own assessment rather than legal certainties.
Secondly, on the notion of “reducing” standards, how the Government would prove that they were or were not reducing them would be problematic. This contains a degree of subjectivity, which would create considerable legal uncertainty if it were to be added to the Bill. Again, the term “standards” can mean a voluntary, best-practice way of doing something. Standards are often not set by Governments but developed by consensus among relevant stakeholders. Of course, there are minimum levels of safety, quality and environmental protection—for example, where voluntary approaches are not effective. These rules and regulations are mandatory and enshrined in our laws, which, of course, are subject to parliamentary approval.
We sincerely believe that the best way to influence standards in other countries is to forge strong trading relationships where we can positively influence those countries through the reputation of UK businesses. Through such relationships, we can insist on the proper treatment of workers and their rights, so that UK consumers are assured that the products they buy from reputable UK businesses are from suppliers whose practices those businesses have assured. In order to achieve that, we need to have trade agreements in place.
On human rights, which are referred to in paragraph (g) of the amendment, noble Lords will recall that the Government have already reaffirmed that the UK is a signatory to the ECHR and will continue to uphold human rights in the UK under the Human Rights Act. The Clause 2 power cannot be used to amend the Human Rights Act, and it would be unlawful for any regulation under the Trade Bill to be incompatible with the rights enshrined in the ECHR.
Baroness McIntosh of Pickering
I have been looking at the continuity agreement reached with the Faroe Islands. I understand that it could potentially result in an implied annual increase in total duties of up to £11 million. It goes on to say that that is unlikely to be true, but I wonder: will there be scope to discuss these continuity agreements—as the noble Lord, Lord Purvis suggested? Perhaps we could do so in an afternoon session and take them all together. This agreement raises issues which will be of interest to the House.
Baroness Fairhead
My Lords, as I tried to explain, the Motions laid by the noble Lord, Lord Purvis, will be dealt with in the usual way. We look forward to those further discussions taking place.
Lord Purvis of Tweed
I may be able to help the noble Baroness. I am grateful for the response from the Government Whips’ Office and its suggestion of tabling time for these to be debated. I will not pre-empt these exciting debates on Faroe Islands fisheries, but they look likely to happen next week.
Baroness Jones of Moulsecoomb
My Lords, I thank the Minister for her response and her promise to bring this back at Third Reading, so I will not go through any of the arguments again. The sunset clause, however, is not secure, simply because Clause 2(5)(b) allows Ministers to scrap it by statutory instrument. It is not, therefore, secure, and that is a matter of concern to me.
However, in the interests of even more co-operative working—and I thank the noble Lord, Lord Stevenson, who has worked very hard, along with the Minister—I beg leave to withdraw this amendment, on the assumption that we will return to it at Third Reading.
Lord Judge
“( ) Regulations under subsection (1) may not create or extend criminal offences, impose fees, amend primary legislation other than retained EU law, or create new public bodies.”
Lord Judge
My Lords, this amendment has very little to do with trade as such, but it raises a constitutional issue. If you looked at those supporting me on this amendment, you might even think that this is a bit of a geeky constitutional issue. It is not. All three of us are members of the Constitution Committee. We speak on our own behalf but feel it essential to draw the attention of the House to what we believe to be a total misunderstanding of the purposes of Explanatory Notes.
The misunderstanding arises in this way. Under the Bill, Clause 2(5) provides the regulation-making powers that may—forgive me for underlining this—among other things, “make provision”. Then there are paragraphs (a), (b), (c) and (d); paragraph (d) is about the penalties. We also looked at the Explanatory Notes. I wonder how many of your Lordships have recently looked at the front page of Explanatory Notes any Bill. I will read parts of them:
“These Explanatory Notes have been prepared by the Department … in order to assist the reader of the Bill and to help inform debate on it. They do not form part of the Bill and have not been endorsed by Parliament”.
I do not suppose that a single Member of the House is surprised by that because, constitutionally, it is impeccable. The Explanatory Notes do not form part of whatever legislation may at some future date be enacted by Parliament.
Faced with the wide-ranging regulation-making power, and that assertion in the Explanatory Notes, can we look at the Explanatory Notes themselves? Paragraph 59 —I will not read the first part—in unequivocal terms says that:
“Subsection (5) does not allow for regulations to make or extend criminal offences, charge fees, amend primary legislation other than retained EU law, or create new public bodies”.
The Constitution Committee produced a report on this that expressed some concerns. Noble Lords may remember that in the EU withdrawal Act there was an absence of safeguards, but eventually—through the efforts of Members of this House—safeguards were put into it that prevented the use of delegated powers to impose or increase taxation and fees, to create a relevant criminal offence, or to establish a public authority. That was the step. The Constitution Committee then looked at the provision in relation to subsection (5), to which I have referred. The committee noted that the Explanatory Notes contained the assertion that the Government were not interested in the worrying provision for creating criminal offences and the like, but that this was not stated in the Bill. The committee then pointed out what subsection (5) extends to and recommended that the Government introduce an amendment to include in the Bill the restrictions on the use of the Clause 2 powers set out in the Explanatory Notes. That is what this amendment is designed to achieve.
There is something rather strange about this. You win some, you lose some. If you lose, you come to the House to ask the House to look at it. In a sense, that is what I should do. However, a more important issue has arisen in relation to the response of the Minister, who in effect is saying, “Look, there is nothing to worry about—what are you getting so concerned about? Just read the Explanatory Notes. That is all you need”. Lest you think that I am exaggerating, let me read the words:
“we believe that the explanatory notes to the Bill, which explain the purpose of the provisions contained in the legislation, is the most suitable document to outline the restrictions to the use of the clause 2 power”.
In other words, the issues which were raised as being of concern to the Constitution Committee, and which were referred to in the Explanatory Notes showing that the Government did not wish to have the powers that would have been troublesome, were simply to be found by looking at the Explanatory Notes. That is a troublesome approach to these issues. As I am aware, it is new: “Look at what the regulations do not contain and you’ll find that in the Explanatory Notes”. It seems a rather strange way of going about legislation.
The letter from the Minister was followed by a reference to an observation by a former Law Lord—who sadly is no longer with us, the highly respected Lord Steyn—based on a decision of the House of Lords called Pepper v Hart in which it is said that he allowed for the possibility of looking at Explanatory Notes in exceptional circumstances. I would argue that that was not as an aid to construction but in effect to say, “If the Executive have said this, you can draw that to our attention while we resolve the issue”.
Pepper v Hart is a troublesome case. Perhaps I may summarise what it is meant to mean in the following way—hopelessly inadequately in view of the presence of some noble and learned Lords here. It means that you can look at what has gone on in the House if the legislation itself is unintelligible. Legislation should not be unintelligible; it should be intelligible. At this stage when we are looking at this legislation, if it is not, we should make it so.
On how far Lord Steyn went about allowing for examination of Explanatory Notes, if it offered a diminution of the principle that Explanatory Notes are not, never were meant to and never should be treated as a legislative provision, I say with great respect to Lord Steyn that I think he got it wrong. I do not believe that that was what he was saying, but if he did it is wrong. We surely must not countenance the arrival of a pernicious new form of legislation, the Explanatory Note. We have enough trouble with guidance. Guidance is a seriously problematic source; it sort of hands over power to the Executive, but at least when we do that we have listened to the debate, have decided that that is the right way to approach the problem and have legislated accordingly. In relation to Explanatory Notes, there has never been a debate; there has never been anything. This comes from the department. The department tells us what the department thinks it wants. It cannot possibly be a guide to what we in this House or in the other place decide that the legislation should be. But we will now look at the department’s own Explanatory Notes to decide whether a provision which is an important safeguard against regulations creating criminal offences, imposing fees, amending primary legislation or creating new public bodies should be found. It is a constitutional absurdity. I beg to move.
Lord Garnier
My Lords, if the noble and learned Lord, Lord Judge, thought that his thinking was inadequate compared to that of Lord Steyn, it is the only inadequate thing that he just said. I rise briefly to encourage him in his arguments and to encourage the Government to understand that it is not only on the Cross Benches and on the Liberal Democrat Benches that the concerns that he has expressed can be found.
I want to look at Clause 2 through the lens of Amendment 3A, because it gives both United Kingdom Ministers and devolved Administration Ministers the power to make regulations that make provision among other things to modify primary legislation and impose penalties, as the noble and learned Lord, Lord Judge, pointed out.
Lord Pannick (CB)
My Lords, I have added my name to this amendment because I share the concern expressed by the noble and learned Lord, Lord Judge, that it is simply not appropriate for Explanatory Notes to be used as the means by which overbroad powers enjoyed by the Minister are to be confined. I will add one point, however: the Minister gave an answer to the concern that we are all expressing. The answer was given in a letter on 19 February to the noble Baroness, Lady Taylor of Bolton, the much respected chairman of the Constitution Committee. In her response to the Constitution Committee’s report, the Minister suggested that the courts would apply a well- established legal presumption that, if powers were intended to be used for any of the purposes set out in the amendment, there would have to be an express reference to that effect in the legislation. Indeed, the Minister also expressed concern that this amendment, if accepted and written into the Bill, would undermine this legal presumption in relation to other legislation that does not include an express reference to these limitations.
My concern about that argument is that these powers are being conferred in this Bill in a Brexit context. The Minister’s letter emphasises that the Government are going to use the Clause 2 powers only to implement obligations and agreements that seek to provide continuity in respect of those already signed by the EU. My concern is that in this specific legislative context it might be said that when a Brexit Bill of this nature does not contain these express limits on the Minister’s powers—the limits set out in the amendment—it should be contrasted with Section 8 of the main Brexit Act, the European Union (Withdrawal) Act, which expressly contains restrictions that are similar but not identical to these limitations. It is my concern that such a contrast might be drawn in this context.
The noble and learned Lord, Lord Judge, made the important point that the Pepper v Hart principle is a troublesome one but, if the Government are not going to accept this amendment, at the very least it would be helpful for the Minister to give the House the clearest possible response to it, in the terms set out in her letter—that the Government understand that the powers in Clause 2 do not extend to the sensitive issues—so that her comments could if necessary be relied on in court proceedings under the Pepper v Hart principle.
Lord Hope of Craighead (CB)
My Lords, we should be very grateful to the Constitution Committee for drawing our attention to this matter, which might otherwise not have been observed. I shall add just a few short points to those that have been made. The first is to stress the importance of the words in subsection (5), to which the noble and learned Lord, Lord Judge, drew our attention:
“Regulations under subsection (1) may, among other things, make provision—”.
It is the words “among other things” that cause me concern. They appear in the Healthcare (International Arrangements) Bill as well: they seem to be a feature creeping in to this kind of legislation, which is quite disturbing. If we find that phrase, I suggest that we have to be even more exacting in setting out the qualifications to the power, otherwise the words “among other things” may be used to expand the power in a way that we have not foreseen. It is really very important, as the noble and learned Lord, Lord Judge, pointed out, that we take those words into account in what we make of this amendment.
My second point is to reinforce what the noble Lord, Lord Pannick, said about the comparison between Section 8 of the European Union (Withdrawal) Act 2018 and what we have now, in reply to the point that we do not need to be concerned about that, because express provision would be needed for a regulation that sought, for example, to create a criminal offence. These exceptions, or almost exactly the same ones, are expressly set out in Section 8(7) as,
“regulations … may not … impose or increase taxation or fees … create a relevant criminal offence … establish a public authority”.
If it was thought appropriate to put those qualifications in that very important subsection, which does not contain the words “among other things”, I should have thought it was all the more important to have them here.
My last point is made with reference to the point made about Lord Steyn’s use of Explanatory Notes. I had the privilege of sitting with Lord Steyn for a number of years and of discussing with him how Explanatory Notes might be used. I do not think that at any point in our discussion he suggested to me that Explanatory Notes could be regarded as a form of legislation or its equivalent—certainly not. He was referring to them as a means of understanding ambiguities in legislation; he thought that one could look to the Explanatory Notes to understand the legislation one was seeking to explain. That was his point, and it was made in a number of cases where I agreed with him. It would be a mistake to think that he was embarking on something outside the normal use of Explanatory Notes, which is to explain but not to legislate. For these reasons and the others mentioned, I warmly support the amendment that the noble and learned Lord has brought to our attention.
Lord Beith (LD)
My Lords, I do not need to add to the masterful laying out of the reasons for the amendment by the noble and learned Lord, Lord Judge, or to what was said by the two Members who have just spoken—particularly the noble and learned Lord, Lord Hope. But I will refer to the consequence of going about the matter in this way. Lord Steyn’s judgment does not place any obligation on the courts to have a habit or practice of referring to Explanatory Notes—it is entirely up to the courts whether they choose to do so—but, if the Government persist in this interpretation, which appeared to us for the first time in a letter from the noble Baroness, it says to parliamentary draftsmen and departments, “Don’t worry about ambiguity; there are the Explanatory Notes and we do not have to get those through either House”. It is an invitation to careless and sloppy drafting; it is an invitation to leaving open a possibility that the Government may not want to specify at this stage, but might be useful at a later date, when the Explanatory Notes would be relied on for a purpose that I do not think Lord Steyn intended. I was quite shocked to find this interpretation of Pepper v Hart coming into the Government’s responses to the Constitution Committee. We need to squash it pretty quickly, before it influences the habits of departments and parliamentary draftsmen any further.
Lord Wilson of Dinton (CB)
My Lords, I offer a footnote in support of noble and learned Lords and the points just made. It should be remembered that Explanatory Notes were for many years produced by officials to brief Ministers on what the Bill meant. They were usually classified—because we used to classify things. Occasionally, when Ministers were having real difficulty explaining a clause to either House, in a kind of noble gesture they would hand over their Explanatory Notes as a way of trying to get their opponents on side. That is the history of this. The idea that, with the slow creep of the Executive’s power, they are becoming a form of legislation of their own is appalling. I can only support very strongly what has already been said.
Lord Mackay of Clashfern (Con)
My Lords, I suppose I ought to take some part in this discussion. I hope to do so briefly, because I was a strong dissenter, on my own, against the decision in Pepper v Hart. I did not believe it was right to allow extraneous matters to be taken into account in construing an Act of Parliament. That Parliament had used the words, and that some Minister had said something in explanation, should not, to my mind, be used to deal with ambiguity. However, I was overruled then, and I am waiting for that judgment to be overruled in due course. Certainly, that judgment does not include statements not made in Parliament by people who are trying to say what they want to happen in the Act of Parliament, and the Explanatory Notes in no sense come within the judgment in Pepper v Hart. I have no doubt at all that the correct way to restrict a power to impose penalties is by putting the restriction into the Bill.
Baroness Fairhead
My Lords, I thank the noble and learned Lord, Lord Judge, and the noble Lords, Lord Pannick and Lord Beith, for tabling this amendment and for highlighting what is clearly an area of genuine concern—not just from them, but from the Constitution Committee.
I start by reassuring the House that the Clause 2 power will be used only to implement non-tariff obligations of our continuity trade agreements. For example, we will have to implement procurement obligations in several of our agreements, including the Chile agreement we signed recently. Without the Clause 2 power, we would not be able fully to implement such obligations under these agreements.
I stand before this House not professing to match in any way the legal brains and experience of noble Lords—and, indeed, noble and learned Lords—but I will give the Government’s position. Explanatory Notes are always admissible aids in the construction of an Act. Exceptional circumstances, as in the Pepper and Hart case, are not required. Indeed, I am asked to refer to the House of Lords case R v Montilla and Others in 2004, in which it was said:
“It has become common practice for their Lordships to ask to be shown explanatory notes when issues are raised about the meaning of words used in an enactment”.
Lord Pannick
I am very grateful to the noble Baroness. Under the Pepper v Hart principle, what matters is not the Government’s intention but the Government’s understanding of the scope of the provision they are putting before the House. I am asking the noble Baroness to say on the record, in Hansard, that it is the Government’s understanding and intention that the Clause 2 power does not give them a power to create or extend criminal offences, impose fees, amend primary legislation other than retained EU law or create new public bodies. It is not about the intention, but about the Government’s understanding of what they are putting before the House.
Lord Garnier
Can I press my noble friend a little further? Why does she not simply arrange for Amendment 3A to be included in the Bill?
Baroness Fairhead
My Lords, there is a genuine difference of legal opinion here. My proposal is that we reflect on this and have a meeting, if your Lordships are content to do that, because we have to work through this.
Lord Cormack (Con)
I apologise for interrupting at this stage, but is my noble friend prepared to say on the record that this matter can be referred to at Third Reading, if necessary?
Lord Judge
May I respectfully ask what, in that case, would be the purpose of the meeting with the Minister to which she referred?
Baroness Fairhead
My understanding is that we have a clear legal position which is strongly believed, and the meeting would be to see whether we can reach a mutual agreement.
Lord Judge
If we can reach a mutual agreement on it, it is at least possible that the Government may decide to amend their Bill.
Baroness Fairhead
There will be other opportunities; perhaps we could have a meeting before the second day on Report.
Lord Judge
Provided it is understood that the resolution of this issue will abide or at least wait for a meeting between those of us who wish to meet the Minister—I would certainly be one of them—and those whom the Minister wishes to meet, that is fine. But I cannot leave the House in the position that we will now leave this for ever, and if the Minister deigns to do us the kindness of giving us what we want, we will have it. We have to know exactly where the Government stand on this. I know the argument, but where do we stand procedurally in the House?
Baroness Fairhead
I have heard a very well-argued case—the first time I have heard the impact of that case. I can commit to writing a detailed letter on our position, having a meeting and bringing this back on the second day on Report, if that is what this House would prefer to do.
Lord Pannick
I suggest that this matter cannot be brought back on the second day, because this is an amendment to Clause 2, which we will have passed. Given that the noble Baroness, fairly and properly, has accepted that what she has heard today requires further discussion, and that the Government may wish to consider further this matter after they have met with noble and noble and learned Lords who are concerned about this, surely the way to proceed is for the Government to accept that it is appropriate for this matter to be raised again at Third Reading to see whether any progress can be made.
Lord Stevenson of Balmacara
My Lords, we are in a very similar situation to where we were in an earlier debate. Clearly there is an issue which needs to be resolved between the Minister and those who feel strongly about it. She is putting the mover of the amendment in a difficult position, because the only right thing to do at this stage is to test the opinion of the House, and I am sure that that is not where we need to go on this. We need to give the Minister time to reflect on the issues and to be convinced, if she has to be convinced, by further points made, and, if necessary, to come back at Third Reading. That is not an onerous consideration.
Baroness Fairhead
I thank the noble Lord, Lord Stevenson, and I agree with that position.
Lord Judge
My Lords, I am grateful to the noble Lord, Lord Stevenson. I think that calling for a Division at 5.24 pm when we have so many other things to deal with might not have been very popular, although I suspect we would have won. I also thank the noble Lord, Lord Wilson, for enlightening me as to where Explanatory Notes come from.
I thank everybody who has spoken in this debate. I will leave it at this: the Executive accept that these powers should not be given. There should be no difficulty whatever in putting them into legislation, rather than leaving them in an Explanatory Note. Although the noble Lord, Lord Pannick has sought—and graciously been given—an assurance of the Minister’s position, I do not think that is enough. For the time being, at any rate, I shall not press this amendment.
Baroness Henig
“(5A) A Minister of the Crown must lay a report before both Houses of Parliament during each session of Parliament reporting on the progress made in all negotiations relating to agreements Her Majesty’s Government intends to ratify under this section. (5B) A report under subsection (5A) must include, at a minimum—(a) a summary of proposed changes against the existing agreement,(b) the estimated date for the completion of the negotiations, and(c) the date when the agreement is expected to be laid before Parliament.”
Baroness Henig (Lab)
My Lords, I hope that my amendment will prove a little more straightforward than the one we have just debated. When the issue of parliamentary scrutiny of trade agreements covered by this Bill was discussed in Committee, the Minister made much of the issue of speed. Speed, she argued, was of the essence in rolling over these agreements. She said that the Government were opposed to any detailed scrutiny arrangements which might slow the negotiations down and delay conclusion of the deals. Since then, it has become increasingly clear that, whatever the Government’s intentions, these deals will not be speedily concluded. Indeed, it could be two or three years before they are all finalised. This being the case, we surely need to put in place some clear scrutiny arrangements. At the very least, these should replicate the information that the EU Commission regularly supplied to us. They should keep parliamentarians and, more importantly, businesses and their customers informed about what is being discussed and the timescales envisaged for the conclusion of deals, so that they can plan effectively for the future.
I am sure I am not alone in having been shocked at the level of secrecy imposed by the Department for International Trade with regard to its progress on trade talks during the last 18 months. In 2017, the Secretary of State for International Trade made his much quoted promise about having up to 40 trade deals,
“ready for one second after midnight”,
at the end of March 2019. Businesses would have assumed with some confidence that all was going well and that, in the course of 2018, progress was being made in rolling over the deals. It was only through a leak in the Financial Times in January of this year that we learned that, in fact, only a handful of deals was going to be finalised by the end of March. Not surprisingly, this has caused great consternation among business leaders and companies, great and small. Now we learn, through a second leak—again in the Financial Times—that the Department for International Trade’s consultations with business representatives have been suspended because information was being passed out of the meeting, allegedly in an unauthorised way.
Where is this obsession with secrecy coming from? Is it from the Department for International Trade or from 10 Downing Street? Whatever the source, this cannot be a recipe for successful trade negotiations, either now or in the future. Both Parliament and businesses have a need and a right to know what is being negotiated, what stage discussions have reached, and when they are likely to be concluded. Successful trade negotiations require consensus—from business groups, sectors of industry and wider stakeholders about the interests that are being pursued and the goals that are going to be set. This requires extensive consultation and collaboration between the Executive, Parliament, businesses and stakeholder groups. The reality is that the secrecy demanded by the Department for International Trade is counterproductive to successful trade negotiations, both in relation to those being rolled over and to future deals.
Lord Davies of Stamford (Lab)
I am most grateful to my noble friend for giving way. I know that she is an expert in the subject. Does she agree that when the European Union has been conducting trade negotiations with a view to reaching trade agreements with third parties, it has always set very high standards of consultation and transparency, reporting regularly to the European Parliament as well as consulting business interests that might be at stake, trade associations and other potential stakeholders? Does she further agree that it is a terrible pity that the British Government do not seem to be following that excellent example?
Baroness Henig
I absolutely agree. That is precisely my concern: that there is an effective scrutiny process in place to replace what we will lose at European level. In later amendments, we shall discuss future arrangements, but my concern is that in the rollover of the existing deals, we have effective scrutiny so that everybody knows where we are in the negotiations.
Parliament and business leaders should not be seen as the enemy from whom important national secrets must be kept, which seems to have been the way things have been going. Our businesses, exporters and trade bodies need to plan. They need to work in tandem with the Government. Of course we accept the need for confidentiality in trade negotiations. We all understand that, but the level of secrecy we have experienced in the past 18 months has been totally counterproductive.
My amendment would put some basic scrutiny arrangements in place to cover the period for which these deals are being rolled over. It enables Parliament, businesses and the wider community to know what stage they have reached and when they may be completed. Reporting once a Session is hardly an onerous requirement on the Executive. After all, our current Session is now nearly two years old. That seems to me a basic requirement for effective parliamentary scrutiny.
I hope that the Minister will tell me that the amendment is unnecessary, as the Government will bring forward something similar at or before Third Reading, but meanwhile I beg to move.
Baroness Fairhead
My Lords, I thank the noble Baroness, Lady Henig, for tabling Amendment 5. It gives the House an opportunity to revisit the issue of how the Government will update Parliament on the status of negotiations on the continuity agreements. We enjoyed a useful discussion on this in Committee.
First, let me reiterate that Parliament plays a crucial role in scrutiny of free trade agreements, and we intend that to continue. It is right that Parliament should expect to be updated by the Government. That is why the Government have already informed Parliament on progress of our continuity agreements through a Written Ministerial Statement. As your Lordships will be aware, they have already gone through a process of scrutiny in becoming free trade agreements with the EU.
We have also laid our first free trade agreements for scrutiny in Parliament ahead of ratification, which we believe is the right level of scrutiny, along with their accompanying parliamentary reports and explanatory memoranda, in which we have committed to giving explicit information about any significant changes, should any occur, making clear where they are, and any economic impact, should there be any.
Unfortunately, we cannot give a running commentary on the progress towards signature of our other continuity agreements. We believe that doing so would create a handling risk with our partner countries. Some partner countries may not wish to share such information, and a commitment to do so might prejudice the prospect of a successful negotiation. We are trying to get the best possible outcome for the UK.
However, let me assure the noble Baroness that, as we are aiming for continuity, we do not expect there to be significant changes. I therefore argue that the detailed reporting required by the amendment would be unsuitable for the continuity programme. For the future free trade agreements programme, the Government have committed to publish updates on the conclusion of each substantive negotiating round and to publish an annual report on all future trade agreement negotiation programmes under way. In this way, we will ensure that Parliament is kept fully updated on progress as we pursue new FTAs with partner countries.
Although I understand the desire to know what progress we are making towards transitioning continuity agreements, I hope that the noble Baroness, Lady Henig, understands the Government’s position and therefore request that the amendment be withdrawn.
Lord Berkeley (Lab)
Before the Minister finishes, I do not think that she answered my noble friend’s question about comparing the Government’s policy on non-disclosure agreements and secrecy with what the European Union has done for many years. That applies not just to these trade agreements, but to most discussions with industry and everyone else to do with the whole Brexit process. People seem to be required to sign NDAs before they get any information at all. Is that now the Government’s policy—that no trade agreements or anything similar can be achieved unless the industry concerned signs NDAs? That seems a pretty draconian change.
Baroness Fairhead
My Lords, the engagement we have with civic society, businesses and trade unions will be critical as we develop our future trade agreements, and we will continue those discussions. We have already talked about creating a strategic trade advisory group, which will contain members from civic society, trade unions and business organisations. We have also agreed to have expert bodies, so I hope that will reassure the noble Lord that we are intent on continuing very active engagement.
The difference here is that these are continuity agreements that have already been negotiated and scrutinised through a process, and we are aiming for continuity here. Therefore, we believe that the appropriate level of scrutiny by Parliament is for the Government to bring forward the reports when they have been signed, alongside a detailed report on the changes, if any, and the economic impact. Of course, ratification will be required, and that will go through scrutiny in the normal way.
There is a very different position on future free trade agreements, on which I wholeheartedly take on board the points made by the noble Lord and the noble Baroness.
Baroness Henig
I have listened carefully to what the Minister said. She talked about a “running commentary”, and I do not think that is what my amendment sought. It sought a report once every Session, which, I respectfully suggest, is not quite the same thing. As has been said, these are continuity agreements. What I—and, I am sure, many other Members of this House—seek is continuity: when we are no longer members of the EU, we want the same level of information as we were getting from the EU. We seek a level of information; we do not want a dilution of processes, with more meagre information and more difficulty in finding out what is going on. That is what lies at the heart of this.
I have listened carefully to the Minister, and I do not propose to pursue the matter at this stage—but I am sure that I and many other Members of this House will keep the Government’s feet to the fire on the issue of getting hold of information and making sure that everybody, particularly businesses, commercial organisations and people throughout the country, know where we are and what is going on. They should not have to rely on leaks from newspapers for their information. Having got that off my chest, I beg leave to withdraw the amendment.
Baroness Fairhead
“Post-ratification report
(1) This section applies where—(a) the United Kingdom has ratified a free trade agreement, and(b) the other party (or each other party) and the European Union were signatories to a free trade agreement immediately before exit day.(2) Before the end of the period of five years beginning with the date of ratification, a Minister of the Crown must publish a report giving the Minister’s assessment of the impact of the agreement on trade between the United Kingdom and the other party (or each other party) to the agreement.”
Baroness Fairhead
My Lords, this group includes Amendments 6 and 7. With the indulgence of the House, I shall speak now to Amendment 6, and then respond to Amendment 7 when my noble friend Lady Neville-Rolfe, who tabled it, has spoken.
I thank noble Lords for their contributions during the discussion on post-ratification reports during the Committee stage. Once again, the debate demonstrated the value of this House and your Lordships’ expertise and knowledge. In the light of that debate, I can confirm that the Government accept that post-ratification reports are important tools for understanding the real effect trade agreements have on the economy. They are useful not only in informing our discussions in joint committees but in refining our strategies for future trade negotiations.
Having had the benefit of this House’s wisdom in Committee, the Government have tabled an amendment that would require a Minister of the Crown to publish a report on the impact on trade of each of our continuity free trade agreements. These reports will need to be published within five years of ratification of the agreements. The reports will assess whether trade flows between the UK and the other signatory or signatories have changed since the agreement began to be applied. If there has been a change, the reports will then discuss how much of that change can be attributed to the agreement itself.
Given that these reports will consider impacts across the whole of the UK, this will include an assessment of any impacts on the devolved nations. We will of course share these reports with the devolved Administrations. I hope the House will support the amendment.
Amendment 7 (to Amendment 6)
Baroness Neville-Rolfe
Baroness Neville-Rolfe (Con)
My Lords, I thank my noble friend the Minister for a useful meeting, and for responding to my amendment in Committee and to the concern that was expressed on all sides about the need to monitor and review trade agreements. I support this proposed new clause. Good government requires objective review in the light of performance and the priorities of the day. Regulations are reviewed every five years in many areas.
I have tabled the amendment to establish two points. First, I wanted my noble friend to explain why she felt we could not include my simple proposal that the Secretary of State should arrange for the report to be laid before the Scottish Parliament, the National Assembly for Wales and the Northern Ireland Assembly. Can she agree that this will be done? Secondly, the review clause applies only to trade agreements ratified before exit day. I am also interested in having such provisions apply in the case of new agreements made after Brexit. Can the Minister outline her intentions on this point? We are entering a period of profound change, where a habit of looking back critically would be both desirable and helpful. I beg to move.
Lord Purvis of Tweed
My Lords, in Committee there were a number of amendments, including one in my name, which sought to make the case that some of the agreements that we are party to by virtue of our membership of the EU are significant for the economy as a whole and certain sectors of the economy. Some have a greater impact on some of the nations and regions of the UK and, therefore, to understand the impact of our trading policy it is necessary to have the report. So I welcome the Government’s position, as outlined by the Minister.
However, there are a couple of areas where I would wish to press for further information. One area relates to comments I made earlier about the status of the vast majority of the agreements to which we are party and have signed prior to exit day but which we are looking to replicate or agree after exit day. These will not necessarily be considered as continuity agreements—a point made by the noble Baroness, Lady Neville-Rolfe.
The agreement with Japan is a good example. It has been in force since 1 February and, given all the powers under this Bill, is a candidate to be considered as a continuity agreement. The Japanese Government have said that they do not wish it to be a continuity agreement but a new trade agreement. Under the Government’s amendment, how would that be reported on? It would not come under its remit. That is one of many examples.
Lord Lansley
I declare an interest as the UK co-chair of the UK-Japan 21st Century Group. My understanding of the Japanese Government’s position is that they have made it clear that the procedures that are required by the Japanese Diet for a treaty would make it impossible for them to bring this forward as an agreement between the United Kingdom and Japan in the event of a no-deal exit. They would require it to be considered as a new treaty because we were no longer members of the European Union or covered by the withdrawal agreement. Were we, however, to sign the withdrawal agreement and to have a transition period, the Japanese Government, in their view, could consider it to be a rollover agreement during the transition period.
Lord Purvis of Tweed
That is helpful. However, my question to the Government remains as to what the status of the Bill would be, under the amendment, with regard to the reporting mechanism. Japan is one example among the vast majority of examples also in this category. A degree of clarification on that would be helpful.
The second issue is: why five years? Under the regulations, the agreements have to be renewed by Parliament after three years. One could therefore have a situation whereby an agreement could be renewed twice, lasting nine years, but with only one report. Would it not be better if the Government brought forward their report prior to the conclusion of the three-year life of the agreements? It would be no more burdensome for there to be a reduction from five years to three, and the report would be one of the key documents that Parliament would use when considering whether or not to renew the regulations after the three years; otherwise, they would be significantly out of kilter and either the report would not be helpful to the extension of the regulations or we would be unable to have a meaningful discussion on their extension in the absence of a report on the impact on Britain of the agreement.
Baroness Fairhead
My Lords, I thank my noble friend Lady Neville-Rolfe for Amendment 7, which brings reporting on future FTAs into scope, and her support for Amendment 6. The engagement I have had with my noble friend, as with others in this House, has been invaluable.
My noble friend asked why we are not agreeing in statute to lay the reports before the devolved Administrations. The UK Government, as a point of constitutional principle, are not responsible for laying documents in the devolved Parliaments. However, I recognise the importance of ensuring that the devolved Administrations are appropriately involved. That is why we are proposing that the Minister will make a commitment in the House that the Government will send the reports to the relevant Ministers in each of the devolved Administrations. We hope that that solution addresses the objective and the constitutional agreement.
Lord Purvis of Tweed
From my experience of the Scottish Parliament, there is nothing to prevent any UK Government submitting to the Library of the Scottish Parliament or Welsh Assembly documents similar to those laid in the Library of this House, so that MSPs and AMs can be informed and do not have to rely on their Governments submitting them.
Baroness Fairhead
That is a helpful interruption, but we would probably like to have a more formal process for handing the reports to Ministers and devolved Administrations.
As my noble friend may be aware, the Government published a Command Paper on 28 February on our processes for making free trade agreements after the UK has left the EU. In that paper, we outline our plans for transparent scrutiny of future FTAs, including publishing a scoping assessment prior to launching negotiations. We will also publish full impact assessments of new FTAs once negotiations are concluded. It is important to note that we have not yet begun negotiations on new FTAs, but the Government would be willing to consider publishing similar reports for future FTAs to those required by the amendment or continuity free trade agreements.
As regards our helpful discussion on the agreement between Prime Ministers Abe and May, the UK undertook to make an enhanced agreement with Japan. My noble friend Lord Lansley was correct in saying that the Japanese Government have agreed that, subject to there being an agreement, the EU-Japan agreement will continue during the implementation period, as with all our other continuity agreements. The Command Paper on scrutiny and transparency sets out our overall approach to scrutiny and consultation in relation to trade agreements. The UK and Japan have agreed to deliver a bilateral trade agreement based on the EU-Japan EPA, enhanced in areas of mutual interest, as I said. In scenarios such as this, the exact approach that we take on scrutiny and consultation will obviously depend on the nature and potential impact of the agreement that we seek.
The noble Lord, Lord Purvis of Tweed, asked whether the reporting requirements referred to in the proposed new clause would apply to Japan. The answer is that they would. The reporting requirements apply to all agreements with third countries that sign an FTA with the EU before exit day.
I hope that with that assurance my noble friend Lady Neville-Rolfe will feel able to withdraw her amendment.
Baroness Neville-Rolfe
I thank my noble friend for her very helpful assurances and have pleasure in withdrawing my amendment.
“Trade in legal services in the EU
It shall be an objective of the Government to ensure that any future trade agreement between the United Kingdom and the European Union contains reciprocal rights for UK qualified lawyers to practise law in the European Union after exit day.”
Baroness McIntosh of Pickering
My Lords, as I mentioned earlier, since Committee the Government have published the very helpful Implications for Business and Trade of a No Deal Exit on 29 March 2019. Paragraphs 39 and 40 set out the importance of the services sector, which overall accounts for 80% of the UK’s GDP. The last available figures—from 2016—show that the legal services sector generates £31.5 billion in UK revenue. The UK has signed an agreement with Switzerland, and this is an example of a rolled-over agreement that will potentially bring direct benefits to UK lawyers. The Government say at paragraph 40 of their paper that in a no-deal scenario,
“the EU has said that UK nationals would be treated in the same way as third country nationals with regards to recognition of their professional qualifications. This would mean the loss of the automatic right to provide short term ‘fly in fly out’ services, as the type of work lawyers can do in each individual member state may vary, and the loss of rights of audience in EU courts. UK lawyers and businesses would be responsible for ensuring they can operate in each Member State they want to work in”.
I have a couple of questions for the Minister, my noble friend Lord Bates, whom I am delighted to welcome. What provision has been set out in the rolled over agreement with Switzerland, particularly regarding the insurance and banking sectors, for rights of audience, rights to establish and rights to continue to provide legal services in Switzerland for this purpose? I would be very grateful if my noble friend would take the opportunity to update the House on the provision that the Government are making, in a potential no-deal scenario, to ensure continued rights of audience, continued rights to “fly in, fly out” services, continued rights to establish themselves and continued rights to provide services in the interim between no deal and a future deal being signed. When the regulations went through this House, it was pointed out by my noble and learned friend Lord Keen that EU lawyers would have the right to enjoy those privileges in the UK. It would complete the circle if my noble friend could update the House with an assurance that mutual recognition is being sought with other member states and in the agreement signed with Switzerland.
Lord Bilimoria (CB)
I emphasise how important this issue is. From my experience, the UK has arguably the finest legal services in the world. As the founding chair of the UK India Business Council, I am aware that foreign lawyers are not allowed to practise in India. That makes it very difficult for our lawyers to provide advice not just to British companies in India but to Indian companies, and that is a huge loss for India and our British legal services. The ability of our lawyers to practise abroad is crucial. The EU is another area where we have taken mutual recognition for granted. All sorts of situations could arise in a no-deal scenario—situations involving not just advice to companies but disputes. What about consumer rights, for example? British consumers will no longer be able to sue in relation to a European product here in the UK. It will have to be done in the country of origin in the EU and, if our lawyers cannot help out, that will be to the detriment of our consumers. Therefore, this is a very important point that cannot be taken for granted and should be included.
The Minister of State, Department for International Development (Lord Bates) (Con)
My Lords, I thank my noble friend Lady McIntosh for presenting this amendment and for giving us the opportunity to put on the record further remarks on where we are with regard to legal services. As she reminded us, legal services contribute around £25 billion to the UK economy, with a trade surplus of around £4 billion. They directly employ well over 300,000 people in the UK, two-thirds of whom are outside London. The UK is a world leader in the provision of legal services, as the noble Lord, Lord Bilimoria, also pointed out, and English law has a reputation for excellence across the world. We are determined to continue to build on this success.
We acknowledge that leaving the single market might have implications for market access and that some UK and EU service suppliers will not enjoy the same rights as they do today. That point was made by my noble friend Lady McIntosh when referring to Implications for Business and Trade of a No Deal Exit on 29 March 2019, published by the Government on 26 February—specifically paragraph 40, which sets out a case study on legal services. In a sense, that underscores that the Government see this as a key priority in the future economic framework negotiations.
That is why, in the political declaration on the future relationship between the EU and the UK, there will be comprehensive arrangements on the trade in services, covering a wide range of sectors, including legal services. The political declaration includes a commitment to conclude arrangements for services and investment that go well beyond WTO commitments and build on recent EU free trade agreements, as well as a commitment to make appropriate arrangements for professional qualifications.
The Government want to secure positive outcomes for the professional business services sector, including legal services. However, as my noble friend will be aware, our future trade relationship with the EU is subject to negotiation with the EU. A trade deal must be negotiated before its terms can be set out in law. I am aware that this is perhaps a probing amendment that seeks to get some points on the record, but clearly the Government’s view is that what my noble friend proposes is not the correct vehicle.
I am aware that in previous debates on this Bill and on some no-deal secondary legislation my noble friend has raised concerns about the impact of a no-deal outcome for lawyers. We do not want a no-deal scenario but, as a responsible Government, we have to prepare for it.
The no-deal SI relating to the practising rights of European lawyers in England and Wales and Northern Ireland, which this House debated in January, and was made on 13 February, provides transitional arrangements for EU-EFTA lawyers. The purpose of this no-deal SI is to clarify the position of EU qualified lawyers who are practising in England, Wales and Northern Ireland immediately before exit day, so that they can be secure in the knowledge of what their position will be in the event that we exit without a withdrawal agreement.
Baroness McIntosh of Pickering
My Lords, I am most grateful to my noble friend for such a comprehensive response. I am sure some in this House will agree that English law has a reputation for excellence, but speaking as a non-practising Scottish advocate, perhaps Scottish law is pre-eminent. I am grateful to my noble friend for updating the House on transitional arrangements for EU-EFTA lawyers and the position in Scotland. I was particularly pleased to hear of the arrangements in the UK-Swiss agreement.
I wish to return to this subject in the next trade Bill on our future relations—I do not know whether we have a date for that. For the moment, I beg leave to withdraw the amendment.
Lord Lansley
“Preferential trade schemes: parliamentary approval
(1) The Taxation (Cross-border Trade) Act 2018 is amended as follows.(2) In section 32 (regulations etc)—(a) after subsection (3)(a) insert—“(aa) the first regulations under section 10 (preferential rates given unilaterally),”,(b) in subsection (3)(b) omit “that section” and insert “section 8”.”
Lord Lansley
I am glad to have the opportunity to speak to Amendment 9 in my name and that of the noble Lord, Lord Stevenson. Amendment 9 follows our constructive discussions in Committee and outside the Chamber with the noble Lord, Lord Bates, and his colleagues on the question of the trade preference scheme, typically referred to as the generalised scheme of preferences in the European Union context.
A generalised scheme of preferences or the trade preference scheme established by this country would be one intended to give unilateral access to our markets for the products of some of the least and less-developed economies, assisting in their economic progress.
In so far as we have been discussing continuity, the intention is for the United Kingdom to maintain some continuity between the European Union preference scheme and a future preference scheme in the United Kingdom. However, I want to talk about where there may be scope for differences. If noble Lords want to look at the measure, it can be found in Schedule 3 to the Taxation (Cross-border Trade) Act 2018. That is why the amendment amends that Act, not to interfere with its revenue-raising functions but in relation to the scrutiny to be applied to regulations to establish a trade preference scheme.
Under that Act, when the Government bring in a trade preference scheme, the first such regulations will be subject to an affirmative procedure. As I understand it, the scheme may be established in line with the existing European Union preference scheme. However, it will be helpful for me to raise a number of issues with the Minister to give him a chance to put the Government’s intentions on record—as he helpfully did on the last group—about the character of the regulations and the extent of detail to be provided.
First, when we looked at Schedule 3 to the Taxation (Cross-border Trade) Act, we found it very difficult to relate that directly to what is in the EU’s preference scheme. That is mostly because the EU’s preference scheme does not include those countries with which it has association agreements that effectively supersede and replace the unilateral preferences. They have entered into bilateral or multilateral arrangements.
Whereas “least-developed countries” corresponds directly and derives from a UN classification, the list of “other eligible developing countries” is referenced to a World Bank classification, “among other things”. It is not the same as the classification by the World Bank. In particular, it would be helpful if my noble friend would confirm whether it is the Government’s intention to follow the EU practice and to identify in that category a sub-category of “vulnerable developing countries”. I think the intention of the unilateral scheme of preferences is to support economic development in circumstances where they are not the poorest countries of the world but none the less have significant issues—often they are structural or governance issues—that require additional preferential support.
Secondly, can access to preferences be suspended or withdrawn, as Section 10 of the Taxation (Cross-border Trade) Act makes clear, in recognition of or in consequence of human rights abuses in those countries or in relation to United Nations sanctions? Will the regulations make that clear?
Thirdly, what is the situation where the availability of this unilateral system of preferences none the less gives rise to dumping? I remember way back in 1981 that I was responsible in the Department of Trade and Industry for the generalised scheme of preferences as it applied to chemical products. The dumping of petrochemicals produced in Middle Eastern countries illustrated this point: the fact that one is a developing country does not necessarily mean that one does not have the ability to have serious competitive issues with producers in this country.
Where preferences might lead to dumping, or to subsidy, or to an increase in imports that could give rise to injury to markets and producers in this country, will the Secretary of State under the regulations be required to ask the Trade Remedies Authority to investigate any such complaint? As is the case elsewhere in the Act, will the Secretary of State be required only to act and to implement remedies in so far as the Trade Remedies Authority itself determines that there is a need to act and in line with its recommended remedy? It is not clear in the 2018 Act that the Trade Remedies Authority is required to be used by the Secretary of State in relation to the preference scheme.
Will the first set of regulations make clear the overall structure of the preferences scheme? Will it also make clear the structure in relation to specific products from developing countries, which are not to have the unilateral nil duty of tariff but are to be treated as graduated products? This sometimes happens for reasons of relative competitiveness or due to the need to protect industries in this country—as might, for example, be the case with textile imports from India or Bangladesh. Will the availability of the preferences for those graduated products be specified in the regulations, so that the two Houses can look in detail at the way in which the preference scheme is to vary in relation to certain sectors and certain countries, which might give rise to differences between the EU scheme and our scheme? Clearly there are graduated products, particularly in the agricultural sphere, where the protection afforded is to southern European producers for certain agricultural products that have no relevance in the United Kingdom. This could be true for industrial products as well.
As was said in the previous group of amendments, that is my list. I hope the regulations will include—but not necessarily be limited to—those details. There may be other issues that noble Lords will want to make sure are set out by the first regulations. It will be helpful for us to have an idea because, depending on circumstances, it may not be long before the shape of the trade preference scheme becomes clear in detail, not just in its overall application, as was set out in the 2018 Act.
Lord Stevenson of Balmacara
I rise briefly to support the amendment in the name of the noble Lord, Lord Lansley, which I have signed up to. The meeting that he referred to was extremely helpful in drawing out some of the confusion that emerged during our first debate in Committee. The issues of how countries get on to the lists, how the lists get managed and shaped, and how the changes might come forward were all explored carefully; we now have a much better understanding. In these lists, there are bound to be curious decisions which do not seem to match up to one’s perspectives. I was in Tanzania on holiday recently and it certainly did not come across as one of the least-developed countries, although clearly there are issues around how it will progress and develop its own trading arrangements.
The point behind the amendment is to get on record some further points that have emerged. The noble Lord was kind enough to suggest that we might have further questions, but his all-encompassing knowledge and brilliant, incisive questions are quite enough for me.
Lord Bates
I thank the noble Lords, Lord Lansley and Lord Stevenson, for moving the amendment standing in their names and giving us another opportunity to discuss this important area. We are moving to a stage where we can consider how having an independent trade policy could provide opportunities, particularly to the least developed countries in the world.
I also thank the noble Lords, Lord Lansley and Lord Stevenson, as well as the noble Lord, Lord Fox, and the noble Baroness, Lady Neville-Rolfe, for the debate we had in Committee and for then participating in what I was glad to hear reported as a helpful meeting. I join noble Lords in saying that I found it an incredibly helpful meeting, which improved my own understanding not only of the barriers and hurdles but of the opportunities that are there.
I should perhaps deal directly with my noble friend Lord Lansley’s questions, rather than outlining issues that have been previously discussed in Committee and on which the House is already aware of our position. The noble Lord asked whether it is the Government’s intention to identify a sub-category of vulnerable countries. The answer is yes: we will be replicating the GSP+ tier of economically vulnerable countries.
The noble Lord asked whether these trade preferences would undermine human and labour rights. The UK has a longstanding commitment to universal human rights, and this will be reflected in our trade preferences schemes. As part of transitioning the EU preferences scheme, we will be maintaining a similar approach to human rights commitments.
On the question of who will investigate accusations of subsidies, dumping, surges of imports et cetera, the Trade Remedies Authority will be able to investigate cases against any country, including preference-receiving countries. In doing so, it will consider allegations of dumping, subsidies and unforeseen surges in imports which cause injury to UK industry. Where the TRA determines that a trade remedy measure should be applied, it can make a recommendation to the Secretary of State, who can accept or reject that recommendation. Such measures usually take the form of an additional amount of import duty above the most favoured nation rate.
Lord Lansley
I am grateful to my noble friend the Minister and indeed to the noble Lord, Lord Stevenson, for their contributions to this short debate, and for the discussions that we had, which were not so short but were extremely helpful in clarifying many of the issues; they have enabled us to be brief today. I am grateful to my noble friend for his responses to my questions, which were very satisfactory.
I have two things to say. First, what he described as the role of the Trade Remedies Authority seems an appropriate one and mirrors what would be the case with other countries who are not part of the GSP scheme. I hope he implied that the Secretary of State would follow the TRA’s recommendations on the extent to which the preferential access is suspended or withdrawn; this can lead to a rate of duty that lies between nil and the standard rate—the most favoured nation rate. It is not necessarily in excess of the most favoured nation rate, as my noble friend said, but might fall somewhere between the nil rate and the MFN rate.
On the second point, I completely understand that noble Lords might expect us to start with a preference scheme that mirrors the European Union scheme and then consider the extent to which we can, or need to, change it in order to improve it—to address both the different circumstances of EU industries relative to those of developing countries and some characteristics of the scheme itself. Given that the legislation is structured so that the first regulations get affirmative processes and subsequent regulations do not, I hope that that will not inhibit Ministers from trying to consult proactively, as they have done through the White Paper and otherwise, on how the preference scheme could be improved if and when—there is definitely an “if” as well as a “when”—we come to establish a trade preference scheme that is the UK’s own scheme, rather than one which simply reflects the EU scheme. However, on the basis of the very helpful response from my noble friend, I beg leave to withdraw the amendment.
Lord Lansley
“The customs tariff: parliamentary approval
(1) The Taxation (Cross-border Trade) Act 2018 is amended as follows.(2) In section 32(3)(b) (regulations etc)—(a) leave out “an increase in” and insert “to vary”, and(b) after “section)” insert “from that which is in the United Kingdom’s Schedule notified to the WTO”.”
Lord Lansley
Amendment 10 stands in my name and that of the noble Lord, Lord Stevenson. In Committee, we did not discuss what tariffs the United Kingdom would apply if we were to leave without a deal with the European Union. Since Committee, although Ministers have not published a proposal—notwithstanding some hints that they would—we are told something about it by virtue of reporting by Sky News. I do not know whether that is true or not; I tend not to rely on media reports for these purposes. As it happens, I tabled Amendment 10 before Sky News started reporting anything of this kind, because it seemed that noble Lords would want to talk about what such a tariff structure might look like.
This amendment relates to the implementation of import duty under Section 8 of the Taxation (Cross-border Trade) Act 2018. There are regulation-making provisions in Clause 32 of that Act, which specify that the first regulations under the Act require an affirmative procedure in this case, and that the affirmative procedure should also be used when there is an increase in duty in the standard case. For these purposes, “standard case” means when there is not a preferential rate or a tariff-rate quota, or when something is not subject to trade remedies. In that sense, it is what my noble friend referred to in the last group as an “MFN rate”. That is the standard case for these purposes.
The provision currently says it would be an affirmative procedure when there is “an increase in” that duty. The effect of Amendment 10 is to change that, so that it would be an affirmative procedure for any regulation that sought “to vary” the rate from the rate set in the schedule notified to the WTO. One of the points I hope to make is that this enables us to say something about the shape of how we might approach the situation if there is no deal. If we remain in the transition or implementation period, we will clearly abide by the EU external tariff. Depending on the nature of the future relationship with the EU, we may continue to be within a single customs territory and, by implication, within a single EU external tariff. That does not necessarily reflect the Government’s point of view, because they appear to want to be able to reduce tariffs below the EU rate, even though we remain in a single customs territory. This is a debatable proposition, which we will perhaps debate later but not on this group.
In this amendment, there is an expectation that, if we leave without a deal, we will start with our schedules to the WTO being those that we have notified—as I said right at the beginning of our proceedings today, in response to the noble Lord, Lord Kerr. They are essentially in line with the EU external tariff. My proposition is that there is no need for this; indeed, there would be significant detriment if we did not maintain those schedules. Under the WTO rules, we should have what is known as a bound rate, which is in line with the EU external tariff. The bound rate is the one that we are, in this sense, bound not to exceed. However, that does not mean that that is the rate that is applied. It is not widespread, but it is entirely normal practice under the WTO rules to have not only free trade agreements of the kind which are contemplated under Article XXIV, which lead to preferential arrangements, or the kind of preference scheme that we were just talking about for the less developed countries, but also to apply a rate of duty that is lower than the rate which one is bound to under the schedules for the WTO.
The proposition I put to your Lordships is that we should be thinking constructively about how to use the flexibility under the WTO rules to vary the applied rate of tariff from the bound rate, if we were in the unhappy circumstances of leaving without a deal. We would leave the bound rate, the WTO schedule and the EU external tariff where they are, in the expectation that, even if we leave without a deal, we may enter into a relationship with the European Union with a customs relationship which might require us not to vary from the EU’s external tariff—we would just leave that alone for the time being. In the short term, this would enable us to reduce tariffs on products from around the world which are presently subject to a higher tariff or to tariff-rate quotas. It would enable us to offset what is otherwise a significant risk of overall price increases for UK consumers.
The reasoning of course is that the EU will not change its external tariff. If we leave without a deal, we will be subject to the EU’s external tariff. Roughly half of our imports come from the European Union; a significant proportion of those—for example, cars—will have a 10% tariff applied. To turn it the other way round, UK producers would be in the unhappy position of being subject to increased costs when they try to sell. What we do not want to happen is that, simply by virtue of leaving, we impose high tariffs, leading to higher costs for UK consumers.
When people have speculated about what the tariff on a no-deal basis might look like, in some quarters they have tended to say, “We cannot lower our tariffs because the consequence of that is that we will have given something away unilaterally, which would prejudice our ability to enter into bilateral trade deals with other countries”. This is not the case. If we proceed by having an applied rate that is lower than the bound rate, first, it will become apparent to us and other countries to what extent liberalised, lower rates of duty stimulate imports from those countries, in some cases in competition with the EU at a level of duty which it has not been able to match in the past. It will begin to tell countries, and us, what the impact of lower rates of duty might be on trade between those countries.
Secondly, those countries would know that, if no bilateral deal was brought to a successful conclusion which then gave a preferential rate of duty to the United Kingdom under a free trade agreement, we could restore our applied rate back to the bound rate. They would then lose the benefit we had given them in the short run. In a nutshell, the short-run benefit of lowering tariffs not only potentially offsets what might otherwise be price increases but enables us to demonstrate to other countries what the benefits of a bilateral deal in the long-run might look like.
My expectation, and the expectation of most developed economies, is that the bound rate and the applied rate will converge in the long run. They are generally the same thing, but we are not required to have them as the same thing. It gives us an opportunity to vary rates and see what the future might look like. In the short run, it also gives us the opportunity to vary the rates of duty from those in the EU tariff to give specific benefits on things such as agricultural products or some industrial products where the protection that is required for European producers does not apply to UK producers. In that way, we can start to benefit from lower rates of duty where the European Union does not currently offer that option to us.
Lord Stevenson of Balmacara
I have a private joke with the former Minister, the noble Baroness, Lady Neville-Rolfe, that there is a small and declining number of people in this House with an interest in intellectual property, and that we used to gather to discuss arcane issues using incomprehensible language to our hearts’ content. The noble Lord, Lord Clement-Jones, is clearly a member of that group, and there are one or two others. The noble Baroness, Lady McIntosh, who is unfortunately not in her place, has joined the group recently. I say that because the discussion of the WTO tariff rate is coming down to that rather narrow group of people who have a deep knowledge of and fascination for the issues and are interested in exploring them, but are frustrated by the fact that the Taxation (Cross-border Trade) Bill, on which we should have had the chance to discuss the points so ably made by the noble Lord, Lord Lansley, was held back from us by procedural rules and went through without much debate. We are therefore having to invent a way of getting into that discussion.
The noble Lord, Lord Lansley, has done a great service to the House by going through some of the very intricate and complicated issues around setting tariffs and rates and how you play the game against the very complicated rules of the WTO. He does it, however, from a position of knowledge and experience that, I am afraid, will be frustrated again tonight, because there is not the will in the House to go through it in detail. Indeed, I tabled an amendment a week or two ago—when I thought there would be more time to discuss these things—on the prospect of the GSP tariff rates, setting and mechanisms. He is right that there are broader issues around those that we should discuss. However, this is not the time—and we do not have the time—to go into the detail, so I will not press my Amendment 14, which comes later, because the noble Lord, Lord Lansley, has raised the same points in a broader context. I hope that the Minister will respond briefly to the points raised, so that some of the issues that need to be on the record are on the record, but perhaps we should save some of the more detailed issues for another day.
Lord Bates
I thank my noble friend for moving the amendment. The noble Lord is right: my noble friend has raised, effectively, three issues that need to be examined. One is the level of tariffs. In that regard I will probably disappoint my noble friend by referring back to my noble friend Lady Fairhead’s response from the Ministers’ Bench to the invitation of the noble Lord, Lord Kerr, to set out a timetable for when those tariffs might become known. She made her points and they stand on the record; I probably do not need to repeat them. I also draw to the attention of the House The Implications for Business and Trade of a No Deal Exit on 29 March 2019, which was published on 26 February. On this occasion I draw my noble friend Lord Lansley’s attention to the section on tariffs, beginning at paragraph 31 and continuing into paragraph 32, which explores some aspects of the setting of tariffs.
Those are two aspects on the level of tariffs, but I now turn to some of the specifics to which my noble friend referred. He asked about the status of the common external tariff applied by the WTO. The noble Lord is correct that we have notified our bound tariff schedule to the WTO. Our bound schedule represents the upper limits of what tariffs the UK could apply on imports. If, for example, our bound schedule says 10% for product X, we could choose to apply 9%. The Government have yet to announce their applied tariffs for a no-deal scenario, but the noble Lord, Lord Lansley, is correct to say that on leaving the EU we will be free to set out tariffs within the parameters of the bound schedule that we lodged last year.
The EU’s common external tariff—as referred to by the noble Lord, Lord Lansley—is the EU’s version of its applied tariff schedule. These are the tariffs that will apply to UK exports to the EU in a no-deal scenario. My noble friend also referenced the Taxation (Cross-border Trade) Act, which states that the first time a tariff is set, and whenever an import duty rate increases, the made affirmative procedure will apply; otherwise the negative procedure will apply.
These amendments would make the made affirmative procedure apply in different circumstances. In the case of Amendment 10, that would be any time the rate of import duty diverged from the bound commitment made by the UK to the WTO; in the case of Amendment 14 the made affirmative procedure would apply in all circumstances. However, under both amendments it is currently stipulated that the setting of the tariff would remain a matter for the other place. The Act ensures that the scrutiny procedures applied to the exercise of each power are appropriate and proportionate, taking into account the extremely detailed nature of the tariff and the frequency with which it may be changed. The tariff is long and complex; it currently contains 17,000 types of goods and is more than 1,000 pages long. The EU tariff is subject to regular, almost daily, amendment, so the current balance of the chosen procedure reflects that understanding.
Once again, I express the Government’s appreciation to my noble friend Lord Lansley for moving this amendment, giving us the opportunity to expand on our positions and put those additional remarks on the record. I hope that is helpful and reassuring to him, and that he feels able to withdraw his amendment at this stage.
Lord Lansley
I am grateful to my noble friend, and to the noble Lord, Lord Stevenson of Balmacara. This debate has been very helpful, and the takeaway from this—one I am grateful to my noble friend for confirming—is that the bound schedule has already been notified to the WTO. People need to be very clear about the fact that if we leave without a deal and the Government come forward and say, “These are the tariffs that we intend to apply”, they are not varying the WTO bound rate but saying that, on a most favoured nation basis, they will apply these rates. That provides a basis for negotiations on preferential schemes that could emerge over time. I read the document about the implications of no deal for tariffs, and it is correct: the Government must balance the desirability of supporting liberalised trade, with benefits for consumers through price and choice, with protection for producers in this country. That will be a delicate balance to strike. If people are aware that we can behave in this way with an applied rate that varies from the bound rate, it removes the argument that by applying a lower rate in the short run we have prejudiced our ability to conduct trade negotiations with other countries in the future—we have not done that. If we get rid of that argument, it helps to shift the balance in many cases in favour of lower rates in the short run, rather than higher rates. I am most grateful to my noble friend for his response. On that basis, I beg leave to withdraw the amendment.
Lord Lea of Crondall
“UK membership of the European Free Trade Association and the European Economic Area
It shall be the objective of an appropriate authority to achieve before exit day the implementation of an international agreement to enable the United Kingdom to become a member of the European Free Trade Association and continue as a signatory to the EEA Agreement.”
Lord Lea of Crondall (Lab)
My Lords, last summer the House supported a proposition along the lines of retaining our membership of the EEA. Given that all other ideas seem to be falling by the wayside one after the other like dominoes, it now has even more steam behind it. I expect this will be demonstrated in the other place quite soon, with the proposition supported by cross-party groups in the Commons and in this House.
Before I come to the main issue, I want to make a point about all the bad news from the car industry, with BMW and Toyota adding to it. This is another demonstration of the need to stay in the customs union, which will be debated later.
We are talking in this Bill against a background of leaving the EU—not about whether it is a good idea, which it certainly is not—and moving from Pillar 1 of the twin-pillar European Economic Area, which is the European Union, to Pillar 2, which is EFTA. Given where we are now, I think that it is the only way we can still be part of a family of agreed rules and justiciable arrangements, with the emphasis shifting on the latter point from the European Court of Justice to the EFTA Court.
I wish to get out of the way a rather unnecessary obstacle. I refer to the publication by this Government on 20 December of the EEA EFTA separation agreement with the UK. Although this is a treaty provision whereby we will leave the EEA on 29 March, will the departure requirement in Article 71 of the draft agreement be automatically frozen in the hypothetical situation of our reaching agreement with the EU to extend the Article 50 period, which is becoming more likely, so that it does not happen on 29 March? If we crash out, would we not have the right to apply to rejoin EFTA? Would not Parliament have the right to vote on such a treaty change if it were no longer logically derivative of the wider constitutional Act? Many lawyers think that there should be such a vote.
Jeremy Corbyn paid tribute in the Commons recently to the cross-party Norway-plus group, echoing its view that we need full access not only to the single market but to a customs union. This policy is supported by the TUC under the distinguished leadership of Frances O’Grady. As I have said previously, I prefer to say “the” customs union, because I am agnostic about whether there is a cigarette paper of difference in this context between the definite and the indefinite article. The EU customs union and the single market between them—they are intertwined—cover a wide range of electronic data, driving licences and product standards, as well as labour standards. Given what has been said in the newspapers today, membership of them would be the only way to guarantee that workers’ rights in this country kept pace with further improvements in the EU. As we have seen from today’s reports, the Prime Minister restricts her commitment to consultation, which past experience suggests gives a veto to the CBI, even though I suspect that it, like the TUC, will remain part of the employers’ negotiating team in Brussels. In other words, it could have its cake and two bites at the cherry, given its reluctance to be part of this arrangement.
Lord Monks (Lab)
My Lords, the House has carried an amendment such as this before and has done so overwhelmingly. It crops up in the context of this Trade Bill and will do so again whatever the Government do. If they achieve their withdrawal agreement, the direction of travel of what happens next will have to take account of the Norway-plus option. If they fall flat on their face next week, we will see that the options which the country needs to consider urgently are likely to include this one.
It is the only option that combines reconciling the referendum result with single market membership and the customs union arrangement as well. I know that time is tight, but I ask the House to keep this option in mind; the fact that it is being treated briefly tonight does not mean that it will not be very important in the future. I hope people will reflect on the points made by my noble friend in moving this amendment.
Lord Bilimoria
My Lords, to follow what the noble Lord, Lord Monks, said, I was one of the noble Lords who led on the amendment—along with the noble Lord, Lord Alli, and others—suggesting that the EEA was the least worst option. That amendment to the withdrawal Bill was passed overwhelmingly. That decision, therefore, has been made by this House; it was overturned by the other place, but it could quite probably—as the noble Lord, Lord Monks, has said—come up again as the least worst option.
Lord Stevenson of Balmacara
My Lords, although the key point was made by the noble Lord, Lord Monks, that this might seem a little out of keeping with the rest of today’s discussions, points were made here that will be resonant as we move on with the Bill. I commend them to the House.
Lord Bates
My Lords, I am conscious of the time, but I also want to ensure that noble Lords have an opportunity to reflect on the serious issues raised by the noble Lord, Lord Lea. We may deal with them briefly this evening but we did not deal briefly with them when they came up in Committee. There was quite some debate on them on 4 February, and for those noble Lords who are interested, they can read it in glorious technicolour between columns 1360 and 1370 in the Official Report of those proceedings. Perhaps if the noble Lord, Lord Lea, will permit me to summarise what the key arguments were at that point, I will try to answer two of the points that he raised.
EFTA membership would not be acceptable because it would mean accepting the free movement of people between its four existing members. To gain access to the 29 existing free trade agreements negotiated by EFTA, the UK would have to negotiate its way into each and every one of them with the relevant third countries. There is no guarantee that that would be successful: EFTA’s trade agreements were not negotiated with the size and type of Britain’s economy in mind. Were the UK to join EFTA, it would constitute 71% of the enlarged area.
If we rejoined the European Economic Area to stay in the single market, we would not have control over our borders. It would mean having to accept all four freedoms of the single market, including free movement of people across the 30 EEA states. On laws, it would mean having to implement new EU legislation covering the majority of the sectors of our economy. In contrast, we are making an up-front sovereign choice to commit to ongoing harmonisation with EU rules on goods, covering only those necessary to provide frictionless trade in the context of our agreement.
The noble Lord, Lord Lea, said that if we crash out, we need to keep the right to rejoin EFTA. If we leave the European Union without a deal, we fall out of the EEA and EFTA. We would be able to apply to rejoin, but this is contrary to government policy for the reasons that I have explained. He asked what the impact on the EEA Agreement would be if we extended Article 50. If we were to extend Article 50, the UK would, of course, stay within the EEA under the EU pillar until we left the EU. With regard to citizens’ rights agreements made with the EEA and EFTA states, these would enter into force only when we leave the EU or at the end of an implementation period.
I hope that, with that brief summary, the noble Lord—whose contributions I always enjoy and listen to attentively—will not feel that I have not responded to him, but in the context of the wider consideration of this issue in the debate, the Government’s position remains as it was in Committee. I therefore ask him to consider withdrawing his amendment at this stage.
Lord Lea of Crondall
My Lords, I thank the Minister for that reply. In fact, he did not answer all the questions on 4 February. I could draw attention to some of them, but I will not. This could have been an opportunity today. Free movement of persons is, of course, an issue of which we have experience within the European Union. We would be cutting off our nose to spite our face on areas of the economy, such as the whole entertainment, theatre and ballet industry, as the noble Baroness, Lady Bull, referred to on one occasion. There are many, many others, so these sweeping statements about control of our borders are really over the top and not a sensible way to address this issue.
I am not going to say more at this stage. Suffice it to say that the initiative is now with the House of Commons. I have some confidence that in the next few days and weeks this will become, as my noble friend Lord Monks said, a strong policy in the Commons. I rest on the fact that it is still the policy of the House of Lords, as has been said by my noble friends. On that basis on this occasion, I will not seek to test the opinion of the House.
“Parliamentary approval of trade agreements
(1) Negotiations towards a free trade agreement may not commence until the Secretary of State has laid a draft negotiating mandate before the appropriately constituted Committee and it has been approved by—(a) resolution of that Committee, and(b) a resolution of both Houses of Parliament.(2) Prior to the draft negotiating mandate being laid, the Secretary of State must have consulted with each devolved administration on the content of the draft negotiating mandate.(3) Prior to considering a resolution approving a mandate relating to the negotiation of a free trade agreement, the Committee must produce a sustainability impact assessment.(4) Before either House of Parliament may approve by resolution the text of a proposed free trade agreement, the Secretary of State must lay the text of the proposed agreement before the Committee and that text must be approved by a resolution of that Committee.(5) Prior to the laying of the text of the proposed agreement, the Secretary of State must have consulted with each devolved administration on the text of the proposed agreement.(6) Prior to considering a resolution approving the text of a free trade agreement under subsection (4), the Committee must produce a report setting out a recommendation in relation to the ratification of the agreement.(7) The Secretary of State must lay the report produced under subsection (6) before both Houses of Parliament.(8) Schedule (Committee on Trade Agreements) contains further provision about the reports under subsection (6).(9) A free trade agreement may not be ratified unless the agreement has been laid before, and approved by an amendable resolution of, both Houses of Parliament.(10) The Constitutional Reform and Governance Act 2010 is amended as follows.(11) At the end of section 25(2) insert “, or a treaty containing a free trade agreement as defined in section (Parliamentary approval of trade agreements) of the Trade Act 2019.”(12) In this section, “free trade agreement” refers to any agreement between the United Kingdom and one or more partners that includes components that facilitate the trade of goods, services or intellectual property including but not limited to— (a) Free Trade Agreements (FTA) as defined by section 8;(b) Interim Association Agreements, Association Agreements (AA);(c) Economic Partnership Agreements (EPA);(d) Interim Partnership Agreements;(e) Stabilisation and Association Agreements (SAA);(f) Global Agreements (GA);(g) Economic Area Agreements (EAA);(h) Cooperation Agreements (CA);(i) Comprehensive Economic and Trade Agreements (CETA);(j) Association Agreements with strong trade component;(k) Transatlantic Trade and Investment Partnerships (TTIP);(l) Investment Protection Agreements.”
Lord Stevenson of Balmacara
My Lords, after that brief pause for dramatic effect, we move on quickly. We have already begun to discuss this issue because it was the subject of the Motion before the House before we began to consider Report, so I can be relatively brief. I thank the noble Lords, Lord Hannay and Lord Purvis of Tweed, for joining me on Amendment 12. I will speak also to Amendment 35, which would be a new schedule dependent on Amendment 12 and which I consider to be consequential.
The background is the White Paper on future trade deals that was referred to. It is very good to read in that paper that,
“the Government is clear that we must have a transparent and inclusive future trade policy that delivers for all parts of the United Kingdom … that there must be a strong and effective role for Parliament in scrutinising our trade policy and free trade agreements … We recognise that the best free trade agreements will be those that draw on the extensive expertise and experience of both the House of Commons and House of Lords and have its full support”.
Unfortunately, those good recommendations in the White Paper do not follow on from the analysis. The problem that we have come across is that the stumbling block seems to be the rather startling assertion:
“The making amending and withdrawing from treaties are functions of the executive which are carried out in exercise of the Royal Prerogative”.
I thought that we decided some time ago that the royal prerogative had had its day. It is a bit odd to see it prayed in aid in this case.
Trade negotiations are no longer just a matter of the import and export of physical goods. They are about societal rights, environmental rights, the provision of healthcare, and investment protection. There are trade-offs between services and tariffs, which was exactly the point that we were discussing earlier today. The public are entitled to know what the Government are doing. We in Parliament are duty-bound to have a role in scrutinising what the Government intend to do. Surely our country needs a modern approach to the approval of trade agreements, with proper roles identified for the Executive and for Parliament, which can operate a sensible scheme rooted in reality, not fantasy, and which is appropriate for our representative democratic system.
The Government say that this proposal,
“should draw on the expertise of Parliament … via a close relationship with a specific parliamentary committee in each House”.
They suggest that these committees,
“would have the power to produce a detailed report … to assist parliamentarians and the public in understanding the agreement and its potential implications”.
Moreover:
“Where the Committee(s) indicated that the agreement should be subject to a debate prior to the commencement of parliamentary scrutiny under CRaG, the Government would consider and seek to meet such requests where those requests are made within a reasonable timeframe and subject to parliamentary timetables”.
These are a pale imitation of what we already have in the EU, where the relevant committee follows trade negotiations extremely closely and a plenary vote in the Parliament is required before the conclusion of an agreement.
In our view, the arrangements proposed in the White Paper do not provide a solid role for Parliament that meets the expectations of those who are interested in trade and which is required for modern trade negotiations, particularly during the scoping and negotiating phases; n or do they accord Parliament the role it should have in ratifying the final agreement, with positive votes being required in each House. I hope the Government will engage with us on this issue and I would be very happy to meet them again to explore the way forward. In the interim, I beg to move.
Lord Hannay of Chiswick
My Lords, this amendment is in the names of the noble Lords, Lord Stevenson and Lord Purvis, and my own. I do not wish to appear disobliging towards the Command Paper the Government tabled last week and to which the Minister referred this afternoon before we started Report. It contains some useful material but unfortunately it falls short of providing a proper role for Parliament in three important respects, and thus fails to bring this Parliament anywhere close to the degree of mandating, oversight and approval that will prevail in some of the main trade partners with whom we will, in the future, be negotiating if and when we become responsible for a new, independent trade policy—most significantly, of course, the European Union and the United States.
The first defect is the Government’s refusal to put any of these provisions that they referred to in the Command Paper into the Bill. The degree of mandating and oversight will remain entirely in the Government’s gift on every occasion in which we set out to negotiate a major free trade agreement. Their willingness to give Parliament a say is clearly absent when one considers the consultation the Government have been holding on proposed agreements with the United States, Australia and New Zealand. No doubt having a public consultation, which they are engaged in at the moment, is entirely valuable and appropriate, but there has been no involvement at all by either House of Parliament in that consultation. That, surely, is a sad defect.
A second defect is that there is no provision at all in the Command Paper for mandating ahead of, and oversight during, the negotiations for parliamentary bodies—the word “mandate” never appears at all. The EU will be seeking a mandate from the European Parliament before negotiating with us and the European Parliament will no doubt have oversight throughout the negotiations. In the US, the Administration have just tabled their proposals for an agreement with us and these will undoubtedly be subject to detailed scrutiny and consideration by both Houses of Congress. Why should this Parliament not receive the same provisions and opportunities?
The third defect lies in the process of parliamentary approval for any agreement once the negotiations have been successfully concluded. The CRaG procedure, which is the Government’s preference, provides only for a negative procedure, which I suggest is inadequate for the very complex and sensitive issues that free trade agreements now entail. It is a much weaker instrument than the affirmative procedure proposed in this amendment. I hope that the Government will reflect carefully on how to remedy those three major defects. Without such remedies, the Bill clearly falls short of what is required in a period when trade negotiations have, quite rightly, become the object of careful parliamentary scrutiny and approval all across the world at every stage. Why should this Parliament be left on the sidelines?
Lord Purvis of Tweed
My Lords, I am very grateful to the noble Lords, Lord Hannay and Lord Stevenson, for working collectively to condense a number of amendments in Committee into one composite amendment. It captures the two broad areas that were left outstanding in the Government’s Command Paper, the presentation of which I and others welcomed. The first area explores how the Government see the prerogative power of the Executive taken forward in a new, more complex world. The second concerns the devolved Administrations. Both areas are deficient in the Command Paper, as has been said already.
To illustrate the first point, I was born in 1974, when there were four regional trade agreements in the world. In 1992, there were 24 and in 2019 there are 471. That shows the massive growth in breadth and complexity of trade agreements that have been notified with the WTO. Nine been notified to the WTO during the tortuous process of our consideration of this Bill, which shows how trade moves fast but also widely and with growing complexity. Therefore, reverting, in effect, back to a consideration of the prerogative power before our membership of the EU is not really sufficient. It is why the International Chamber of Commerce, in a meeting I chaired, was so disappointed with the British Government seeking,
“to address the issue of 21st-century trade with 19th-century constitutional practices”.
This amendment seeks to address this fundamentally.
There is no direct replication of the relationship between the Commission, the Council and the European Parliament. The European Parliament has formally notified and engaged from the start of a trade negotiation 12 times. We are seeking to maintain this as the same form of platform of relationship, and if there is no direct read-across from what we have at the moment we will seek to use that as an opportunity to enhance the role of Parliament, rather than enhance the role of the Executive. That is why the first element seeks a role for Parliament in supporting the mandate or the negotiating objectives. The Government may say they have an issue with the word “mandate”: we are just taking the word of the Prime Minister when she sought and secured, “the mandate I need” when it came to negotiations with the European Union recently. When that passed the House of Commons she said she was,
“armed with a fresh mandate”.
This is the Prime Minister’s language and if the Government are opposed to it, they need to explain why the Prime Minister’s language is wrong.
On the second area, we have changed the use of the prerogative power over recent years. Canada still deploys troops without parliamentary approval—we do not. We have moved to fixed-term Parliaments. We have changed, adopted and modernised the prerogative power and that is why it is appropriate that Parliament has a role in setting the negotiating objectives and mandate and also has a vote on the final ratification.
My final point concerns consultation with the devolved Administrations. This formal statutory underpinning of consultation was sorely lacking in the Command Paper. It is welcome that there will be a process through the concordat, that there will be a forum and that there will be ongoing discussions with Ministers, but just to give the current example of the Faroe Islands trade agreement, the draft text was not shared and the level of consultation with devolved Ministers was not appropriate. We seek to address those two areas in this amendment, with consultation with the devolved Administrations, an updating and a more appropriate role for Parliament. I hope that the Government will see this in the spirit in which it was tabled—that we wish to build on the Command Paper and improve it—and that they will accept it.
Viscount Hailsham (Con)
My Lords, I rise briefly simply to explain why I do not feel I can support the proposed new clause, although generally speaking I agree with the views that have been expressed in its support. I shall indicate what I could support with some changes to the new clause. I shall deal first with proposed new subsection (9), which makes the ratification of the agreement subject to approval by resolution of both Houses. This provision, in fact, goes much further, as the noble Lord will appreciate, than the procedure set out in the 2010 Act with regard to the approval of treaties, but I welcome the principle and I have no difficulty with it. However, I have a question which I hope the sponsors of the proposed new clause will address. I may have overlooked the answer—it may be staring me plain in the face. What happens if the Lords decline approval but the Commons approve the trade agreement?
There is no provision in the Bill to deal with that situation, and it would be profoundly unattractive if the House of Commons were to approve the trade agreement and the House of Lords were to refuse it, the result being that the trade agreement could not pass. This is actually dealt with specifically by Sections 20(7) and 20(8) of the CRaG Act of 2010, but there is no similar provision in the new clause. Because the procedures between the new clause and CRaG are fundamentally different, I do not think you could simply import the procedures in CRaG to the new clause. Perhaps I might seek guidance from the mover of the amendment on how to resolve a difference of opinion between the two Houses.
To move very quickly to proposed new subsections and (1) and (4), so far as the former is concerned it is very good idea that the negotiating mandate should be placed before an appropriate committee and discussed in both Houses of Parliament. It is a splendid idea, and I also agree with the supporting procedure set out in the proposed new clause. The one thing I do not agree with is that the negotiating mandate should be made subject to approval of the committee or the House. That is an undue restriction on the ability of the Executive to negotiate. I would say yes to consideration and discussion, but no to express approval.
The same point relates to proposed new subsection (4). I see no reason why the agreement of the appropriate committee should be obtained before the matter is put to a vote under subsection (9), because that subsection is already a parliamentary lock on the agreement. Why, therefore, should there be a pre-agreement by the appropriate committee before it goes to both Houses of Parliament? It seems to me that that restricts the ability of Parliament to do that which it thinks is right, and it is unnecessary because the parliamentary lock already exists.
To summarise, I cannot agree with this new clause, but I could agree with it if the principle of consideration and discussion were substituted for that of express approval in subsections (1) and (4).
Lord Lansley
I thoroughly agree with my noble friend Lord Hailsham in his argument. I will add one thing. The Commonwealth Parliamentary Association just a few weeks ago brought together people from across the Commonwealth to discuss a number of issues. The meeting I attended was a discussion on the ratification of treaties. It was clear that Australia and New Zealand—which of course have a long continuing history of negotiating their own trade agreements—still use the prerogative power as the basis on which the Executive enter into a trade agreement, but they do it in the context of continuing scrutiny, oversight and an approval process following implementation of legislation.
What I read in the White Paper last week went a long way towards replicating that in a very satisfactory way—that is, we would do those things in a similar way to Australia and New Zealand such as the outline approach being presented, reports on rounds and negotiations being reported back to Parliament and of course an approval process. It is perfectly reasonable to wait on the two Houses of Parliament to tell the Government what they think should be the committee processes by which these are considered. Australia, for example, has a joint standing committee on treaties, which looks at the way treaties are ratified. I do not think it is the case that mandates are being taken all over the world; some of the countries that have the greatest constitutional consistency with us do not have a mandate. The noble Lord, Lord Hannay, was right about scrutiny and oversight, but he elided them with the necessity for Parliament to issue a mandate. Under our constitutional processes we should not be issuing a mandate, and the proposed new clause falls on that count.
Lord Bilimoria
My Lords, at the heart of this is Parliament taking control. What has been a problem for the past two and two-third years is that the Executive have continually tried to bypass and bully Parliament, whether with Article 50 or the statutory instruments that are going through now. This is really frightening. I am sorry to say to the noble Lords, Lord Lansley and Lord Hannay, and the noble Viscount, Lord Hailsham, but there is a big difference between Australia and New Zealand, and, for example, the United States of America. Not only does that country undertake a meaningful public consultation before negotiating, but it releases all the negotiating text to a large representative panel and subjects the deals to an affirmative vote by Congress, which is also entitled to amend deals unless it waives its right. That is Parliament having a say. That is transparency. The European Union, with its mostly mixed agreements, needs ratification by member states. It is crucial that we accept these amendments, to make sure, in the words of the Brexiteers, that we take back control.
Lord Kerr of Kinlochard
My Lords, my perspective is that of a former negotiator. I do not think that a serious parliamentary procedure of the kind set out in the amendment for the approval of a mandate and the approval of the outcome of a negotiation damages one’s negotiating stance or limits one’s flexibility. I do not believe that at all. Having negotiated against Americans, I know that it greatly strengthens their hand to be able to say, “Here is the proof that I cannot give you what you want, because Congress would turn it down”. At the end of the day, when Congress turns one down—and it does—that is a very serious and effective deterrent to those disagreeing with the Americans in a negotiation. Speaking against unilateral disarmament in 1957, Aneurin Bevan talked of the dangers of sending the Foreign Secretary naked into the conference room. If we do not accept the amendment in the name of the noble Lord, Lord Stevenson of Balmacara, we will weaken the hand of British negotiators in the future.
Lord Tugendhat (Con)
My Lords, I will intervene very briefly. The proposers of this amendment put forward their arguments so admirably that there is little more to say, particularly the noble Lord, Lord Hannay, who compared the role envisaged for this Parliament with the roles of other parliaments. As we all know, one of the key arguments in the referendum campaign was about taking back control. Here is an absolute instance of where Parliament ought to take on greater powers if it is to take back control over an important area of British policy. The other thing is that a great deal has been made by the Government, the Secretary of State for International Trade and the Prime Minister about the centrality of being able to do trade deals. The argument is put forward that one of the great reasons for being outside the EU is that it gives us the ability to do trade deals. They are going to be a central part of government activity once we have left the European Union. For those two reasons, it seems to me that the Minister will have to put forward some very strong arguments indeed if she is to convince me and perhaps some others that it is right for the Government to ignore the principle inherent in this amendment.
Baroness Fairhead
My Lords, I thank the noble Lords, Lord Stevenson of Balmacara, Lord Purvis of Tweed and Lord Hannay of Chiswick, for tabling Amendments 12 and 35. They seek to ensure that Parliament has a significant role in free trade agreements and impose obligations on the Government and a scrutiny committee in relation to mandate-setting, transparency and approval of free trade agreements.
I fully understand the desire of noble Lords right across the House to ensure that there is strong and effective scrutiny of future trade agreements. It is an objective that the Government share. We have listened carefully to the views put forward in both Houses on this topic and last week published comprehensive proposals for enhanced scrutiny of future trade agreements in a Command Paper. This included confirmation that we would publish our outline approach to negotiations, including our objectives, accompanied by detailed economic analysis.
We further committed to publishing progress reports after each negotiating round and an annual trade report across all live negotiations. This draws on best practice internationally and will ensure a high degree of public transparency around our negotiations. In terms of Parliament’s role, we committed that we would work closely with a committee, or one in each House, to ensure that it could effectively scrutinise negotiations from start to finish, as well as setting out opportunities for scrutiny of FTAs throughout negotiations.
It is to this role that Amendments 12 and 35 apply. I will address these amendments and our proposal in this area in more detail. Amendment 12 would disapply CRaG to trade agreements and instead require that the agreement secured the approval of both Houses prior to being ratified, as well as requiring the approval of both Houses for negotiating mandates. Without wishing to revisit ground that was covered during Committee, it is worth reiterating that such a proposal goes to fundamental constitutional principles that underline the negotiation of international treaties. The negotiation and making of treaties, including international trade agreements, is a function of the Executive. This rule is not only the result of centuries of constitutional practice but also serves an important function. It enables the UK to speak clearly, with a single voice, as a unitary actor under international law. It ensures that partners know our views and are able to have faith that our position, as presented formally in negotiations, is the position of the United Kingdom.
Regarding the setting of mandates, we have considered international practice, and it is telling that there was none among those we considered in which the legislature had this role. That includes the EU, Canada, Australia and New Zealand. The noble Lord, Lord Bilimoria, referred to the United States. It is true that the United States legislature is different from ours. Congress does not vote on a mandate for each agreement but delegates authority for brokering trade agreements through a trade promotion authority. This includes setting out overall objectives for trade negotiations and legislation but not specifically for individual deals. The trade promotion authority then enables an expedited process for the consideration of trade deals whereby Congress has 30 days to consider the mandate for an individual country negotiation and can call hearings on them with the United States representative. They are therefore consulted in relation to the specific mandate for each country and during negotiations, as we plan to consult Parliament.
The noble Lord, Lord Hannay, said that there had been no consultation with Parliament, but there was a debate on 21 February to consult the Commons on four new free trade agreements we are considering. As he will understand, we are unable to negotiate right now while we are members of the EU. We will ensure that Parliament has the opportunity to scrutinise the outline approach to negotiations, and those would usually go to general debate in each House.
Lord Hannay of Chiswick
I am most grateful to the Minister for that clarification. I think I heard her say that there will now be an opportunity to consider the objectives the Government are pursuing in their negotiations—when they are able to conduct them—with Australia, New Zealand and the United States. That is very helpful, but she seems to be making rather heavy weather about the word “mandate”. She gave us a very lengthy exposition of the royal prerogative, which is something that is behind us but is now exercised, of course, by the Government. Could she not possibly think a little more carefully about ways in which this objective could be achieved? She has said already, I think, that the Government intend to set out their objectives in the negotiation. Why can they not say that they would seek the view of both Houses of Parliament on their objectives, which would be a mandate for the negotiations? That is all that is being suggested.
Baroness Fairhead
My Lords, the chosen words of the Government are “outline approach”. On the noble Lord’s point, the ability to have objectives in that outline approach and the ability for both Houses to debate and scrutinise those objectives is the key part of what we are discussing here. I agree with my noble friends Lord Hailsham and Lord Lansley, who talked about the critical issue here, which is consideration and discussion. That is absolutely what this Command Paper proposes—in the initial stage of the outline approach, to particularly scrutinise those objectives.
Lord Bilimoria
The noble Lord, Lord Kerr, said very clearly that the power of having Parliament behind the Government enhances our negotiating position with the mandate that that gives. The exact example is: why have we been outgunned by the EU in the negotiations over the past two and two-thirds years? It is because it has had a clear mandate from 27 countries, whereas we have a divided country and a divided Parliament. That does not give a clear mandate whatsoever, which is all the more reason we need the amendment.
Baroness Fairhead
My Lords, I do not want to go into the world of semantics, but the preferred term is “outline approach”. The objectives will be the objectives set, which will be scrutinised in the way in which we are proposing in both Houses. I agree totally with the noble Lord, Lord Kerr, that you want the ability to go back and say, “I do not think that will get through my executive board” or whoever because we want a clear set of objectives. This is what we intend to have, and an ability to say, “I do not think that will rub”. I also note that the International Trade Committee in the other place did not call for the power to approve the mandate.
We recognise the legitimate desire of this House to ensure that Parliament is able to shape our approach to negotiations. That is why we are committed to publishing the approach to negotiations. It will include those objectives. We will ensure that Parliament can scrutinise these. My noble friend Lord Tugendhat asked whether it is sufficient. We are trying to ensure enhanced scrutiny, so that is exactly what the Command Paper proposes. As I said, we expect that this would usually be through a general debate in each House.
Lord Warner (CB)
Does the Minister not accept that a Command Paper does not give the assurance to Parliament that provision in legislation does?
Baroness Fairhead
My Lords, I will come to that point later, which relates to the question that the noble Lord, Lord Hannay of Chiswick, raised on whether these matters should be on the face of the Bill.
The essential point is this: this is the first time in 40 years that we have been negotiating a free trade agreement. We are keen to make sure that we do not lock ourselves into a process by having detailed elements on the face of the Bill which would then be difficult to change. What we want to do is to ensure that, through this Command Paper, the process of an enhanced scrutiny is clear, that there is an ability for Parliament to scrutinise at every stage and, furthermore, that there is a committee which will meet in confidence, which I think was something that was raised in this House as critically important. The noble Lord, Lord Hannay of Chiswick, raised this with reference to the ISC, pointing to the fact that sometimes confidential discussions need to be held in a room with a committee of experts. That is what we are proposing. We would also expect these outline approaches and objectives to be the subject of close dialogue with the relevant committee.
Lord Stevenson of Balmacara
I will keep the Minister in suspense about what I am going to do, but not for long. I am grateful to all noble Lords who have contributed to this debate, which has been high level, and interesting in that some of the issues which perhaps have been a bit confused have been allowed to emerge in it.
I make it absolutely clear at the start that I do not believe that the amendment in my name and those of the other noble Lords who have joined me is a perfect solution to the problem we are facing. The noble Viscount, Lord Hailsham, is quite right to pick up a number of inconsistencies in that—noble Lords do not have to laugh that loud. But in my mitigation, may I say that it is not the job of the Opposition to draft for the Government the sort of detailed legislative framework which is being talked about here? This needs a lot of time, effort and attention which we are not able to bring to it.
Viscount Hailsham
Does the noble Lord then accept that it is necessary to have some provision to deal with the situation that would arise under proposed new subsections (1) and (4), where the two Houses disagree?
Lord Stevenson of Balmacara
Yes—but I do not have it. I challenge the Minister: if she is asserting that we are as close as she says we are, would she agree to have further discussions and bring forward an amendment we could both support at Third Reading? I will give her time to seek inspiration. I am not confident that it will come in any palatable form but I make this offer genuinely. It is so important and the principles so germane to what we are doing that we should try to go the extra mile if we can.
Having said that, I think the Government are hiding behind a completely fantasised world in which everything is rolled back, as someone said, to the 19th century with the royal prerogative secure in its place. Somehow, Parliament would be consulted; it would be able to scrutinise and look at the outline approach. The clue is in the language: why outline an approach except to mandate? Why scrutinise, when what we are talking about is post hoc discussion in Committee, reports that will gather dust in libraries but not have any effect, and no chance to influence at a parliamentary level what is being decided.
There are issues of principle at stake—about who has the right to make the decisions that will literally affect the people of this country in a very material way. This is because of the way in which trade has moved away from being simply about goods. It now involves services and a whole range of socioeconomic issues that need to be addressed in the round, at the highest level, by those elected by the people they serve. We have a role, though not as an elected House. I say to the noble Viscount, Lord Hailsham, that, in any discussion about priority, of course it has to be the Commons that takes the final decision.
These proposals need to be worked through properly. I will pause for a second to allow the Minister to respond on whether she is prepared to take this up at Third Reading. I will talk until I have to sit down, but I will give way to her if she wishes to make a comment.
Lord Mackay of Clashfern
While my noble friend is proposing to make a comment, it is highly important that the question of whether something should be discussed at Third Reading is a matter for this House. We have become rather accustomed to attempts on the part of Ministers to decline the opportunity of a Third Reading, but it is for this House to decide. I have no doubt that this particular, very important problem, which involves a delicate balance between the Executive on the one hand and Parliament’s two Houses on the other, should be handled with the utmost care. As the noble Lord, Lord Stevenson of Balmacara, noted, this is an issue about which there is already a bit of difficulty with the detail. We must try to get this right. I have no doubt that, if it is agreed at this stage, the House will allow it to be raised at Third Reading.
Baroness Fairhead
My Lords, we have had very fruitful discussions and come quite a long way on this point. All I can say is that I would be happy to discuss it further but I cannot guarantee to come back at Third Reading with any changes. On that basis, the noble Lord will have to decide how he chooses to treat his amendment.
Lord Stevenson of Balmacara
The Minister is certainly very brave to take on a former Lord Chancellor in his pomp. I agree with the noble and learned Lord. The House has a very strong view about this and would like to see it back, but I am stuck with the procedural arrangements, as far as I understand them. I cannot amend the amendment before the House at the moment. I assume that the only way to do this would be to vote it through—if the House will agree to its view being tested—and hope that we can bring it back either through ping-pong or in some other way. I give way to the noble and learned Lord to see if he has inspiration of his own.
Lord Mackay of Clashfern
Inspiration is not my line but there is no doubt at all that it is for the House to decide. The mere fact that the Minister has not been able to agree that the matter should come back does not seem to be a bar to the House deciding whether or not it is right. If the noble Lord tables a new amendment for Third Reading, the clerks will have a view but, ultimately, whether it should be considered is a decision for the House.
Lord Stevenson of Balmacara
I am grateful to the noble and learned Lord. I am getting inspiration in the form of a book from my noble friend.
Lord Grantchester (Lab)
My noble friend could retable the amendment. He should, really.
Lord Stevenson of Balmacara
In short, the advice is confused, but I am going to think about it.
The noble Lord, Lord Tugendhat, set a very high test for the response today. He wanted a detailed response that would assure him that the Government had in mind significant changes that would meet some of the questions raised. I think the view of the House is that the response was not up to that level; therefore, I wish to test the opinion of the House.
“Customs union
It shall be the objective of Her Majesty’s Government to take all necessary steps to implement an international trade agreement which enables the United Kingdom to participate after exit day in a customs union with the European Union.”
Lord Stevenson of Balmacara
My Lords, the purpose of the amendment is to give the other place a chance to consider whether the UK should seek to remain in a customs union with the EU. It is an option that we know is realistic and negotiable, as signalled by senior EU figures over recent weeks and months. It has demonstrable support among communities throughout the United Kingdom, this House and the Commons, as well as business and trade unions, and would go a very long way to providing a permanent solution for Northern Ireland.
A customs union with the EU would guarantee continued UK access to existing EU trade agreements without having to roll over after 29 March, although that does not seem to be going terribly well. It would enable the UK to have a say on the direction of future European trade negotiations, allowing us to push forward our principles of development and strong standards, and our values in tackling issues such as climate change. It would offer certainty and stability to British industry, thereby protecting jobs and allowing businesses to secure new trading opportunities. When coupled with a close single market relationship, it would create the conditions for our vital services economy—80% of our GDP—to flourish and grow. The other place narrowly rejected a customs union when it considered the Bill, in part because the Prime Minister promised to replicate the benefits in her deal. However, they are for negotiation and certainly not yet agreed.
If this House supports the amendment, we are doing our duty in allowing the Commons to think again about a really important issue. I beg to move.
Lord Purvis of Tweed
My Lords, there is no doubt that we on these Benches support the free economic movement of goods and people, which benefits all parts of the British economy and of our United Kingdom. The news today from the motor manufacturing industry is no surprise to those who have been following the assets leaving the United Kingdom and seen the people leaving the United Kingdom. There is a growing and depressing trend of businesses making a choice to move away, or at least to move some elements away, from the United Kingdom.
One of the principal reasons for that is the uncertainty about our trading relationship with our biggest market. The amendment, to which I have put my name, is better than the Government’s current position, or any position they are likely to take. That is why I support it. It is becoming a cliché that business needs certainty, but for many businesses it is now too late. The least this House can do, through the Bill, is to offer a higher level of certainty to businesses that there is some support for the UK remaining a member of a customs union.
I shall give one small example, of the many that could be offered, of why it is important to avoid the kind of disruption that leaving a customs union would bring about. This was highlighted in the Government’s recently published paper, Implications for Business and Trade of a No Deal Exit on 29 March 2019, and it illustrates what leaving a customs union would mean. There is a requirement for all businesses trading with the European Union to have an economic operator registration and identification number, in order to,
“complete the necessary customs documentation for goods they are importing”.
It is not simply desirable; it is necessary. As the Government themselves say,
“an EORI number registration is one of the most basic and straightforward parts of the process most businesses would need to undertake to prepare for no deal”.
Businesses will need that number on exit day. The government document goes on:
“As of February 2019 there had only been around 40,000 registrations for an EORI number, against an estimate of around 240,000 EU-only trading businesses”.
So we are one-sixth ready to leave.
The document highlights the fact that on an issue for which government communications have been strong, and the information to businesses about the fact that they needed to prepare has been clear, they have not done so—for a number of reasons. This illustrates the complexities required of the business community if we are outside a customs arrangement that would amount to a union. That is one reason, among many others, why we support the amendment.
We on these Benches reserve our right to campaign strongly for the UK to retain membership of the single market, as well as the customs union, of the European Union, and to say that if there is to be a withdrawal agreement it should be ratified by the people in a referendum. I hope that those on the Labour Benches are also moving faster in that direction. That debate is for another time. The debate on the movement of people is for the next day on Report, but for the moment we can give a signal to businesses across the country that the House of Lords, at least, is focused on providing a degree of certainty, even if the Government are not.
Lord Kerr of Kinlochard
My Lords, for this House it is déjà vu all over again. We voted for a customs union in the withdrawal Bill on 18 April, by an enormous majority of 223. The amendment then was in my name, and I made a speech of coruscating brilliance taking up several columns of Hansard, advancing five very strong arguments for the customs union. I refer the House to my speech on that occasion.
Lord Wigley (PC)
My Lords, I shall try to be as brief as the noble Lord, Lord Kerr. I too tabled an amendment early in the Committee stage—the predecessor to the amendment that he so ably moved at that time. My feeling is that we have lost an opportunity to find a satisfactory compromise in the negotiations. The red lines laid down by the Prime Minister have stopped the possibility of getting a deal, including a customs union and possibly a single market—that would have avoided the difficulties with Northern Ireland and safeguarded the position of Gibraltar. More than anything, it would have looked after the manufacturing industries for which we in Wales worked so hard, with different parties in government, to secure over the past 30 years. I think that it was 52 Japanese companies that came to Wales, to sell to the European Union: they came for that reason. We now see the danger of Japanese companies and others being lost. Let us also look at the situation of the agricultural industry, and the need to ensure that we have that export market. For all those reasons, I hope that the amendment will be carried—by the same majority as last time.
Viscount Trenchard (Con)
My Lords, I know I am in a small minority in your Lordships’ House on this one, but I would like briefly to put the other argument. According to the trade data published by the ONS in September 2018 the customs union, of which noble Lords would like us to remain a member, has not actually achieved any benefits for the UK during the 20 years for which we have been a member. The UK’s slowest-growing export trade since 1998 was goods exports to the EU.
Lord Hannay of Chiswick
I just want to correct the noble Viscount. We have been a member of the customs union with the European Community since 1972—rather more than 20 years.
Viscount Trenchard
I do not disagree with the noble Lord—but the point I was making is that in the period since 1998 goods exports to the EU have grown by only 0.2% per year, or 3.7% over those 20 years, reaching £164 billion in 2017. However, the UK’s goods exports to countries outside the EU customs union have grown in the same period by 3.3% a year—over 60% in total—to £175 billion. So the customs union has not been quite as marvellous for this country as noble Lords opposite suggest. I very much hope that the Government will stick to their policy of leaving on a basis whereby we will have our own independent trade policy, which will enable us to do more trade and enter into trade agreements with the economically faster-growing parts of the world.
Baroness Altmann (Con)
My Lords, I support the amendment. I hope we will send back a clear message to the other place that it needs to reconsider the importance of having a customs union—for our integrated supply chains, for the success of our manufacturing industry and, indeed, for peace in Northern Ireland and security on the Northern Ireland border. I am afraid that a number of colleagues in the other place do not seem to understand how international trade deals work. The idea that we would have rolled over all 40 trade deals that we had through the EU by now has been shown to be fanciful. I do not believe that it is safe, in the 21st century, to assume that operating as a medium-sized country outside a customs union will deliver us more and better trade than remaining within it.
Baroness Falkner of Margravine (LD)
My Lords, I would like clarification from those who tabled this amendment: they refer to “a” customs union but other speakers have used the expression “the” customs union, as the noble Baroness, Lady Altmann, has. For the purposes of what I am going to say. I will assume that they mean remaining in the EU’s customs union and common commercial policy.
If that is the case, I understand the motivation for seeking a halfway house between leaving and remaining, which is what this implies. However, being in a customs union and being entirely subject to the EU’s common commercial policy, which is the overarching umbrella under which the customs union sits, is the worst of all options. That is why Switzerland and Norway—two countries with different arrangements in the EU—have chosen not to be part of the customs union. So while the idea may be attractive to protect trade in goods—and I admit that is important—given that we have an economy where trade in goods is a relatively small part of our exports, the sting of the common commercial policy, although it is encroaching into services, is primarily about trade in goods, not trade in services.
Being under the umbrella of the CCP without membership of the EU will mean that we will not be present in the European Council, which has the ultimate say over trade deals; we will not be present in the European Parliament or in regional parliaments. Noble Lords may remember the Canada-CETA story and the Parliament of Wallonia. We would not even have the status of the Parliament of Wallonia in future trade deals were we stay in the customs union. We would be a rule taker without a seat at any table. It would also render the previous amendment, which the House overwhelmingly passed, entirely redundant.
Turkey feels so disadvantaged by its current arrangement in the customs union—which, incidentally, was only agreed as a stepping stone towards full membership—that it is seeking to change those terms. However, I suspect that by now it is not seeking to change the terms because it accepts that it is not going into membership of the European Union.
The CCP is designed to serve the interests of member states—and so it should—but it is not designed to serve the interests of the fifth biggest economy in the world. Even those who feel that the United Kingdom will be much diminished if it leaves the EU must surely recognise that we are a more significant economic power than Turkey. So when the EU rightly seeks to advance its own interests, who will speak for UK interests? When the EU moves to use trade remedy laws—we have had a great deal of discussion during the passage of this Bill about trade remedies—to protect its own industries, and when that does not cohere with the United Kingdom’s interests, while we remain a member we can say something about it; we can indicate our preferences. If we are out of the EU but within the customs union, we would have no say over our interests being disadvantaged in the interests of any of the 27 member states which would be at the table.
Lord Kerr of Kinlochard
The situation the noble Baroness is describing will obtain if the Prime Minister’s deal goes through and we go into an interim transition period. It is certainly the situation that would obtain if we go into the backstop. We would be a rule taker. We would have no say in the making of the tariffs but we would have to apply them. We would not be consulted; we would be notified.
The amendment refers to “a” customs union. We have never attempted to work out what kind of customs union the EU would be prepared to agree with us. We have never done that because the Prime Minister’s rash red line ruled it out. We are now going into the worst possible case, if the deal goes through, of being absolutely a rule taker and absolutely not in the European Council, as correctly described by the noble Baroness. However, that is not what the amendment is asking for. It is asking for the negotiation of a real customs union between the United Kingdom and the European Union.
Baroness Falkner of Margravine
The noble Lord has expressed sentiments that I have heard many times over the past three years from Mr Corbyn. In our various EU Select Committee meetings with the EU’s chief negotiator Mr Barnier, some of us raised the issue of whether there would be a possibility of negotiating a different sui generis, unique, bespoke customs union. We have been told in terms that that is not possible. I fear that concealing one’s intentions behind “a” customs union in the hope that if all else fails the EU will come around to providing us with a customs union presents the EU with a situation where it would have to consider how it could give each country it does any negotiation with in the future a bespoke customs union.
Anyone who knows anything about EU law—I accept that the noble Lord does, but I do too—will tell you that it will not uniformly make such an enormous exception in a law that has been there from the 1950s to accommodate the United Kingdom, particularly not at this late stage.
Baroness Altmann
I think what the noble Baroness is doing for the House is eruditely explaining the trade-offs that the country is facing as a result of the decision that was taken and the red lines that were imposed. What this House is talking about—and what the amendment seeks to achieve—is to protect the manufacturing success, jobs and the integrated supply chains that we have built up in this country on which so many people’s livelihoods depend, as well as protecting the border in Northern Ireland. That is entirely accepted. Indeed the House has already passed the amendment which would also require us to have some kind of regulatory alignment in order to better achieve the aims we are trying to set out. However, that does not mean that we should not have and do not need a customs union.
Baroness Falkner of Margravine
The noble Baroness has just told your Lordships that the House was trying to protect manufacturing through being in “the” customs union. So we have on one side “the” customs union, which is the EU customs union, and on the other side we have a bespoke customs union. That in itself illustrates the problem with those who want to reverse where we are today.
I urge the House to look at the common commercial policy carefully, not only in the light of Articles 206 and 207 of the TFU, and to look at the jurisprudence. The jurisprudence on the part of the CJEU expounds the EU’s common commercial policy into foreign direct investment rules way beyond common commercial policy and into the EU’s external action policy. Some of us may have no problem with that, but the jurisprudence will continue while we are outside the room and not at the table. The jurisprudence will reflect the EU’s priorities, not ours. It would leave us in a vulnerable position going forward whether we were in “a” customs union or the bespoke customs union, which would potentially give us bargaining rights and some say in jurisprudence. Certainly that customs union would give us no rights at all.
I am not used to evoking Mr Blair in support of any cause—I suppose it will have the same impact here as it does elsewhere in the country—but even he has gone public to say that the worst of all worlds would be for us to stay in the customs union. If noble Lords want to support trade in goods they need to move either towards the withdrawal agreement and the FTA that is likely to come with it, or to move to simply remain in the EU. This amendment is an ambush to try to achieve that latter aim. I am pro that latter aim—I am pro remaining in the EU—but I can see, with 20-something days to go, that either we have to agree with the withdrawal agreement, as I voted the last time, or we have to go the other way, as I said in my previous speech, and ask the Prime Minister reconsider our position. A customs union is not going to do that and, on that basis, I will be voting with the Government.
Lord Bates
My Lords, at this hour, and given the debate, there will probably not be many Members of your Lordships’ House who are carefully weighing the arguments on either side, wanting to know what the Minister is going to say from the Dispatch Box that could just persuade them another way. We have been around this course many times and the arguments have not changed. The House knows the Government’s position on this: they have set it out many times. The people of the United Kingdom voted to leave the European Union and to take back control of their laws, borders and money, and have an independent trade policy. If we had a customs union, we would not get that. That is the central point against the amendment. On the other hand, we have a withdrawal agreement that allows us to have many of the benefits of our membership of the European Union without being members of it, and honours the referendum result.
I shall come to two points. The noble Lord, Lord Stevenson, when moving the amendment—which is worthy of further examination as to what it is seeking the Government to do—said that he wanted to give the other House an opportunity to think again on this issue. The noble Lord, Lord Kerr, in a brilliant, brief contribution—perhaps because we had heard his eloquence on this point in Committee—reminded the House that it voted in favour of his amendment. What they did not mention was that when it went to the other House, giving it an opportunity to think again, it rejected not only your Lordships’ amendment but the concept of a customs union put forward by Stephen Hammond when the Bill was at this stage in the other place. If the purpose is to give that House another opportunity to think again, perhaps it could shout down the Corridor, “We have already said it; did you not hear us the first time?”
Some noble Lords have pointed out that the uncertainty is damaging for business. I accept that. Uncertainty is always damaging for business. What business needs is certainty. However, right at the 11th hour, when we are within sight of and have an agreement, with an exit day that meets the criteria, the amendment proposes to require Her Majesty’s Government to reopen the whole negotiation process that has taken place over the past two years. Somehow that is supposed to help business. Not many businesses would sign up to that level of reopening negotiations and uncertainty. The presentation of the amendment presupposes that the outcome and benefits of a customs union are known. No—they would have to be negotiated. That would be the case unless, as the noble Baroness, Lady Falkner, rightly said, it actually related not to “a” but “the” customs union. In that case, the noble Lords’ option would be there immediately. That is the position of those who want to stay in the European Union, and we understand it.
The amendment therefore plunges us further back into uncertainty and more years of negotiation. The House has already given its view, not once but twice, on this issue. The other place does not need the chance to think again and I therefore urge noble Lords to vote against the amendment if it is pushed to a Division. Most importantly, I urge all Members in the other place not to listen to the amendment but to look at the withdrawal agreement before them next week and make sure that they vote for it, so that we leave the European Union on 29 March, as the British people wanted, but with a deal.
Lord Stevenson of Balmacara
Follow that wonderful peroration! The Minister has been practising, I am sure. I congratulate him on his brilliance in getting out of the Tugendhat trap. He obviously thought that he would be judged on whether he met the very high standards required of an answer in this place before going down to an ignominious defeat—as I hope will be the case. He did it by setting his own bar and then deciding whether he had passed it by inventing, as often happens in these debates, the things that I did not say and then arguing against them effectively. He ended up by appealing to the green Benches down the Corridor, where I think he will probably find a slightly better response than he will get today.
I am sorry that the Minister has to defend the indefensible. As he said, all the arguments have been exhausted. In response to two of the charges, yes, the other place has considered this matter before, but somebody once said, “When the facts change, I change my opinion. What do you do, sir?” On the question of uncertainty, surely it is better to have a certain target, even if it takes time, than the continuing uncertainty of whether there will be a target, and that is what this amendment tries to do.
Customs unions are not very widely found in the world. They are a very special thing, particularly when they involve equality of partners trading with each other. The majority of customs unions in the world involve single dominant economies forcing terms on others. This customs union is a particularly good example of the way in which mature democracies coming together can create good for all and we should be very chary of moving out of it.
The Minister challenged the wording of the amendment but it is incredibly inclusive and was drafted to make sure that it stood the test of time. It simply states:
“It shall be the objective of Her Majesty’s Government to take all necessary steps to implement an international trade agreement which enables the United Kingdom to participate after exit day in a customs union”.
It does not imply staying in the EU. I think that we have had the debate. I wish to test the opinion of the House.
“Involvement of judicial systems in trade disputes
(1) A trade agreement is not eligible for signature or ratification by the United Kingdom unless the agreement includes the provision in subsection (2).(2) Subject to section (3), legal proceedings brought against the United Kingdom under investment protection provisions included in a trade agreement will be heard by the courts and tribunals system of the United Kingdom.(3) If in the view of the Secretary of State there is a substantive case for including an investor state dispute settlement chapter in a future free trade agreement, regulations to that effect must be laid before both Houses of Parliament in advance of the approval of the mandate for that free trade agreement; and such regulations must be approved by a resolution of each House of Parliament before the mandate may be approved.”
Lord Stevenson of Balmacara
My Lords, Amendment 15 deals with whether future trade agreements should have a chapter or separate part relating to investor-state dispute settlement systems. These complicated issues have a long history and have been a feature of trade agreements for many years. I think the UK has some 90 in place. As a country, we have not found much difficulty with them. Their main purpose was to ensure that in the case of arrangements for financing and operating the agreements set up under various free trade agreements and similar arrangements, those who put money at risk had a secure route to ensure that when issues outside their control or the control of one of the partners concerned caused difficulties, there was a chance to recoup the monies involved.
In that sense, these ISDS chapters and separate agreements have a place, but they have some downsides, which have not yet had as much discussion as they should have had. The arrangements have been used in the past to prevent social change in countries which have been subject to a free trade agreement where investors have thought that their investment was at risk. They have sued in courts which have been set up specifically for the purpose and which are not transparent or available for wider scrutiny, in order to recoup the investment involved or to change the policies that have been brought about.
For example, in a recent case in a western European country, an investor sued a town authority which had introduced a national minimum wage on the basis that the deal under which they had been brought in to support the scheme did not make provision for additional wages to be paid out and, as a result, the company was losing funds. That case was not a question of cash transfer, it was the cancellation of a policy, which I think many people would find a rather strange outcome.
These schemes have been the subject of recent debate and discussion, particularly around TTIP, but in particular about the fact that they were included in the agreement with Canada signed by the EU only a few years ago and now in the process of being ratified. However, it is being ratified at the expense of the ISDS chapter. In order to ameliorate that in some ways, the EU has set up a special judicial system under which these schemes can be considered. It may be that the future of ISDS measures, if they are included in schemes, lies in that sort of approach. As will be argued, I am sure, that is a very intensive system in terms of salaries, structures and procedures and it may not be worth the candle.
This is a probing amendment to get a better understanding of where the Government stand on these issues. In moving the amendment today, we are also reaching out to the Government to suggest that it is time we got more organised. It seems strange that, at quite a high level, a mature democracy such as the UK, with tried and trusted judicial systems, has to go to the trouble of setting up a parallel system to deal with this class of activity. Surely our existing legal systems should be capable of drawing these in and working with them. Even it were necessary to set up a separate arrangement, does it need to be a permanent system or could there be an alternative route? If the Government were interested in further discussion on that, we would make an offer to see if we could find an amendment that would work. I beg to move.
Baroness Fairhead
I thank the noble Lord, Lord Stevenson of Balmacara, for tabling this amendment. I will make some statements about why we are much more supportive of ISDSs and these dispute resolutions. I draw noble Lords’ attention to the fact that, as this House is aware, the Trade Bill is not intended to cover future free trade agreements or the investment policies associated with them. As a result, Clause 2 allows the Government to change domestic law where necessary to ensure that these continuity agreements can operate in a UK context. To be clear, no powers in the Trade Bill will be used to implement investment protection provisions, because such provisions in trade agreements do not require legislation.
I want to comment about investment protection provisions more generally because I believe they have a place. According to UNCTAD, foreign direct investment in 2017 was around $30.8 trillion. There are around 3,000 international investment agreements, most of which include these sorts of provisions. They have been going for over 40 years and, to date, only 855 claims have ever been completed. This means that, for the vast majority of investment agreements, no claims have been made. Furthermore, states have won more claims than investors—37% to 28%—with the rest either settled or discontinued. This does not suggest a bias in favour of investors and, I hope, offers a bit of comfort.
I understand the concerns that have been raised in the past, but our assertion is that many have been overstated. Often, ISDS mechanisms are attacked because they seem able to force a Government to regulate in a particular way in the public interest. However, they do not infringe on that right to regulate. The right of Governments to regulate is protected in international law. I reassure the noble Lord that the threat of potential claims has never affected the UK Government’s legislative programmes. We have more than 90 agreements with these clauses, as the noble Lord said. We have never had a successful claim made against us.
The amendment would require investment disputes to be heard by UK courts or tribunals in all instances, which has the potential to undermine what we think has been quite an effective process—an internationally accepted framework which has successfully supported our investors worldwide. The noble Lord, Lord Stevenson, mentioned new concepts, including the multilateral trading court. I agree with him that that is just one of a number of concepts. Work is at an early stage internationally. Future negotiations should take place in a forum where states will be fully involved to ensure that the system delivers. I fully agree with the noble Lord on that. We support the objectives of ensuring fair outcomes of claims, high ethical standards for arbitrators and increased transparency, which is another of the points that have been held against the previous systems. We have pushed hard for greater transparency.
As the noble Lord is aware, we in the UK expect other countries to treat our businesses operating abroad as we treat their investors in the UK. Our concern is that if the amendment were passed, it would be likely that any future partners would also insist on reciprocal provisions. That would mean that any disputes brought by UK investors against a host state would be required to be heard in its national court. This has the potential to be to the disadvantage of our investors.
The amendment could also create a precedent by encouraging some existing bilateral investment treaty partners to seek amendments with the UK to ensure consistency. UK investors—I am sure we all agree—can make incredible contributions to the countries in which they invest, including in hospitals, schools and other infrastructure. Potentially, this amendment could lead to decisions by UK investors to not invest. These countries would therefore not benefit; indeed, our assertion is that countries could be damaged in investment terms. I also ask noble Lords to note that, while international arbitration has been a valuable tool for our investors—who, in some cases, have been subject to egregious treatment by local Governments—we have never been successfully sued.
Most of our future negotiating partners who favour the inclusion of investment protection and ISDS would expect this to include some form of dispute resolution through a means that the international community is trying to work out. Securing agreement on an alternative domestic process could lead to the UK having to accept an unwelcome trade-off.
Additionally, as I highlighted at the start of my comments, the Trade Bill is not intended to deal with future free trade agreements. Therefore, we do not propose coming back with any changes on this at Third Reading. I am very happy to have discussions with the noble Lord outside the Chamber, but in respect of the true aims of this Bill and the systems already in place to resolve those disputes, I ask him to withdraw the amendment.
Lord Stevenson of Balmacara
I am very grateful to the Minister for her full response. I look forward to reading it in Hansard. I will take her up on her offer of further discussions, but at this stage, I think the best thing is to withdraw the amendment.
Lord Tyler
“Geographical Indications
It shall be an objective of an appropriate authority to take all necessary steps to implement an international trade agreement which ensures mutual recognition of Geographical Indications in the United Kingdom and the European Union.”
Lord Tyler (LD)
My Lords, I am a co-signatory to this amendment. I will be exceedingly brief because of the late hour, and also because I am extremely optimistic about the response I will get from the Minister. On 23 January, the Committee heard an extremely helpful response from her and since then she and I have exchanged correspondence, which has underlined the commitment of the Government to try to support the objectives that we were seeking on that occasion, and which are included in the proposed new clause here. It is purely declaratory; it strengthens rather than undermines the Bill, so I hope I can expect a very positive response.
Much as I am tempted, even at this late hour, to wax eloquent on the merits of Cornish clotted cream, pasties and sparkling wine—particularly as, this week, the people of Cornwall celebrate their great patron saint, St Piran—it is more appropriate that we move smartly on and get a very enthusiastic response from the Minister. I am sure that the Government will recognise that what we have sought to do here is to give form to the precise reassurances that she gave in Committee, and which she has subsequently repeated in her correspondence. I beg to move.
Lord Deben (Con)
My Lords, I wish to make a confession: when I was a Minister responsible for this area, I disobeyed the Government’s policy. Then, it was that we should be opposed to all these appellations and very determined in insisting that they were a restraint on trade and a disgrace. I thought that was nonsense. We have done great damage to our food industry by not defending so many of the things we have. Cheddar cheese, for example, can be manufactured almost anywhere in the world, but it is a Great British invention. The noble Lord, Lord Tyler, referred to what Cornwall has produced; in Suffolk, we now have a kind of local food industry which is really important. The fact that the food is made locally matters hugely, even if it is sold a long distance away.
This is much closer to what people want; it is much closer to what food ought to be like. It is much further from the kind of industrialised agriculture and food industry which, we must understand, is the “museum”—if I may use the expression of the ambassador from the United States. It is a museum of the kind of food we have produced, which has not had this very important distinction. Part of that distinction is the geographical identification. I know that my noble friend will be hugely supportive of this, but I thought I ought not to leave the opportunity to admit my past transgressions.
Baroness Fairhead
My Lords, I thank the noble Lord, Lord Tyler, for tabling this amendment. I fear, however, that I may not be able to give it the wholehearted support that he wants, because it seeks to bind the UK into a negotiating position of agreeing reciprocal protection of all EU and UK geographical indications—GIs—as part of the future economic partnership agreement. I can, however, reassure this House, the noble Lord, Lord Tyler, and my confessional noble friend Lord Deben, that the Government fully recognise the importance of continuity in the protection of UK GIs. We have heard, loud and clear from all parts of the UK, the concerns of our producers. It remains a priority for us to secure this protection; we agree that it is very important to maintain it.
While we share the objective of continuing the protection of UK GIs, we do not support the amendment because its effect would be to restrict our negotiating position on the detail of the future agreement. It is important for the Government to retain options that give us the flexibility to conclude negotiations successfully, with both the EU and potential future partners, in line with UK interests. These negotiations will be to the great benefit of UK industry, not least the UK’s superb food and drink industry, by opening markets to our products.
As I hope I explained in the House on the last occasion, the protection of UK GIs in the EU has been confirmed as continuing in both negotiated-deal and no-deal scenarios. This has been confirmed by the European Commission and is consistent with our understanding. These GIs should continue to have the same level of protection.
For the future protection in the UK of both UK and other countries’ GIs through the withdrawal Act, we have agreed to establish our own GI scheme, which will be very similar to the EU scheme—a good scheme, to echo the point of my noble friend Lord Deben. This was confirmed in the White Paper. The scheme will provide a simple set of rules giving all 87 of our GIs continued protection in the UK when we leave the EU. The independent scheme will be established in both a no-deal and a negotiated-deal scenario. It will be open to new applications from both UK and non-UK applicants from day one, and it will fulfil our obligations under the WTO agreement on trade-related aspects of intellectual property.
In the rest of the world—again, as I confirmed last time—we are working with our global trading partners to transition the EU trade agreements, including ongoing obligations towards, and recognition of, our GIs.
While existing UK GIs will automatically remain protected whether we reach an agreement or not, existing EU GIs in the UK do not automatically benefit. As the House is aware, the withdrawal agreement with the EU means that all existing EU GIs will get the same level of protection as now until a future economic partnership agreement between the UK and the EU comes into force. The potential long-term protection of existing EU GIs would, therefore, not be determined then but as a result of the future economic partnership. This amendment, which proposes a reciprocal agreement, would, therefore, prejudice the negotiation. Furthermore, by requiring a reciprocal system of mutual recognition, it would tie the UK into accepting EU GIs created in the future. That would mean that the UK would be forced to protect successful EU GI applications without the ability to assess them ourselves.
As I emphasised earlier, not agreeing to a reciprocal arrangement would have no consequences for the protection in the EU of existing UK GIs, which should enjoy continued protection after exit regardless. In summary, therefore, we believe fundamentally in the importance of GIs, particularly for the agricultural community, but if this amendment passes it will remove the flexibility necessary for the UK to successfully negotiate new trade relationships outside the EU.
Additionally, I have assured noble Lords that the desire of UK GI producers for continuity of recognition and protection is fully acknowledged and is a key priority for us. In that context, the comments of the European Union grant us additional assurance that they will continue to be protected. On that basis and in the light of the negotiation of the future economic partnership, but with the absolute conviction that we are committed to UK GIs, I ask the noble Lord to withdraw this amendment.
Lord Tyler
My Lords, I have listened with great interest to what the Minister has said. There is a simple trade-off here. She said that if we were to pursue the declaratory proposed new clause, it would reduce flexibility. The more flexibility there is in a case such as this, the less one can be sure and confident that the situation is going to continue to protect in the way that my noble friend Lord Stevenson—I think that I can call him that on this occasion—and I would like. Various producers in the UK want that continuity as a certain guarantee for the future. However, we will read with care in the Official Report what the Minister has said and see whether further action may be needed. In the meantime, I beg leave to withdraw the amendment.
Trade Bill
Wednesday 13th March 2019
(5 years, 8 months ago)
Lords ChamberRead Full debate Trade Bill 2017-19 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 127-R-II Second marshalled list for Report (PDF) - (11 Mar 2019)
16:36 - Division on Amendment 22 - Ayes: 285 / Noes: 184 - Amendment 22 agreed.
17:36 - Division on Amendment 24 - Ayes: 254 / Noes: 187 - Amendment 24 agreed.
19:22 - Division on Amendment 34 - Ayes: 193 / Noes: 154 - Amendment 34 agreed.
“Continuation of North-South trade and prevention of customs arrangements at borders
An international trade agreement between the United Kingdom and the European Union may not be ratified under sections 20 to 25 of the Constitutional Reform and Governance Act 2010 unless the agreement—(a) is compatible with the terms of the Northern Ireland Act 1998, and(b) does not—(i) negatively affect any form of North-South trade in goods or services or the operation of the relevant North-South implementation bodies, or(ii) create or facilitate customs arrangements between Northern Ireland and the Republic of Ireland after exit day which feature—(a) physical infrastructure related to customs checks,(b) a requirement for customs or regulatory compliance checks,(c) random checks on goods vehicles, or(d) any other checks and controls related to trade, that did not exist before exit day and which are not subject to an agreement between Her Majesty’s Government and the Government of Ireland.”
Lord Hain (Lab)
My Lords, the amendment stands also in the names of the noble Lords, Lord Kerr and Lord Bruce, and the noble Baroness, Lady Altmann. This amendment, which has cross-party support, is consistent with the previous amendment carried by your Lordship’s House, and which the Government accepted when the European Union (Withdrawal) Act was adopted last summer. However, it is vital that those provisions in Section 10 of the withdrawal Act are reflected in this Bill, which concerns not our divorce deal, as that Act did, but our long-term trading relationships.
In principle, the UK has joined Ireland and the EU in a shared objective of avoiding a hard border on the island of Ireland in order to help protect the hard-won peace process delivered by the Good Friday agreement—a peace process that is still just that: a process that, in my view, has dangerously reversed these past couple of years. The border is often described as the Irish border, a description which seems to absolve the UK of any ownership of it, but it is a UK land border with Ireland. If we leave, it will be a border between the UK and the EU, so it is our responsibility as much as it is Ireland’s and the EU’s responsibility under any circumstances.
Only last week, the head of the Northern Ireland Civil Service, David Sterling, warned of potentially grave and profound consequences of a no-deal Brexit—including a sharp rise in unemployment, the collapse or flight of businesses and potential unrest—for Northern Ireland, which, lest we forget, voted by 56% to 44% to remain in the European Union in 2016. Senior civil servants do not usually speak so candidly and compellingly. Advocates of a kamikaze Brexit might take notice and might also take notice of the strong words of the 50 or more Northern Ireland businesses which wrote to MPs in similar terms over the weekend.
The extent of trade and traffic over the Irish border is huge: 110 million person crossings take place every year; Northern Ireland, with its population of 1.8 million people, exports £3.4 billion over the border, by far its biggest export destination outside the UK and the first export destination for new and growing enterprises; at least 5,000 Northern Ireland companies trade with their neighbours over the border with Ireland; tens of thousands of people live on one side and work on the other; supply chains operate across the border without impediment; more than 400,000 lambs and 750 million litres of milk are exported across the border to Ireland for processing; and 177,000 heavy goods vehicles and 208,000 light vans cross the border every single month, which is 4.6 million crossings a year, and there are 22 million car crossings, and they take place all along a 300-mile border with nearly 300 crossing points.
By way of comparison, the Norway-Sweden land border is 1,000 miles long with only 57 crossing points. That is a hard border accompanied by infrastructure at the frontier, yet it is the very one most cited by those Brexiteers who seek to brush aside our border with the Republic as something which can be solved with a few cameras and some online programmes.
There are unique arrangements under the Good Friday/Belfast agreement for north-south co-operation. The Department for Exiting the European Union lists no less than 157 different areas of cross-border work and co-operation. Many of them have been facilitated by the common legal and policy framework provided by Ireland’s and the UK’s common membership of the EU since 1973. These areas are the things of everyday life—the precious signs of normality in the post-conflict border region—and there must never be new barriers or controls erected to block or discourage them. They include: food safety; tourism; specialist schools; fighting crime; tackling environmental pollution; water quality and supply; waste management; bus services; train services; cancer care; blood transfusions; and gas and electricity supply. We must never disrupt these arrangements, either through a divorce deal or—the amendment is directed at this—any new trade agreements.
WTO rules, which primarily remove barriers to trade and prevent unfair discrimination, will not allow these areas of north-south co-operation and everyday cross-border movement to be maintained. WTO rules and the obligations of an EU member state would strictly limit the kind of bilateral co-operation between the Republic and the UK as an EU member state which has made the border invisible in everyday life.
Some find all these essential facts to be tiresome obstacles to their Brexit dream. They argue that the border in Ireland will never need any new barriers, that the UK will never erect any on its side and that somehow Ireland, which by law has to obey EU and WTO customs and regulatory rules, will not do so either. The same people go on to use the word “technology” as a magic solution, repeatedly citing reports by one or two alleged experts on how, maybe, such solutions might work and might be ready someday, somehow.
Lord Kerr of Kinlochard (CB)
My name is on the amendment but I have very little to add to the authoritative introduction from the noble Lord, Lord Hain. I agree with him that we should be pressing at an open door here. At the start of Report, the Minister, in responding to me on what the tariff regime would be in the event of no deal, indicated that we would be told in due course. Such is her power that I understand that the schedules were published this morning—conveniently for our debate. I am sure that that was the only reason for their publication and I am sure that we owe it entirely to the Minister, because the timing is so apt.
I myself have seen nothing from the Government but, according to the press, it is made clear in today’s announcement that temporarily at the outset—I do not know how long that means—if a tariff regime is required on 30 March because we leave with no deal, it will not be applied at the inner Irish border. There will be no tariffs and no customs checks, and imports will be exempt from quotas, although, for imports from the EU other than across the Irish border, tariffs will be charged—10% on motor cars and quite a high tariff on agricultural products of various kinds. I am not quite sure how long such an arrangement can last. It will be a breach of WTO rules, but I guess that the WTO will live with that for a bit. Although I have never wanted a BMW, if I did want to buy one, it would be 10% cheaper if I imported it via Dublin and Belfast, which would be slightly odd. I cannot see that lasting on a permanent basis.
However, my point is that the Government are quite right to exempt the inner Irish border—it really matters. It therefore seems obvious that it should be easy for the Minister to accept Amendment 22, moved by the noble Lord, Lord Hain. The Government have already accepted it in another context, as he explained, and today’s announcements show that they would intend to apply it to the inner Irish border anyway.
The other night, in his reply to a question from the noble Lord, Lord Campbell of Pittenweem, the noble and learned Lord, Lord Keen of Elie, said:
“The whole point of the present withdrawal agreement and the Northern Ireland protocol is to ensure that we adhere not only to the terms but to the spirit of the Belfast agreement”.—[Official Report, 12/3/19; col. 978.]
I applaud that. The withdrawal agreement is dead, but we must uphold the spirit and letter of the Belfast agreement, whatever the future regime, and this amendment would permit us to do that. Since it seems to be in line with the Government’s actions and words—in today’s tariff announcements and last night’s speech by the noble and learned Lord, Lord Keen—I very much hope that the Minister will be able to accept the amendment.
Lord Eames (CB)
My Lords, speaking from a Northern Irish position, I urge the House as strongly as I can to support this amendment in the name of the noble Lord, Lord Hain.
As the debate over the entire Brexit situation has come and gone in the past few weeks, there has been growing concern across the business community in Northern Ireland about the hidden implications of what we are debating. They will affect every strand of the Northern Ireland business community, which is finding itself thrust on to the knife edge of Brexit.
The whole border question has obvious but also hidden implications. The noble Lord, Lord Hain, rightly referred to the Belfast agreement. While it is all too easy to raise the worry about an increase in violence and the breakdown of relationships—and to overplay that card—it is equally dangerous not to mention it. The subtlety of that situation is such that, with the words of this amendment, we are not only strengthening the spirit of the Belfast agreement but recognising that it is an integral part of the whole vista of trade.
Across the border counties, the links between the Republic of Ireland and the Province of Northern Ireland, there are numerous small businesses which are absolutely identifiable as Irish, in a sense. They are small and may not employ many people, but they are the absolute breath of the local community. Those businesses—as well as the major BMWs of this world, if the noble Lord, Lord Kerr, will forgive me—are not only the heartbeat of our community but are indicative of why Northern Ireland will probably be the greatest sufferer if what we fear in the light of yesterday’s events down the Corridor comes to pass.
So I urge noble Lords to take seriously the thinking behind this amendment. The noble Lord, Lord Hain, is ideally placed to speak about the situation from his years of experience in dealing with us in Northern Ireland and seeing something of what makes that community tick. While I am introducing an element that is not about detailed trade negotiations or principles, I believe that it is a genuine, real reason why this amendment must be passed.
Lord Bruce of Bennachie (LD)
My Lords, I rise briefly to support this amendment, to which I have put my name. Sadly, we have arrived at a point where a deeply divided Conservative Party has deeply divided the nation. The irony of that is that it is the Conservative and Unionist Party that currently presents the biggest threat to the integrity of the United Kingdom. Just over two weeks—15 days—before we are due to leave the European Union, the Government, if they do not take action or accept this amendment, present the greatest potential threat to the Good Friday agreement. This hard-won agreement was forged in the understanding that the UK was and would remain in the European Union, and that the UK and the European Union would be its joint guarantors. We are now moving into a new situation where it is unclear who the guarantors would be.
People talk about a deal, but there is no deal. There is an agreement, twice rejected, on how we leave the EU. The deal comes afterwards and has to be negotiated: we have not even begun to address that. Yesterday the Government published two guidance statements on trade and tariffs—one of them specifically for Northern Ireland. Yet this guidance acknowledges only what the UK Government can or will do. It cannot by definition legislate for any EU measures.
The Northern Ireland guidance states:
“Because these are unilateral measures, they only mitigate the impacts of exit that are within the UK government’s control. These measures do not set out the position in respect of tariffs or processes to be applied to goods moving from Northern Ireland to Ireland”.
So will the EU impose tariffs on agricultural products from the UK to Ireland or to the rest of the EU, just at the beginning of the lamb sales? Is that what we would be facing? And that is just one sector and one example.
That is why this new clause is needed. It is a clear and unequivocal statement that nothing can be done and nothing should be done that undermines in detail the terms of the Good Friday agreement. As long as the Government stand by their position, there is no agreement that conforms to this clause—because the House of Commons has rejected the agreement twice. So we are in danger of being in default. Parliament either has to accept the backstop, which was the means of securing acceptance—twice rejected by the House of Commons—or the Government have to abandon the red lines and seek more time to pursue a softer strategy built around the customs union. Better still, in my view—I guess my colleagues on these Benches will agree—we should suspend Article 50 and put the deal, which would have to come with a backstop, to a vote of the people, with the option to rescind Article 50 altogether, on the basis that there is no agreement that either commands a majority in Parliament or is consistent with the Good Friday agreement. Currently there is no such agreement on the table.
I commend this amendment to the House on the basis that adopting this new clause would give the House of Commons a building block for squaring the circle, which the Government and the House of Commons have so far utterly failed to do.
Baroness Altmann (Con)
My Lords, my name is also on this amendment and I echo every word of the excellent speeches from the noble Lords, Lord Hain, Lord Kerr of Kinlochard and Lord Bruce of Bennachie, and the noble and right reverend Lord, Lord Eames. We have an international obligation. We have signed the Belfast agreement—a long-standing, deep and binding international agreement—and somehow it seems to have been forgotten or overlooked in the frenzy of focus on some kind of “pure Brexit”, as it is called. The noble and right reverend Lord, Lord Eames, called this the “hidden element”. It has become frighteningly clear that the Brexiteers did not understand Brexit properly. They imposed impossible and inconsistent red lines which have left us in the position we are now.
While the economics imply that staying in the customs union and single market will protect frictionless borders and supply chains and our manufacturing industry and services, it makes us a rule taker, and forces us to have some connection with the ECJ. On the political side, this has led to the drive towards dropping the backstop, as if it was a problem we should not care about—actually, we should care about it deeply—or even considering no deal, which clearly leaves Northern Ireland high and dry.
Leaving the customs union and single market cannot support an open border. Nor can no deal, or Canada-plus-plus. It saddens me that so many of our colleagues on these Benches are willing to countenance playing fast and loose with the hard-won peace achieved in Northern Ireland, for the sake of some kind of trading advantage which may or may not occur. I appeal to my colleagues on the Front Bench, and to my fellow Peers on the Conservative and Democratic Unionist Party Benches alongside me, to accept this amendment. It has already been accepted as part of the withdrawal Act. Surely we cannot, and must not, abandon the frictionless border in Northern Ireland, or cut Northern Ireland off from the rest of the UK.
Lord Alderdice (LD)
My Lords, I want to address something in this amendment that is important, but which has not been picked up so far. In saying so, I support the amendment, which proposes to support the Good Friday agreement. People tend to think of that in terms of the structures within Northern Ireland and between north and south. However, a key part of the agreement was the arrangement of the British-Irish Intergovernmental Conference between the United Kingdom and the Republic of Ireland. For 10 years, it did not meet. The British and Irish Governments were in default of the Good Friday agreement for a decade. The European Union supported the Good Friday agreement, as did our friends in the United States.
In the context of the Good Friday agreement and addressing our difficulties, the suggestion that Ireland should be with the 27 countries which are negotiating with the UK, or having negotiations on their behalf, actually ignores the Good Friday agreement. If Britain and Ireland were not fulfilling it, the European Union should have been pushing the British and Irish Governments to come together to reach agreements that they could bring to Brussels together. There have been suggestions that this would be a breach of European Union understandings; it would not. However, not doing it is a breach of the Good Friday agreement.
If the British and Irish Governments have already agreed, or would agree over the next few months, on the main north-south economic and transport issues—agriculture, agri-food business and electricity—and agree that they would approach Brussels and request that these issues be dealt with on an all-Ireland basis, because they already largely are, it is highly likely that Brussels would accept that, whatever the other issues. It would not require a backstop; it would be a frontloading. The key thing is that the British and Irish Governments need to work together on this. That is what the last clause in the amendment says. In some ways, this ought to be the first clause, and the first stop, not a backstop: that the Governments come together and propose something.
People have repeatedly said that it is not appropriate for Ireland and the United Kingdom to negotiate together, because this is something between the UK and the EU as a whole. However, that simply does not work if people believe that they and the EU support the Good Friday agreement, which requires and mandates direct negotiations between London and Dublin on all joint issues. This has not been happening and I appeal to the Minister, as I appeal to Ministers in the Republic of Ireland, to come together on this issue. Ireland should be a bridge between the UK and the EU, not a bulwark for the EU against the UK.
Lord Purvis of Tweed (LD)
My Lords, it is a pleasure to follow my noble friend, who speaks with great authority on this issue. In following him, I will use one example to highlight the importance of this amendment in maintaining the spirit and including the contents of the agreement. I use the example of today’s announcements on the proposed tariffs that may be applied on a no-deal Brexit and the Written Ministerial Statement on how that will impact on the Northern Ireland border, already referred to by the noble Lord, Lord Kerr. I was grateful for an opportunity to have a conversation with the Minister about this today.
The proposals for the tariff regime, which would be an increase of 489 tariff lines on goods from the European Union and would have to have some form of mechanism across the border of Northern Ireland, need to be seen in the context of operating within a year. This is not simply an emergency or temporary proposal, and a year is a long time in the context of some of the statistics referred to by the noble Lord, Lord Hain. There were 46 million vehicle crossings at the 15 Northern Ireland border locations in the last year, according to the Northern Ireland statistics agency—3.8 million of those were goods vehicles, nearly three-quarters of deliveries involve small businesses, and two thirds of cross-border trade is bilateral agri-food and intermediate trade. That means these are small businesses—as already referred to, 80% are low-value—and often individual businesses trading on a self-employed basis, but every one of those people will have to be registered with an economic operator’s index number, or EORI. Only one-sixth of all businesses have so far registered, so the system, even as published today, is not operable, but new processes and procedures have to be carried out. The Government are giving no advice to Northern Ireland businesses on that. They believe a unilateral action, against the spirit of the Good Friday agreement and the spirit of an all-island economy, is the way forward.
How can it be a unilateral approach if tariffs will not be applied to goods coming from Ireland, but will subsequently be applied if those goods are part of intermediate trade with Great Britain? Liz Truss, the Chief Secretary to the Treasury, was asked at lunchtime where the checks would be carried out. She said that she believed it would be at “a border in the UK”. This is the Chief Secretary to the Treasury today. What does that mean? If one is tolerant, one may forgive her not knowing the terminology of Great Britain and the United Kingdom, but that is unforgivable, given that she said she will vote for a no-deal Brexit in the other place this evening. What kind of consultation is being carried out, not just with the Irish Government—which, as my noble friend indicated, is urgent—but with businesses on both sides of the border that will be operating?
Linked with the long-term basis is the fact that the unilateral approach is not WTO-compliant, unless the Government trigger one element in WTO processes on public morals. There are some dispensations that can be provided, in extremis, on the basis of public morals that can set aside a system where we will not apply tariffs from one country, if we have no intention of applying them to the rest of the world. It would be a retrograde step if the Government activated a public morals clause at the WTO on a situation as delicate as that on the Northern Ireland border. The Government are setting aside security and border integrity as the basis of the unilateral no-deal proposal. The Government should see sense and support this amendment, because it provides the framework for these consultations to be carried out.
Lord Stevenson of Balmacara (Lab)
My Lords, this has been a short but poignant and moving debate. We have reached back into history and tried to articulate fears and concerns.
Lord Mackay of Clashfern (Con)
If the noble Lord would allow me, I entirely agree with the difficulties associated with the border, and the need for a soft border, but I am not sure that this amendment achieves that. It would not directly affect the no-deal situation at all. It describes what I regard as a soft border; it is what I would like to see and what the Prime Minister’s deal, with the backstop and so on, is intended to do. But we are now dealing with a different situation. I would love to see a secure, soft border between Northern Ireland and Ireland, but I am not at all sure that the amendment secures that in any way whatever, although I would be glad to have help on that. It would not be as a result of an agreement between the European Union and the UK if there was no deal; no deal is the very opposite of an agreement between the EU and UK.
The other problem is that Ireland’s relationships with countries no longer in the EU would be regulated by the EU. I should be glad of some explanation from the people who know all about this of exactly how the amendment achieves the result I and they wish to achieve.
Lord Stevenson of Balmacara
My Lords, that is a well-made point. It is probably better if the mover of the amendment, my noble friend Lord Hain, responds to it in detail, but I think the wording is clear. Indeed, as my noble friend said, this takes us beyond the no-deal exit problem because it is for the future. It is meant to govern future arrangements across the border between the UK and Ireland. My noble friend might have more detail on it. I do not think the noble and learned Lord’s point destroys the arguments that have been made. I understand where he is coming from, but the issues we are talking about are for all time. They are important to build on our history and practice up to this point.
The noble and right reverend Lord, Lord Eames, spoke very powerfully, getting across the idea that if there is an opportunity for this House and, indeed, any other place to strengthen the spirit of the Belfast agreement, it should be supported. This is an opportunity to do so. He said that it was about not just the history, but the future of those who work and operate in Northern Ireland and Ireland, and about trade and opportunities. The combination of peace and prosperity, which, after all, is what we all seek at all times, surely is not something the Conservative and Unionist Government will really whip their members to vote against. I hope the Government will be able to accept the amendment and allow us to move forward.
The Minister of State, Department for International Development (Lord Bates) (Con)
My Lords, I add my thanks to all noble Lords who have contributed to this short but very profound debate. In particular I thank the noble Lord, Lord Hain, for moving the amendment. I think the whole House recognises the important role he played while Secretary of State to help that process gather ground into fruition. It has been a proud part of successive Governments that we cherish and nurture that hard-won peace. It is why we said right at the outset in the future relationship White Paper that the prime objective would be that,
“the UK and the EU meet their commitments to Northern Ireland and Ireland through the overall future relationship: preserving the constitutional and economic integrity of the UK; honouring the letter and the spirit of the Belfast (‘Good Friday’) Agreement; and ensuring that the operational legal text the UK will agree with the EU on the ‘backstop’ solution as part of the Withdrawal Agreement will not have to be used”.
That was very much at the heart of our objective. We are absolutely committed to the Good Friday agreement and that part of it.
I do not take the point the noble Lord, Lord Bruce, made about division out of context, but I am sure he would recognise that the whole thrust of the Government’s and the Prime Minister’s negotiations, and what the withdrawal agreement is about, is seeking to secure the type of border arrangements that my noble and learned friend Lord Mackay referred to and that the noble Lords, Lord Hain and Lord Alderdice, and the noble and right reverend Lord, Lord Eames, and others seek to work towards. Peace on the island of Ireland between Northern Ireland and the Republic of Ireland, and the Good Friday agreement—the partnership between the United Kingdom and the Republic of Ireland in this context—surely must be the red line above all red lines that we need to preserve.
That is why there is the amendment in the EU withdrawal Act making that explicit, which the noble Lord, Lord Kerr, was instrumental in securing. That has been a key part of what Her Majesty’s Government have done when engaging in negotiations on these matters, which was brought to fruition in the withdrawal agreement. Were the withdrawal agreement passed yesterday in another place, we would not need this amendment or this discussion. These are matters for the extremely unwelcome event of no deal.
Some specific points have been raised, which I will try to address. I hope that will help noble Lords in deciding what to do with this amendment. The noble Lord, Lord Purvis, said that this has been emerging over 12 months—an increase of 480 in the current position with the EU. The Government have had to find a way of ensuring that there is no border, from the UK perspective, in the spirit of the Good Friday agreement. Any checks that must be carried out for non-revenue purposes will be done away from the border. HMRC is very familiar with carrying out such checks on that basis.
My noble friend Lady Altmann asked how the plan works to supply work with suppliers. These are unilateral measures—they are not for goods moving from Northern Ireland to the Republic of Ireland, which would be subject to the EU’s common external tariff and single market rules. The only way to avoid a hard border is to commit to entering into discussions with the European Commission jointly to agree long-term measures to avoid one.
The noble Lord, Lord Purvis, asked whether there will be a border in the UK. The Government do not intend to construct infrastructure at the Northern Ireland land border. We will also not carry out any new checks on goods moving from Northern Ireland to Great Britain. HMRC will assess the risks and take a risk-based approach to investigating allegations of breaches of those rules. The noble Lord also asked about the status in terms of the WTO—whether it breaches the MFN model. We are confident that the policy is in line with our WTO obligations, taking into account the unique set of social, political and economic circumstances of Northern Ireland. In developing our policy alongside WTO rules, we have also had to take into consideration a broader set of our international obligations, including those under the Good Friday agreement. Furthermore, as we have set out, these arrangements are strictly temporary. The noble Lord, Lord Kerr, asked us the meaning of “temporary” in this respect; it is a period up to 12 months.
I will come to the point raised by my noble and learned friend Lord Mackay, because it is material to what we have been discussing today. He made the important observation that the amendment as worded seeks an agreement between the UK and the Government of Ireland. Of course, because the Irish border is, as he rightly said, a border between the United Kingdom and the European Union, it would need an agreement with the EU. I think that is the point my noble and learned friend was making. In that context, the way in which the amendment is currently worded would be unlawful because it refers to the Government of Ireland as opposed to the EU.
The noble Lord, Lord Hain, said that this amendment does not put the Government in a straitjacket. It would seek to limit flexibility—no “facilitations”, for example, would rule out future technologies, which is something the EU has specifically agree to look at as a priority once the withdrawal agreement has been agreed. In terms of EU imports into Northern Ireland, not across the land border, the answer to the question of whether tariffs apply is yes. The waiver applies only to goods moving from Ireland to Northern Ireland. This is a temporary measure that would need to be implemented.
The noble Lord, Lord Kerr, asked about potential arbitraging in terms of pricing. Many things affect the price of cars, in terms of tax and currencies, and an individual car from Dublin, driven across to Belfast, would be exempt from the 10% tariff. It would not necessarily be cheaper, but these measures would be temporary. Surely this breaks most favoured nations status, which I have addressed.
I hope that noble Lords will feel that I have addressed a number of the points that were raised. I thank all noble Lords for raising these matters and assure them once again that this has been absolutely up front and central, at the heart of the Government’s strategy to preserve that hard-won peace and that special relationship. This is something that needs to be there only in the event of no deal, which we are all working tirelessly to avoid. I invite the noble Lord to address the point on the wording regarding the Government of Ireland and the European Union, which, on our reading, means that if the amendment were passed, it would be unlawful. If he could address that specifically, I am sure that it would be helpful to all noble Lords.
Lord Puttnam (Lab)
I thank the Minister for giving way. I have been waiting for a voice to appear during this debate—and it has not. That is the voice of the people of the Republic of Ireland. I live there and would like to get across to your Lordships the incalculable level of anxiety that has been caused to the people of the Republic of Ireland by our apparent indifference about what happens, for example, in the event of no deal. I cannot stress that enough. When noble Lords decide how they wish to vote—I am sure that it will go to a vote—I beg them to consider my neighbours, in particular, as the noble and right reverend Lord, Lord Eames, mentioned, small farmers on both sides of the border who are terrified about what will happen should we, by some ridiculous accident, crash out. I beg the Minister to try to add the voice of the people of the Republic of Ireland to this debate, because they do have a voice in this.
Lord Bates
I recognise that and know that the noble Lord is passionate about the Republic of Ireland—as he said, he resides there. There is a fundamental point here: that anxiety would not be necessary if the withdrawal agreement, which was agreed in December, had been passed in the other place last night. That must be the best solution to remove the anxiety to which the noble Lord refers. He also alludes to a very important piece of work, which needs to start immediately—namely, rebuilding those friendships and links, and that partnership, which have served us so well in recent decades, to ensure that the progress that has been made has not been lost. That needs to start immediately. As I say, I take on board very much the point that he has raised.
Lord Hain
I thank my noble friend Lord Puttnam for the point he made. I have lots of friends on the island of Ireland, on both sides. I know that there is a real feeling of hurt among citizens of the Republic, given our tangled history—our colonial history, going back centuries—which created enormous distrust and suspicion from Dublin towards us. It was overcome by building trust almost day by day, week by week, over the last 20 years, by Governments of all colours—in particular, those led by John Major, Tony Blair and Gordon Brown, and subsequently. That sense of pain is very deep.
I thank the noble Lord, Lord Bates, for his generosity towards me. What I feel very strongly goes to the point made by the noble and learned Lord, Lord Mackay of Clashfern, whose interventions are always interesting and intellectually testing; I often agree with them. The point is this: we have no idea what sort of future awaits us. We do not know whether we will have an agreement with the European Union at all. There are vociferous voices, some in this House but particularly in the House of Commons, that do not want a deal with the European Union. Therefore the terms of the amendment are absolutely right. The default position that we can fall back on is that we need at least to agree with the Irish Republic in the terms of the Belfast/Good Friday agreement how the border issue is to be managed. I do not see that that is the obstacle in the terms of the amendment that the noble and learned Lord and the Minister have suggested.
Lord Brown of Eaton-under-Heywood (CB)
I am grateful to the noble Lord for giving way, not least because I confess that I am almost certainly behind the curve here and may well be about to ask a very inept question. But this amendment is directed solely to an international trade agreement between the UK and the European Union. In the event of a no-deal exit, I am unclear whether any future trade agreements that are going to be reached will be with the European Union as opposed to, for example, individual EU countries such as Germany and France. If that were to be the position—I may well be barking up a most irrelevant tree—and there were a future agreement with Germany, as I understand it, the proposed clause would not bite. Is that right?
Lord Kerr of Kinlochard
It could be that the Germans are planning to leave the European Union, but while they remain their external trade will be conducted by the European Union.
Lord Mackay of Clashfern
I would love to vote for this amendment if I thought it would achieve what the noble Lord, the Irish people and indeed all of us want. Unfortunately, it outlaws agreements between the UK and the European Union only in the circumstances narrated. My belief is that if this happens, it will not be as a result of any agreement between the EU and the UK but because there is no agreement between the EU and the UK. This is possibly my blindness, but I do not see how this goes anywhere towards preventing the evil that all of us—I cannot speak for anyone but myself, strictly speaking, but certainly most of us, judging from what I have heard—want to avoid. We want a soft border whatever happens between Northern Ireland and the Republic. I am sure that people in the Republic want that and the Northern Irish people want that—and certainly I and all who love them want that.
Lord Hain
Perhaps I may say to the noble and learned Lord that, while we may all want it—in fact, we all say we do—unless we will the means we cannot actually ensure and guarantee it. That is what the amendment does in respect of future trade agreements. The same wording was accepted by this House and by the Government in the other place, and has become part of the withdrawal Act—but that is part of, if you like, the divorce settlement. What we need to do is ensure that the same principles apply to our future trading relationship.
The Earl of Courtown (Con)
My Lords, with apologies to the House, we are on Report and we should get on with it.
Lord Hain
Perhaps I may conclude with something that might help the noble and learned Lord, Lord Mackay. It is what this amendment does not say that is important. This amendment does not tie the Government’s hands, except in terms of the exact requirements for the future, because that is not appropriate in a clause of this kind, which I hope will be accepted and put into the Act. It spells out for new trade the principles that the Government have already accepted in the withdrawal agreement. So it is already in statute, and I am therefore puzzled as to why the Government are not accepting this agreement by approbation.
Lord Bates
My Lords, it may be helpful to the House if I explain our hesitation on precisely that point. Section 10(2)(b) of the EU withdrawal Act prohibits regulations creating new border arrangements —that is, arrangements that did not exist before exit day—unless they are in accordance with agreements between the UK and the EU. This amendment would prevent any arrangements unless they were subject to an agreement between the UK and the Government of Ireland. Such an agreement, in our view, would be unlawful for Ireland to enter into, as customs and a common commercial policy fall within the exclusive competence of the EU. I want that point to be clear on the record.
Lord Hain
I understand that point. However, under the Good Friday agreement—the Belfast agreement—we are bound and obligated, including with the approval by treaty of the European Union, as the noble Lord, Lord Purvis, said, to agree things with Dublin. That is the way it works. That is part of the Good Friday agreement that has the blessing of the European Union.
I repeat that we have no idea as yet of our future trading relationships with anybody, including across the Irish border—no idea at all. This amendment spells out the principles that have already been accepted in the withdrawal Act, and agreed in statute by the Government. I therefore wish to test the opinion of the House.
Lord Purvis of Tweed
“Publication of trade agreement progress register
(1) For the purposes of subsection (2)—(a) the first reporting period begins with the passing of this Act and ends one week afterwards;(b) each subsequent reporting period is—(i) the week beginning with the end of the previous reporting period, or(ii) if the condition in subsection (4) is met, the month beginning with the end of the previous reporting period.(c) the last reporting period is—(i) the reporting period in which exit day falls, or(ii) if the condition in subsection (4) is met, the reporting period in which any transition period provided for in the negotiated withdrawal agreement expires.(2) Before the end of each reporting period, a Minister of the Crown must publish a report relating to the continuing application of EU trade agreements after exit day.(3) A report under subsection (2) must—(a) specify the trade agreements the United Kingdom is party to as a member of the European Union (the “existing agreements”),(b) for each of the existing agreements, specify whether the United Kingdom intends to sign an agreement that replicates the effects of the existing agreement (the “continuity agreements”),(c) for each of the continuity agreements, specify—(i) whether the agreement has been signed, and(ii) if the agreement has not been signed, what progress has been made towards signing the agreement, and(d) for each of the continuity agreements that has not been signed, specify—(i) the likelihood, in the Minister’s opinion, that the agreement will be signed before exit day, or(ii) if the condition in subsection (4) is met, the likelihood, in the Minister’s opinion, that the agreement will be signed before the end of any transition period provided for in the negotiated withdrawal agreement.(4) For the purposes of subsections (1)(b)(ii), (1)(c)(ii) and (3)(d)(ii) the condition is if the United Kingdom has signed a negotiated withdrawal agreement with the European Union.(5) In this section, “negotiated withdrawal agreement” has the same meaning as in section 13(16) of the European Union (Withdrawal) Act 2018.”
Lord Purvis of Tweed
My Lords, this feels like an intermission between two parts of the main feature this afternoon, so I shall be brief. The amendment is even more important given the vote in the Commons last night and the votes likely to come up in the other place. It would provide for a duty on the Government to update the information that they published on 21 February.
I signed up to a weekly trade newsletter from the European Commission at the start of this Bill’s consideration. It includes a weekly digest of the latest news on EU trade, new trade negotiating texts, reports and studies about ongoing discussions, upcoming events and consultations and the EU Trade Commissioner’s statements on related topics. That is the type of information available through the Commission that should be the benchmark by which our Government provides information, not only to Parliament but to civic society and interested groups across the country. But unfortunately, it is in stark contrast with the kind of information that the UK Government publish to date. It is appropriate that we have information on the status of discussions and highlight areas where there are justifiable public differences in approach or policy between our Government and other Governments.
The amendment is not asking for commercially sensitive information or for information that would diminish the ability of negotiators to carry out a set mandate or agreed policy objectives. It is necessary for continuity in the areas that we are discussing.
Also, as we discussed in the previous debate, if there is no deal, we have unilaterally decided to engage in a different trading relationship with countries we currently have arrangements with, and possibly add new tariff lines on goods that are not in place in the current FTAs. The Government seem to think that it is rational to discuss continuity agreements with other countries if there is no deal, apply a new tariff regime with nearly 500 extra tariff lines to businesses trading from those countries and roll over agreements, thereby reinstating the zero tariffs we currently enjoy with those countries by virtue of our membership of the European Union. It is a bizarre approach that the Government think will be beneficial, but it stretches credulity.
At the start of proceedings on the Bill, the Government said that the whole process of moving over agreements would be easy. The noble Lord, Lord Price, the Minister’s predecessor, said that all countries had agreed to roll over agreements but, in fact, they had not. Ministers said repeatedly that all the agreements would be in place by 29 March but many of us knew that that would not happen. The Government denied that there was a problem when it was apparent to everyone that there was, and we knew that those agreements were not going to happen for a number of reasons. Only after frustrated officials leaked information did the Government demur and publish a one-off statement admitting a degree of reality. That is not sufficient and we need to move away from that approach.
The amendment addresses a way forward. It would lead to more information on the trading relationships with the countries we have an agreement with through the EU, but will end if we crash out. The amendment calls for a weekly update before we leave the EU—if we leave—and a monthly update that will form the basis of reporting until the texts of the agreements are shared with Parliament. Unless we have a consistent mechanism, we will have a bizarre situation involving two reporting systems from the Government: one on the progress on continuity agreements and the other on successor or new agreements.
For example, the Government intended to have a continuity agreement with Japan but no reporting undertakings. However, the Japanese have now said they want a successor agreement, which would be covered by undertakings in the Command Paper. But the underlying policy intent has not changed and there will be nothing to stop discussions with a country such as Canada on a continuity agreement then becoming a successor agreement—and there will be two parallel systems of reporting. That is not helpful for clarity or transparency.
Finally, we heard clearly last week from the noble Lord, Lord Kerr, and others who have been at the highest level of negotiations on behalf of the UK, that greater transparency and the involvement of Parliament in approving mandates actively strengthen the UK’s position, not weaken it. In order for Parliament to do its job correctly and engage with civil society groups and those with an interest in trade, or who will be impacted by decisions made in the negotiations, we need a high level of information on progress, rather than simply a descriptor such as “engagement ongoing”, as referred to on 21 February.
That is why I hope that the Government will look favourably on the amendment and, if they cannot accept it, at least establish some principles whereby reporting mechanisms can be more up to date, regular and meaningful than a one-off publication on 21 February. I beg to move.
Lord McNicol of West Kilbride (Lab)
My Lords, the noble Lord, Lord Purvis, has outlined the reasoning for and detail of the amendment. I intend, therefore, to be brief as we have a number of amendments of greater importance.
It is a shame that the Government will not accept the amendment or work with noble Lords on this side of the House to bring more detail and clarity to the reporting mechanism and progress analysis on rollover agreements. Suffice it to say, Her Majesty’s Government are woefully behind on negotiating, securing and signing agreements that will need to be rolled over. Only a handful of deals are close to completion. Ministers have admitted that they are struggling to make progress with the other trade agreements that Liam Fox has a number of times promised would be ready for the day after Brexit.
The Minister of State, Department for International Trade (Baroness Fairhead) (Con)
My Lords, I thank the noble Lord, Lord Purvis of Tweed, for moving Amendment 23, and the noble Lord, Lord McNicol of West Kilbride, for building on it. The Government agree with the spirit of the amendment that providing updates on negotiations is necessary. It is fundamental to our approach that Parliament remains informed. It is something the Government have always sought to do and we will continue to do so.
Your Lordships will recall that, following concerns raised in Committee in this House, the Government published a paper on 28 February providing comprehensive proposals for the scrutiny of future free trade agreements. Many of your Lordships will also recall the debate last week on future trade agreements. The noble Lords, Lord Purvis of Tweed, Lord Stevenson of Balmacara and Lord Hannay of Chiswick, tabled amendments which facilitated a full debate on the scrutiny of future free trade agreements. In that debate, I again confirmed that, for future free trade agreements the Government will publish their outline approach to negotiations, including objectives, and that that would be accompanied by detailed economic analysis. The EU reports to which the noble Lord, Lord Purvis, referred are on future EU agreements.
We have committed to publishing progress reports after each negotiating round and annual trade reports across all live trade negotiations. In terms of Parliament’s role in this, I confirmed that in future free trade agreements the Government will work closely with a committee of both Houses or a committee in each House, and will provide information on a confidential basis to ensure that Parliament can scrutinise negotiations effectively from start to finish and throughout.
In relation to our trade continuity programme—the agreements that are the subject of this amendment—noble Lords will be aware that the Government published a Written Ministerial Statement on 21 February 2019. It provided an update to Parliament on the status of the continuity agreements. I hope it clarified a number of the points that the noble Lord, Lord McNicol, raised. I also trust that the noble Lord, Lord Purvis, will welcome the approach the Government are taking of informing Parliament each and every time a continuity agreement is signed. There have been seven free trade agreements so far and we will continue to take that approach.
These agreements have been accompanied by a signed or initialled report outlining the material changes between this agreement and the existing EU/third country agreement. These reports provide important transparency and inform not just Parliament but businesses and consumers. We will discuss three of the agreements and the reports later today. However, some of your Lordships may not be aware of what the Government have done above that over the past six months to keep Parliament informed more generally. For example, we have provided five oral evidence sessions to Select Committees by Ministers or senior officials, given 10 written updates to the International Trade Select Committee or the European Scrutiny Committee on trade agreement continuity, and answered seven Oral Questions and 53 Written Parliamentary Questions. I hope that those elements are further tangible proof of the Government’s commitment to keeping Parliament informed. However, while the Government agree with the intention of the amendment moved by the noble Lord, Lord Purvis, I am concerned that having this obligation in statute could have unintended consequences in making it more difficult to keep Parliament informed.
The noble Lord, Lord McNicol, asked what the issues were. They are the kinds of obligations that might arise while we are in the middle of negotiations with our partner countries. For example, if we were to say that an agreement discussion was progressing well and that all the key issues had been addressed, that might cause a negotiating issue on the other side. Equally, if we said we thought that it was performing poorly or that there were issues, that might expose issues that our partner countries were ill prepared to address. If negotiations were going badly, a public statement to that effect would likely prejudice them further, resulting, we believe, in a worse outcome for the UK. Our approach is to provide Parliament with as much information as we can, consistent with managing those risks. It genuinely is about getting the balance right between openness and transparency with Parliament and managing often delicate international negotiations.
I trust that the noble Lord, Lord Purvis, takes reassurance from this explanation and, most importantly, from our continued commitment to ensure that Parliament is kept up to date on the trade agreement continuity programme. I therefore respectfully ask the noble Lord to withdraw his amendment.
Lord Purvis of Tweed
I am grateful for the Minister’s response, and for the support of the noble Lord, Lord McNicol. He highlighted that we are likely to have seen only 13% of UK exports represented in the agreements that we have, so there is quite a long way to go. The issue then is whether a one-off published statement would be sufficient. However, I take on board what the Minister said about the other areas, on which there is ongoing engagement with Parliament; that is to be welcomed. I also welcome that in the Command Paper the Government have committed to publish material and to have an ongoing dialogue, both in public and in private, with committees that could well be established. I hope very much that the dialogue will also involve discussions about what type of information is appropriate to be released into the public domain and about doing so in a timely fashion.
On the basis of the Minister’s comments and on the understanding that, if we are to be secure in the information that I think we need on the continuity agreements, we will continue to be persistent on the Written Questions and on the opportunities in Parliament, I beg leave to withdraw the amendment.
“Trade agreement with the EU: mobility framework
It shall be the objective of the Secretary of State to take all necessary steps to secure an international trade agreement with the European Union which includes a mobility framework that enables all UK and EU citizens to exercise the same reciprocal rights to work, live and study for the purpose of the provision of trade in goods or services.”
Lord Fox (LD)
My Lords, on Report your Lordships have already voted through an amendment that creates a process for Parliament’s involvement in setting a mandate for future trade deals and for helping to approve a final deal. Separately, your Lordships have made clear a strong preference for the UK remaining in a customs union. In part, this amendment is the third part of that and is intended to set the scene for the long-term future relationship between this country and the EU. I am grateful to the noble Baroness, Lady Bull, and the noble Earl, Lord Clancarty, for their support for this amendment.
The amendment sets out an objective for a future EU trade deal: a mandate to include,
“a mobility framework that enables all UK and EU citizens to exercise the same reciprocal rights to work, live and study for the provision of trade in goods or services”.
That reciprocal nature recognises one important fact: not allowing or enabling EU 27 people to work and trade in the United Kingdom will mean no such rights for UK people in the EU. By voting for this amendment, your Lordships would create the best possible chance for talented men and women in the UK to work, and continue to work, and offer their services within the EU 27, and of course it would be a win-win scenario. On the other side of such an arrangement, we would continue to welcome into this country people who contribute positively to our economy and our social fabric. Their skills make a positive difference.
In Committee, I outlined at some length, and according to the Government’s own advisers, the positive role that people from the other 27 EU countries play in this economy. Noble Lords will be relieved to know that I will not replay those arguments today, in part because in no measure were those facts challenged during that debate. There has been a net benefit to the UK from the activities of EU 27 citizens here. My speech also acknowledged that issues were thrown up by migration in some communities and that those issues have not been sufficiently recognised and dealt with by successive UK Governments. The benefits of those EU citizens working in the UK have also been insufficiently recognised publicly by successive Governments.
In Committee, the Opposition Front Bench spokesman, the noble Lord, Lord Stevenson, spoke about the appearance rather than the reality of unbridled immigration, and that refers back to the point that I have just made. Although I recognise that this perception is very important and that Governments have to do something about it, I do not believe that we should be put off from doing the right thing and supporting the amendment. I hope that, by doing so, we will demonstrate the value that we place on mutual agreement and on the mutual opportunities that we can create for our people, our businesses and our communities.
As for the Government, I did not notice a great warming to my argument in Committee, although I always foster hopes. However, I appeal over the heads of the Front Bench to your Lordships to see the value in this amendment. Supporting it would be a major step towards setting out the mandate for UK negotiators. It would signal what sort of country we want to live in and it would reject one of Mrs May’s red lines. Opposing the amendment or sitting on one’s hands would pander to the false picture of the role of immigration in our society and would impair the UK in so many ways, not least in trade. I beg to move.
Baroness Bull (CB)
My Lords, I have added my name to this amendment because I believe that it is vital to preserve mobility rights and, in doing so, protect some of the UK’s most productive sectors.
I have noted before the relative silence on trade in services in the Brexit conversation. Attention has been focused on the at-the-border issues associated with trade, rather than the more complex behind-the-border issues of domestic rules, regulations and qualifications, which are germane to trade in services. As I have said before, this silence is particularly hard to understand, given services’ contribution to the UK. They account for over 40% of total exports, 80% of the UK’s GDP and four in five jobs across the country. The largest single destination for UK services is the EU, worth £90 billion annually.
If services have been treated like the second son, mobility has been the Cinderella of the story, pushed from the start to the wrong side of what some of us see as a wrong-headed red line. There is, of course, an inextricable link between mobility and services. Services provided in this country, such as tourism or higher education, depend on inward mobility. Service packages linked to goods, such as maintenance contracts, depend on outward mobility. Services delivered in the consumer’s country are often provided on a fly-in, fly-out basis, and the scale of this trade is significant. The CBI reports that employees of just one firm undertook 17,000 trips from the UK to the EU and 10,000 in the opposite direction in a single year.
The Earl of Clancarty (CB)
My Lords, I have put my name to this important amendment and I will speak briefly about services in relation to free movement.
The recent no-deal impact statement says that free movement of people supports services. It would be more correct to say that free movement is intrinsic to services. This is certainly true of the creative industries but also of many other areas of the services sector. As a British IT worker said, “We freelancers export ourselves”. As the noble Lord, Lord Fox, said in Committee, “Trade is people”. Yet, despite their massive importance—the noble Baroness has given us the figures—the services sector is, as Sir Ivan Rogers said at the University of Liverpool in December,
“the dog that has largely failed to bark”—
an observation that the noble Lord, Lord Stevenson, also made in Committee. And services continue not to bark. This is deeply worrying.
Of course, Brexit has not yet happened and may still not do so. But it is happening now for British workers who provide services in Europe. One is tempted to call them the canaries in the mine—except we are talking about the endangering of people’s livelihoods. More reports are coming in of projects put on hold and of individual freelancers being told not to bother applying for a job unless they have a European passport, irrespective of the level of qualifications they possess. It is becoming a precondition. For many European companies it will make no difference what kind of Brexit we end up with if it is a Brexit without free movement.
I urge the Minister to look at a video blog doing the rounds on social media. It was recorded in English by an IT agency based in Rotterdam and makes it clear that neither the agency nor their clients can work with you if you are not in Europe—“Europe” of course meaning the single market. The impact statement says that the effects on services will be mitigated by a reciprocal mobility framework. However, in reality, the mobility of British workers abroad will be restricted by the severity of the immigration policy outlined in the White Paper and coming our way in the Immigration Bill—a policy which completely ignores the effect it will have on our service industries and on British workers in Europe. Sir Ivan Rogers said:
“UK service industries’ needs have been sacrificed to the primary goal of ending free movement”.
The amendment also refers to study. Unless we have free movement, I am pessimistic about our membership of Erasmus+ beyond 2020. Look at what happened to Switzerland, which was thrown out of Erasmus when a referendum voted against free movement. After a new agreement, I believe that Switzerland is now back.
There are many important reasons for supporting this amendment. From the point of view of trade, it should be supported not just to protect our valuable trade in services and the increasingly important servitisation aspect of manufacturing, but, importantly, to protect British workers and British jobs.
Lord Hodgson of Astley Abbotts (Con)
My Lords, I have not participated on this subject before, but I listened to the persuasive explanation by the noble Lord, Lord Fox. I note the phrase “mobility framework”, which sounds incredibly friendly. But I will urge my noble friend to reject this amendment. This is not because I want to build a wall or because I think perceptions of immigration have been wholly erroneous—although he quite rightly drew the House’s attention to that. The noble Baroness, Lady Bull, said that we need to talk about facts. I will share a couple of facts, which will take only a minute. The population of the United Kingdom is going up by 1,200 a day: that is, 400 from natural increase, 600 from immigration from outside the EU and 200 from immigration within the EU. So we are putting a small town or large village on the map of the UK every week. The ONS projections are that the country’s population will go up by 7 million to 9 million between now and 2040. Manchester currently has 2.5 million people living in it—so we will have to find homes for three cities the size of Manchester.
The UK will by that stage have overtaken Germany as the most populous country in Europe and England will have overtaken the Netherlands as the most densely populated. That is against the background of a new industrial revolution that it is believed will cause 7.5 million jobs to be either lost or radically altered. I quite understand the wishes of the noble Lord, Lord Fox, and the other movers of the amendment, but this had to be looked at in the round of our demographic future. It is not about whether you arrived here recently, or about your colour, your race or your creed. It is about what will enable our society to operate cohesively and well as we see that scale of arrivals, and that scale of change to the way we live and work.
Lord Bilimoria (CB)
I am sorry to interrupt the noble Lord. How can his argument work when, at the moment, we have unemployment at almost 4% and we need the 3.5 million people from the European Union who are over here now? Given an immigration White Paper that says a minimum salary has to be £30,000, and the remarks of the noble Baroness, Lady Bull, and the noble Earl, Lord Clancarty, how will we manage with a slow-growing economy of just over 1% per year, let alone if it should grow faster? We will have an acute labour shortage.
Lord Hodgson of Astley Abbotts
I think the noble Lord is completely wrong. I have explained that it looks as though we will lose 7.5 million jobs because of the fourth industrial revolution; that is the first thing. Secondly, there is drastic underemployment among people aged over 50 who, when they try to get a job, cannot do so. It is seen that they have only a few years left to work and so are not reliable; youth is what people look for. There are plenty of available older people, but jobs will disappear. That is why I could not support this amendment unless we had done a lot more work on what the mobility framework advocated by the noble Lord, Lord Fox, really meant.
Lord Berkeley of Knighton (CB)
My Lords, I will depart for a moment from the beauty of facts to perhaps more abstract philosophy. We have heard about the movement of people with respect to the creative industries; there is an important point to make here. I look back over a career that has taken me from being a chorister at the Royal Academy of Music to working at the BBC and the Royal Opera House, working with orchestras, dancers and singers. In each of those cases a very important contribution was made by the movement of people.
I believe that one of the most important aspects of intellect and civilisation—I am sure many Ministers on the Front Bench would aspire to these things—is curiosity. To experience the best aspects of curiosity, you need freedom of movement, freedom of ideas and the freedom to travel. I am privileged in the way my life has been staggeringly enriched by the movement of people, whether it is my ability to go to a concert in Vienna next month where my music will be played, and another in Budapest, or people coming here to perform. These are people from whom I have learned so much, people such as György Ligeti or Witold Lutosławski, with whom I studied. This movement of ideas and curiosity is vital to the intellectual and cultural health of our nation.
Lord Puttnam
My Lords, I had no intention of entering this debate other than to support the amendment. However, I must make a point to the noble Lord, Lord Hodgson, because he raised it. What we heard from him is all too familiar. When my mother’s family came to this country 120 years ago as Jewish immigrants from Russia, exactly the same charges were being made about a flood of Jewish immigrants arriving in this country and, potentially, destabilising it and making it a more difficult place to live. Does any noble Lord in this House think that that generation of Jewish immigrants did anything other than contribute massively to the wealth and prosperity of this country? This absurd argument is trotted out every 100 years—mostly from his Benches, I am afraid—yet it is always fallacious and, frankly, very upsetting and quite disturbing.
Lord Stevenson of Balmacara
My Lords, at the heart of this amendment is a concern that the necessary steps are taken to support trade involving the use of services, which increasingly spreads across not just performance, art or culture but work in making cars, machinery and so on, of which it is an integral part. The expertise and knowledge that goes with that involves people and we need to accompany the work they are doing in a way which allows it to function properly. If they are prevented from moving, we as a society will suffer. In addition to the well-made points from the Cross Benches on the artistic and cultural level, at a purely practical level, we need arrangements for the new technologies which the noble Lord, Lord Hodgson, referred to, which will be unable to work if we do not have the services to make them do so. I wish him well with his iPad when it collapses and he cannot get the people to service it because they are unable to travel.
More seriously, the fourth pillar of the GATT treaty, of which we are a member through the EU, and would be a member if we come out of the EU, requires countries such as the UK—it we were independent—to make sure that services are delivered in ways which include the ability to provide rights for working, living and studying. Although studying does not necessarily seem to apply to the right to work and live, it is a very important aspect for us in Britain because one of our biggest export earners is our educational services. If we prevent people travelling to provide the facilities which allow studying and the ability to pass on knowledge—as we would be, if we do not have a proper arrangement for that—we will suffer enormously as a result.
Last night, I was at a meeting involving universities, organised by the Industry and Parliament Trust. There was a palpable concern felt by all the academics present about: the inability to engage with Erasmus and Erasmus+; the possibility that the Horizon 2020 funds will not be available; the lack of technical support for research activity, because the salary level grades were too high; and the inability to attract good postgraduate students to provide the intermediate work in research teams, and to teach. They felt that this was going to mean considerable changes in our university systems. This is the implication if we do not have a mobility framework of the type described in this amendment, which I support.
Lord Bates
My Lords, I thank the noble Lord, Lord Fox, for moving this amendment. Before I respond, I should declare an interest, in that my wife came to this country from outside the EU and has contributed over the last 30 years by building a business, and in other ways. Therefore, I have no problem with recognising, as I was invited to do, the tremendous contributions to this country made by people who come to make this place their home. In the same spirit, I recognise the contribution that our European friends have made to this country, in many of the areas referenced already.
Lord Fox
My Lords, I congratulate those Peers who have taken part in the debate. The noble Baroness, Lady Bull, the noble Earl, Lord Clancarty, and the noble Lords, Lord Berkeley and Lord Puttnam, all forcefully put the moral as well as economic case behind the amendment. I thank the noble Lord, Lord Hodgson, for mentioning the industrial revolution. If we are to build a significant place in that industry in the world, as the Government’s industrial strategy seeks to achieve, it will not be by closing the borders and stopping people coming in to give us the value of their services, their knowledge and their ability to build it. This will be a global exercise. If we want to lead in it, we have to fling open our doors and let those people into this country.
The Minister of course put a persuasive case on the proposed regime. In essence, we are taking the regime that has been applied to non-EU migrants and putting it on to EU migrants. I have worked in companies that have sought to bring people into this country to do important jobs, and I have to tell the Minister that it is an extremely difficult process. Making it harder for our closest allies and biggest market to bring people in is not the solution to this problem.
The Minister is right to say that there might be other opportunities to put this point, but I am someone who likes to seize the day. I beg to seek the opinion of the House.
“UK participation in EU and EEA organisations
(1) The Secretary of State must seek to negotiate an international trade agreement with the EU which will enable the United Kingdom to continue, after exit day, to co-operate closely with the bodies listed in subsection (2).(2) The bodies are—(a) the European Medicines Agency;(b) the European Chemicals Agency;(c) the European Aviation Safety Agency;(d) the European Maritime Safety Agency;(e) the European Network of Transmission System Operators;(f) the European Food Safety Authority;(g) the European Union Intellectual Property Office.”
Lord Stevenson of Balmacara
My Lords, those with keen eyesight will have noticed that this is an amended version of an earlier amendment which was tabled in Committee. It reflects the fact that we have been in discussions with the Government on how best to frame an important issue, which is that a duty and obligation should be placed on the Secretary of State in this case and on the Government more generally to ensure that, if we are in a situation where we are negotiating international trade agreements with the EU—in other words, we are not in a no-deal, crash-out situation—the United Kingdom should try to co-operate as closely as possible with the bodies set out in the list.
In moving Amendment 24A, I draw the attention of noble Lords to Amendment 25A which I regard as consequential since it seeks to remove the clause that Amendment 24A is intended to replace.
We can trace the thinking about this back to an amendment moved in the other place at the time the Bill was being considered on Report in the Commons. That amendment inserted into the Bill a requirement that the Secretary of State or an appropriate authority to negotiate an international trade agreement with the EU that includes working closely with the European Medicines Agency, but it stopped at that point. That raises in my mind—and I am sure in others’—why other agencies and bodies of equal importance across a range of issues should not also be the subject of close negotiation. I therefore thought that it would be appropriate to bring forward an amendment at this stage which tries to list some of them.
I noticed that, in the Chequers statement and the White Paper that followed it, there was in fact a much longer list of bodies which were thought to be appropriate in any future negotiated international trade agreement with the EU. They did not appear in my original list, but they could well be considered. I also discovered that the CBI was keen to draw the Government’s attention to its view that the future relationship with the EU would suffer tremendously if a considerable effort was not made to approach bodies such as the European Medicines Agency and then including the European Aviation Safety Agency, the European Maritime Safety Agency and the European Network of Transmission System Operators in the same manner. The version before noble Lords perhaps still does not catch the full attention of the Government, but I hope that, when the Minister responds, he might suggest that we work further on this to make sure that we have reached an agreed position before we get to Third Reading. If so, I would be happy to work with the Government on that.
The Minister will probably raise the question why paragraphs (f) and (g), covering the European Food Safety Authority and the European Union Intellectual Property Office, are on my list whereas they perhaps would not meet the criteria that are going to be raised by the Government. I would be interested to hear his arguments on this, because many Members of your Lordships’ House would think that the European Food Safety Authority meets all the criteria of the others in the list. Moreover, if we are to make a future of our economy in the new modern world, we are certainly going to need to work closely with the European Union Intellectual Property Office, which has a high reputation for all the work that is involved in trying to regulate and bring forward arrangements for new technologies. I beg to move.
Lord Bates
My Lords, I thank the noble Lord for presenting his amendment, and I particularly thank him for the way that he has engaged with officials and with my noble friend Lady Fairhead on this important issue. I can cut to the chase and say that we are probably not going to be that far apart, but let me put some remarks on the record in the hope that we can agree to keep working on this between now and Third Reading.
Ministers from across Government have carried out an extensive engagement on EU exit with businesses, industry bodies and civil society organisations from all sectors of the economy and all regions of the UK. The Secretaries of State at DExEU and BEIS and the Chancellor of the Exchequer co-chair the EU Exit Business Advisory Group to ensure that business is not only heard but is influential throughout the negotiations. The group involves the director-generals and directors of the CBI, IoD, EEF, BCC and FSB. The meetings take place regularly and are included in transparency returns. Since July 2016, DExEU Ministers alone have organised and attended more than 500 engagements with business and civil society stakeholders from every sector of the British economy.
For goods, the UK and the EU want to be as ambitious as possible. As part of this, both parties have agreed to explore the possibility of UK co-operation with EU agencies such as the European Aviation Safety Agency, the European Chemicals Agency and the European Medicines Agency. In addition, the political declaration sets out that the UK will seek to co-operate with the European Maritime Safety Agency and the European Network of Transmission System Operators. As a specific example of this suggested co-operation in the interests of tackling shared safety and security issues, we will continue to co-operate with the European Maritime Safety Agency, including on exchange of information between the agency and the United Kingdom Maritime and Coastguard Agency.
Let me turn now to the core issue that remains between us, which is the position of the EU Intellectual Property Office. The Government are working to find the best arrangement for the UK regarding EU agencies and bodies, but the decision to seek co-operation with an EU agency or body must be made carefully, bearing in mind the context of the UK’s overall aims for the future relationship and negotiations with the EU. As we negotiate our future relationship with the EU, the Government are determined to agree ambitious provisions to help businesses protect their intellectual property rights. Indeed, in the political declaration the UK and the EU commit to establishing,
“a mechanism for cooperation and exchange of information on intellectual property issues of mutual interest”.
In this regard, the UK would seek an appropriate level of co-operation with the EU and other relevant agencies such as the EU IPO. What we can achieve will be subject to the negotiations. However, since intellectual property is a wide-ranging and dynamic area of law, it would be unwise to stipulate in UK law exactly how we want to co-operate with the EU in this given area, as this could have wider implications for the balance of rights and obligations in the future partnership.
Whatever the outcome of the negotiations, I should like to reassure the noble Lord, Lord Stevenson, that trademarks and registered designs are granted on a non-discriminatory basis. That means that, in all circumstances, British businesses will continue to be able to use the EU Intellectual Property Office to protect their trademarks and designs in the EU. The Government want to emphasise that we seek to be ambitious and to obtain the best result possible in the negotiations with the EU on intellectual property. However, as it stands, the amendment would be unhelpful in that it would bind the UK to a particular negotiating approach. The negotiation objectives are complex, and there are vitally important questions which must be weighed in their own right.
In accordance with the commitments made by the Prime Minister, Parliament will have a greater and more formal role in the development of the mandate for the next phase of the negotiations. The Government are more than sympathetic both to the concerns of the noble Lord, Lord Stevenson, and to those of businesses. A thorough engagement with stakeholders and the EU has led the UK to saying that it will seek co-operation with five bodies that I mentioned earlier. This work requires thorough and weighted consideration of how active participation in an agency delivers wider negotiation goals in the context of any associated costs and disbenefits.
I thank the noble Lord for his constructive approach to engagement on this. I believe that we are not far apart from each other, particularly in the light of the progress that we have made to date. As a consequence, I can confirm, as has been the case throughout the process, that I and the lead Minister, my noble friend Lady Fairhead, will be happy to have further discussions to see whether we can reach a mutually acceptable agreement. We will therefore return to this matter at Third Reading. On that basis, I would ask the noble Lord to consider withdrawing his amendment.
Lord Stevenson of Balmacara
My Lords, I thank the Minister for his considerate words and for dealing in detail with some of the issues that I raised in my opening statement. With his agreement, we will see whether we can work further over the next few days to get a common agreement on a wording that can be brought back at Third Reading. I beg leave to withdraw the amendment.
Baroness Fairhead
“Statement on equalities legislation
(1) This section applies where a Minister of the Crown proposes to make regulations under section 2(1).(2) Before a draft of the statutory instrument containing the regulations is laid before either House of Parliament, the Minister must make a statement—(a) as to whether the statutory instrument would, if made, modify any provision of equalities legislation, and(b) if it would, explaining what the effect of each such modification would be.(3) If the Minister fails to make a statement as required by subsection (2), the Minister must make a statement explaining why.(4) A statement under this section must be made in writing and published in such manner as the Minister making it considers appropriate.(5) In this section, “equalities legislation” means the Equality Act 2006, the Equality Act 2010 and any subordinate legislation made under either of those Acts.”
Baroness Fairhead
My Lords, we have talked at length about the purpose of the Government’s trade continuity programme, which is to seek continuity of the effects of existing EU free trade agreements as far as possible as we leave the EU. The vast majority of these existing trade agreements, which we are part of as an EU member state, are already in operation in the UK and have been scrutinised by Parliament.
Let me make it clear that, as part of this programme, we do not expect to need to change existing domestic equalities legislation. In the unlikely event that we need to make minor or consequential changes to this legislation, we will aim to ensure that this does not result in reduced protection against unlawful discrimination or diminution of equality rights. However, as indicated in Committee, to ensure suitable transparency and accountability on this important issue, the Government have worked closely with the Equality and Human Rights Commission to develop this amendment.
Amendment 26 specifically provides for a ministerial Statement to be made before any regulations are laid under the Clause 2 power to implement a continuity trade agreement. This statement will outline whether those regulations modify any provision of the Equality Acts 2006 and 2010 or any subordinate legislation made under those enactments. This is in addition to the reports that Parliament will receive under Clauses 3 and 5, setting out any significant differences between continuity agreements and the corresponding original EU agreements.
I trust that this House will accept this as further evidence that the Government have a strong desire to be transparent with Parliament, businesses and the general public about their continuity programme. I beg to move.
Lord McNicol of West Kilbride
My Lords, briefly, we on this side support the amendment and are pleased the Government are committed to protecting equalities legislation. However, I would like to see the Government go a little further and give a firmer promise that trade agreements will not allow any regression of standards as we move forward. I have nothing further to add.
Baroness Fairhead
My Lords, I thank the noble Lord, Lord McNicol of West Kilbride, for his support. As I think the House is aware, we are trying to work on standards to agree a mutually acceptable form of words.
I conclude by placing on the record my thanks for the positive engagement that the Government have had with the Equality and Human Rights Commission in relation to this amendment. We have worked closely together on developing it. As the House will have seen from the commission’s briefing, it too is supportive of the amendment. Consequently, I hope your Lordships will support the amendment. I beg to move.
Amendment 26 agreed.
Clause 7: Regulations: devolved authorities and general provision
Amendment 27
Viscount Younger of Leckie (Con)
My Lords, I rise as batsman No. 3 today. This group covers Amendments 27, 28, 29, 30 and 36 to 58. I will speak to Government Amendments 27, 29, 30 and 36 to 58 which are minor, technical amendments. I will then respond to amendment 28 tabled by the noble Lords, Lord Stevenson of Balmacara, and Lord Purvis of Tweed, after they have spoken to their amendment.
To avoid the unnecessary duplication of a provision already in place by virtue of the European Union (Withdrawal) Act, Amendment 27 removes Clause 7(2). Clause 7(2) allows for devolved Administrations to make regulations under section 1(1) or 2(1) of the Trade Bill before exit day provided that those regulations do not come into effect until exit day. This is already provided for by the European Union (Withdrawal) Act, which applies this principle to all Bills passed after the Act in the same Session of Parliament. There will be no change to policy with the removal of Clause 7(2); it merely removes an unnecessary and duplicative provision.
For the Bill to work in the way that is intended, the definition of subordinate legislation must include Acts passed in devolved legislatures as well as in the UK Parliament. This is possible by changing the definition of subordinate legislation from that used in the Interpretation Act 1978 to the more detailed one used in the European Union (Withdrawal) Act. This is the purpose of Amendment 29 which ensures that, where possible, the provisions in the Bill respect the important role of the devolved Administrations.
Turning to Amendments 30 and 36, Clause 8(6) in Part 1 of the Bill sets out a list of definitions of terms found in the Bill, such as “devolved authority”. The amendments will move the definition of domestic law from Schedule 1, paragraph 2(7) to Clause 8(6), where it will sit alongside other definitions that relate to the devolved Administrations. This will make the Bill easier for people to follow.
Turning to Amendments 37 to 43 and 45 to 58, Schedule 1 to the Trade Bill allows joint procedure requirements that derive from outside the Trade Bill still to apply to regulations made under Clauses 1 and 2 of the Bill. By inserting the phrase “acting alone” to appropriate places in Schedules 1 and 2, as Amendments 37 to 43 and 45 to 58 seek to do, we are improving the quality of the legislation by clarifying when the devolved authorities are acting alone as opposed to acting jointly with the UK Government.
Amendment 44 ensures that paragraph 6(4) of Schedule 1 works as intended by applying consultation requirements that would otherwise bind Northern Ireland devolved authorities to regulations made under Clause 1(1) and 2(1). These changes are technical in order to tidy up the Bill, and as such I hope your Lordships will support them.
Lord Stevenson of Balmacara
My Lords, it is a test of the abilities of Ministers to be able to breathe life into a list such as that we have just heard. This is a case of drafting amendments beyond the boredom threshold of many people who have to sit through these debates, and I congratulate the noble Viscount on his ability to do that well. I have no objection to the points that he has made and will support them enthusiastically when asked to do so.
In this group, which includes a lot of one-line amendments, is a large amendment dealing with the Sewel convention, which has operated for a number of years in relation to devolved matters in the Assemblies in Scotland, Wales and Northern Ireland—when they meet. It is there because there is concern that the Government have still not bottomed out their arrangements for how all such matters are to be dealt with going forward. While there is no complaint that the convention has not worked well until now, conventions are conventions and there is an argument, at least in principle, that at some point—either now or at some later stage—an attempt should be made to clarify the rules by which it operates and the conditions under which it exists.
I say that particularly because there remains a continuing concern over how the Government attempted to legislate in the withdrawal Bill, in particular on matters being devolved—as they may be under any agreement with the EU or if we crash out—to the UK but for which there was a strongly persuasive case for them going directly to the devolved Administrations. In those circumstances, a great deal of work has been done and a lot of the individual issues have been settled, one way or another. However, a list of matters relating to devolved issues still needs to be resolved so that where they intersect with other geographical locations, there is a workable scheme under which progress can be made.
One issue that arose previously was the extent to which the devolution legislation passed in this House to set up theses bodies could be invoked for issues concerning who has the authority to legislate where a matter is devolved. If a matter is not reserved under the Act, it is devolved, so matters that fall to be devolved must have the consent of the body to which the issue is devolved under the Sewel convention. I am putting this simply; the arrangement is more complex. In the case before us, with trade being such an important issue, we felt that there should be some measure in the Bill to explain exactly the conditions under which the convention would operate and the extent to which it would or would not be concerned. The amendment’s wording is quite clear:
“Regulations made … by a Minister of the Crown may not normally make provision which would be within the devolved competence of a devolved authority”,
unless the Ministers consent. It goes on to say that it would normally be within the devolved competences of the devolved authority, to which conditions are attached. That applies to all areas.
That would have been a very simple introduction to a very simple issue on which I would expect the Minister to respond. However, it will not have escaped the House’s attention that only yesterday, a very similar amendment to another Bill—the Healthcare (International Arrangements) Bill—was moved by the noble Baroness, Lady Manzoor, on behalf of the Government. It covered almost exactly the same territory. It was phrased positively, in a way that the amendment before the House today is not, but it covers the same ground. It said:
“Before making regulations … that contain provision which is within the legislative competence of a devolved legislature, the Secretary of State must consult the relevant devolved authority on that provision”.
It goes on to explain the conditions under which that would operate. The wording is not identical but I would argue that the sensibilities and principles behind this matter are identical to those of that amendment. Does the Minister therefore recognise that, to the extent to which the Government have already considered this issue and legislated for it, it may be in the Government’s best interests to accept Amendment 28, since to do otherwise might cause difficulty for what has already been agreed to in the healthcare Bill? Alternatively, would he agree to meet me and other noble Lords to discuss this, so that we can come back at Third Reading with wording that is consistent with what will soon be in law via the healthcare Bill and appropriate for the Trade Bill?
Lord Purvis of Tweed
My Lords, I will also speak to Amendment 28, to which I have added my name. There is not much to add to the persuasive case made by the noble Lord, Lord Stevenson. I welcome the Minister, who is always assured at the crease even as the third batsman. His clarification on Ministers of the Crown acting jointly with devolved Ministers is helpful; Clause 2 has always been a bit of a puzzle for me when it comes to the joint working of the two sets of Ministers.
As the noble Lord, Lord Stevenson, pointed out, our discussions in Committee concerned the areas of interaction where either devolved and reserved competences align themselves clearly or there is dispute as to where they fall—that is, whether they fall fully in the devolved competences of the Welsh or Scottish Parliament, for example, or are reserved. When we discussed the withdrawal Act, the Government put forward all the different policy areas to be repatriated from European Union legislation. There were no issues with 49 of them. It was recognised that a common framework between the UK and the devolved Administrations was needed for 82 of them. The Government said that there was to be further discussion on 24 of them. In 12 areas, there was no agreement; the UK believed that they were reserved but the devolved Administrations, particularly the Scottish Parliament, believed that they fell fully within the devolved competences.
Lord Hope of Craighead (CB)
My Lords, I add my support to Amendment 28. I hope not to repeat too many of the points already made.
The Minister may have seen the letter from Mike Russell, dated 11 March 2019, to which the noble Lord, Lord Purvis, referred. He draws attention to the fact that the Scottish Parliament is not prepared to give its consent to the Trade Bill as presently drafted, which is a matter of some concern. It is not just being obstructive; it is taking a measured position based on Clause 2 of the Scotland Act 2016, to which the noble Lord, Lord Purvis, also referred. In his letter, Mike Russell said, as the Scottish Government has pointed out, that many of the 24 policy areas currently identified as potentially subject to such regulations are highly relevant in terms of future trade deals, for example food and feed safety, animal health and welfare, agriculture, environmental policy, food labelling, procurement and fisheries management. It is vital that the Scottish Government and Parliament should be able to protect and advance Scotland’s interests and approach in these areas. It is concerning that the Bill as drafted does not mention either consent or consultation. I hope that the Minister will feel able to look at this matter more carefully before we reach Third Reading.
I will make two further points. First, the wording of Amendment 28, adopting the formula in the Scotland Act, uses the word “consent”. I recall long arguments, when we were debating the European Union (Withdrawal) Act, about whether the word “consent” should be included in its various provisions involving interaction with the devolved authorities. The matter was resolved, in connection with the frameworks in relation to trade, by using the word “consult” instead of the word “consent”.
Personally, I would argue that we should adopt the forms in the Scotland Act, but the fact that the word “consult” was used in the amendment to the Healthcare (International Arrangements) Bill, to which the noble Lord, Lord Stevenson, referred, might be worth some reflection on the Minister’s part. As the noble Lord pointed out, the formula used in Amendment 15 to that Bill, which was an insertion after Clause 4, was:
“Before making regulations under section 2 that contain provision which is within the legislative competence of a devolved legislature, the Secretary of State must consult the relevant devolved authority on that provision”.
That does not go as far as the Scottish Government wish, but at least it is a step in the right direction. As that amendment was moved by a Minister to a closely related Bill—it is part of the general package that we are considering, which is all related to our departure from the EU—I hope that the Minister and his Bill team will give careful consideration as to whether, if the Minister is not prepared to accept the formula in Amendment 28, that formula should be adopted instead. The difference between “consent” and “consult” is quite significant—but consultation, at least, would go a substantial way to meeting the concerns of the Scottish Government in these very important areas.
I shall add one further point. I was in the Grand Committee the other day looking at a statutory instrument that had been made by a UK Minister, and it contained a substantial number of amendments to Scottish legislation made by the Scottish Parliament. I asked why that was being done in a UK SI, rather than being dealt with by the Scottish Parliament. When one looked at the description in the back about consultation, one saw that it was defective, because it did not make it clear that the Scottish Government had been consulted. That was an example of a statutory instrument made by a Minister, on which one would have thought that consultation was essential—indeed, during discussions on the withdrawal Bill I was assured that the Sewel convention would be applied—yet the narrative was incomplete. That may have been simply a technical error, but it illustrates how easy it is to overlook the need for consultation, at least, unless that is on the face of the statute. So I warmly support the points made by the two noble Lords in support of the amendment. If the matter is to be taken away, I hope that the Government will come back on Third Reading with something to address this important issue.
Viscount Younger of Leckie
My Lords, I thank the noble Lord, Lord Stevenson, for this amendment, and for his scrutiny of the devolution provisions in the Bill throughout its passage. I also thank the noble Lord, Lord Purvis, and the noble and learned Lord, Lord Hope, for his points, which I will address later. Ensuring that the Bill works for the whole of the UK remains a priority for the Government, so I am pleased to inform your Lordships that yesterday the National Assembly for Wales voted in favour of granting consent to the Bill. I ask that this House consider that when weighing the scrutiny of the Bill in the context of the devolution settlements.
The practical purpose of the amendment is that the UK Government should, as a matter of course, seek the agreement of the devolved Administrations prior to legislating in areas of devolved competence. This is not, in principle, an area of contention; rather, the question is whether this should be on the face of the Bill. I reiterate that the UK Government are committed to not normally using the powers in the Bill to legislate in areas of devolved competence without the consent of the relevant devolved Administrations, and certainly not without first consulting them.
We have respected the role of the devolved Administrations through our programme of engagement with them, government amendments in the other place and my renewed commitment today. The Government will maintain this commitment. More broadly, the UK Government have been working productively and collaboratively with the devolved Administrations on a number of fronts. UK government officials are working with devolved Administration officials to revise the common frameworks analysis and take into account progress on framework areas since March 2018. The Government anticipate publishing a further iteration of this analysis shortly.
During our debates on this legislation, there have been many areas of agreement between us and noble Lords on the opposite Bench. Indeed, the noble Lord, Lord Stevenson, was correct to say in Committee that the use of the powers in devolved areas is,
“more complicated than can be dealt with within the confines of the Trade Bill.”—[Official Report, 23/1/19; col. 724.]
Additionally, the amendment risks setting a precedent whereby competence for policy-making is defined outside the established devolution settlements. It seeks to go further than the convention already recognised in the most recent Scotland and Wales Acts, and could require the court to make a decision on whether or not we were in normal circumstances. I do not believe it is the intention of this House to introduce new legal uncertainty to our statute book.
The Supreme Court made it clear in the judgment on the Miller case that it does not believe it is appropriate for the courts to police the Sewel convention, as it does not lie within the constitutional remit of the judiciary. By inviting this potential judicial scrutiny, the amendment could obstruct the programme of continuity that the Bill seeks to deliver, as the use of the powers could be substantially delayed, to the detriment of the UK as a whole.
I shall now deal with the point raised by the noble Lord, Lord Stevenson, when he mentioned the Healthcare (International Arrangements) Bill. As he knows, I was not involved with that Bill, but I hope that I can help. The amendment to that Bill requires the Secretary of State only to consult. Amendment 28 involves a consent requirement. Those are very different—and this plays into the point made by the noble and learned Lord, Lord Hope. For reasons that we have set out, the consent requirement would create a legal test for the courts, and therefore uncertainty. The powers in the healthcare Bill are different, too. The benefit of the concurrent powers in the Trade Bill is that they allow for the relevant Administrations to legislate themselves where a matter falls under devolved competence, and also allows Ministers of the Crown to make regulations for the whole UK when that makes sense.
As well as the benefits to the devolved Administrations of the concurrent powers, we have made repeated commitments on the Floor of both Houses always to consult the relevant devolved Administration. To take up the point raised by the noble and learned Lord, Lord Hope, about creating legal uncertainty, although the amendment includes the word “convention” in its title, it uses words that appear designed to turn the convention into a legal test. It uses the words “may not normally”, which appear designed to make that a legal rule justiciable by the courts. This could be a substantial block on the use of the Clause 1 and 2 powers, and could lead to delay through litigation, or, ultimately, to a block on the use of the powers if the court judged the situation to be normal. This could allow a challenger the power to withhold consent to the implementation of part of an agreement, meaning that the UK could not bring it into force until the matter was resolved.
Lord Purvis of Tweed
Clearly, I would always defer to the noble and learned Lord, Lord Hope, on these issues, but I had a slight anxiety when I heard the Minister say from the Dispatch Box that UK Ministers would be allowed to make regulations where they considered that that “made sense”. That is not language that we have become accustomed to in devolution practices over the past 20 years. UK Ministers could say almost all the time that it made sense for them to bring forward such regulations, especially in the context of trade agreements that they themselves had negotiated. But that is not the point. The point is that the legislative competences are not those of UK Ministers, but those of other bodes. All we ask is that the practices that have been developed, which have now been adopted in the Scotland Act—it contains language recognising that the Parliament of the United Kingdom “will not normally legislate”—be continued. That is now well established in statute. I cannot see why the Government say that it would cause problems in a separate statute, because it is already in statute.
Viscount Younger of Leckie
I listened carefully to what the noble Lord said. He referred to the point I made about making sense, and legislative efficiency after consultation with the devolved Administrations is what we are looking for. So in effect, I believe that we are on the same side of the fence. But given that we are getting into some quite detailed discussions and debates and my job is to give answers, it may be helpful if we go into such detail outside the Chamber with a further meeting. I have not finished yet, but I hope that so far I have given some reassurance to noble Lords.
Returning to my opening point, the vote yesterday in support of a legislative consent Motion by the National Assembly for Wales is a significant endorsement of the Trade Bill, and I am pleased that the UK Government have been able to meet all of the Welsh Government’s requests to improve the Bill. The Assembly’s vote recognises the UK Government’s meaningful efforts in ensuring that the Bill works for the UK. I hope that I have provided sufficient reassurance on the Government’s commitment, and the potential unintended consequences of this amendment. Therefore, I ask the noble Lord not to press Amendment 28.
Lord Hope of Craighead
I return to the word “normally”, to which the Minister drew attention. I recognise that in its judgment in the Miller case, the Supreme Court made it quite difficult for anyone to take a case before the court based on the use of the word “normally”. Indeed, the convention itself is not justiciable. In a way, that shows the sense of the formula that is used in the Healthcare (International Arrangements) Bill because that does not use the word “normally”. It just states that the Secretary of State “must consult”. If one is asking for consent, a higher level of co-operation is a useful qualification. “Normally” requires consent. But consultation is a sine qua non of proper legislation where the devolved Administrations are concerned. I would have thought that the formula in the amendment would not give rise to the same concern, which is why I suggest that the Minister considers very carefully whether, in this Bill, it would not be appropriate to adopt the same provision.
I appreciate what the Minister says about the consent of the Welsh Assembly, but it is a matter of some concern: the Scottish Government are particularly sensitive in relation to these issues and it would be a pity to say to the Scottish Government that just because the Welsh have agreed the Scots should just accept the provisions. They are making their own arguments based on what they know is important to them. Therefore, I hope that the Minister will pay very close attention to the point made.
Lord Stevenson of Balmacara
My Lords, this has been a useful little debate and I am grateful to the noble Viscount, Lord Younger, for raising all the points that he did and giving such a full response. But may I check with him that he said—it will be in Hansard—that he would be happy to have further discussions about the issue? I appeal to him and his good sense. Given that we are already in debate with him and his officials on a number of issues, this could with advantage be added to the list. It is not that we have any particular reason to want to bring it back in any aggressive form at Third Reading, but the issues raised are worth further discussion, particularly because the Government have chosen to legislate in the Healthcare (International Arrangements) Bill and that, irrespective of whether or not it has direct read-across to the Trade Bill, will have set a standard. We have to be careful that we are not either missing or exceeding that in a way that would be detrimental to any future discussions on trade.
I am willing not to press this amendment if we can be absolutely clear that there will be further discussions, because this point has not been fully resolved. But I give an undertaking that this is in no sense trying to make things difficult for the Government. It would be worth going a further round to get this right.
Viscount Younger of Leckie
As I said, I am very happy to be part of further discussions.
Lord Stevenson of Balmacara
A further meeting, principally with those who raised points in this debate, would satisfy us. I do not think that we are far apart on this, but if we can work out exactly what we want said in a way that would advance the chances of getting a better result for all concerned, that would be the right way forward.
Baroness Fairhead
“(6) In this section, “domestic law” means the law of England and Wales, Scotland or Northern Ireland.”
“Assessment of anti-dumping or anti-subsidy measures
In determining whether the application of an anti-dumping or anti-subsidy measure meets or does not meet the economic interest test under Schedule 4 to the Taxation (Cross-border Trade) Act 2018, the Secretary of State or TRA must give special consideration to the injury caused by the dumping of the goods, or the importation of the subsidised goods, to a UK industry and the benefits to the UK industry in removing that injury.”
Baroness Brown of Cambridge (CB)
My Lords, Amendments 31 and 32 are in my name and those of my noble friend Lord Kinnoull and the noble Baroness, Lady McIntosh of Pickering. Amendment 31 relates to the presumption in favour of adoption of trade measures and it will be familiar to noble Lords from Committee.
The Taxation (Cross-border Trade) Act sets the overarching rules under which the UK’s new Trade Remedies Authority will operate. The Act does not have a clear or explicit presumption in favour of adoption of trade measures akin to the EU equivalent, the Union interest test. Considering whether measures are in the interests of the UK involves taking into account five different sets of interests. In doing that, unlike the EU approach, the Act does not give priority or special consideration to the interests of the complainant industry. That special consideration gives the EU test a presumption in favour of adoption of measures, which is absent in the UK Act. While government amendments on Report of the Taxation (Cross-border Trade) Act improved the wording around the economic interest test, and Ministers have privately assured manufacturers that the intention is that there is a presumption in favour of adoption of the measures, the words contained in the Act fall short of such a presumption.
I thank the Minister for helpful meetings with me and my noble friend Lord Kinnoull on this issue, and I hope that, in her reply, she will be able to clarify the presumption that the TRA will apply when it conducts the test. An explicit reference to special consideration of the need to remove injurious dumping would be particularly helpful.
Amendment 32 relates to the way that the detailed rules for the operation of trade remedies will be scrutinised. These rules will have profound impacts on UK manufacturers’ ability to level the playing field when overseas competitors do not play by the rules. Many of those rules about the operation of trade remedies will come through secondary legislation as a result of provisions in the Taxation (Cross-border Trade) Act. Trade policy generally, including specific issues such as these, is of such importance that we should be discussing it frequently in your Lordships’ House—a sentiment that I believe the Minister might also support. Amendment 32 would require the statutory instruments to be affirmative instruments, to be discussed and approved by resolution of both Houses. I am interested to hear from the Minister about the opportunities that your Lordships’ House will have to debate important trade policy issues. I beg to move.
The Earl of Kinnoull (CB)
My Lords, I added my name to these two amendments and I will be brief. I agree with every word that my noble friend Lady Brown just said. I add my thanks to Ministers and the Bill team, who have been very gracious and given of their time generously to discuss these issues. I have nothing to add to what my noble friend Lady Brown said about Amendment 31, about which I wholly agree.
I also agree with what she said about Amendment 32, but I have one more point to add. It arises out of the report of the Constitution Committee into the Trade Bill. Talking about the formation of the Trade Remedies Authority, it states:
“While we recognise the pressing timescales and uncertainties concerning Brexit, in constitutional terms, creating and empowering an important public body in such a manner is inappropriate”.
I very much agree with that assertion. I therefore regard Amendment 32 not only as a mechanism for debate but as a partial cure for the problem that the Constitution Committee has unearthed in its report. I therefore see it as being an attempt to try to somewhat address that problem. Can the Minister comment on that and, if she feels the amendment should not be agreed, how we should address the itch that the Constitution Committee identified?
Lord Lansley (Con)
My Lords, I will make three very quick points. First, we need to be clear that Amendment 31 simply tries to attach the words “special consideration” rather than “take account”. It is not that all the factors are not there; they are, and they will be considered. The point is that special consideration should be given to this. It is not necessary to do that, because the nature of the structure in Schedule 4 would suggest that that precisely would be the case. I cannot therefore support the amendment. Temperamentally, I want to support Amendment 32, but I fear that in practice there will be many such regulations and it would not be the best use of time for this House and the other place repeatedly to engage in approving regulations of this kind.
I am interested in whether the Minster has anything to add on the potential announcements today on tariffs, which we foreshadowed last week. It is said that all the existing remedies presently imposed by the European Union would be continued, even under a no-deal scenario, by the United Kingdom. I want to inquire—the Minister might choose to reply by letter—to what extent it will be sustainable for us to do that when the remedies will have been assessed in relation to the European Union as a whole, rather than to the United Kingdom itself. For example, an increase in imports leading to injury to an industry might well be applied by the European Union in relation to an industry in Italy or Spain, but it would not be appropriate for such a remedy to be applied in the United Kingdom. That would very rapidly be open to challenge if we do not get the Trade Remedies Investigation Directorate, which is up and running in the Department for International Trade, on the case, so that we can, if we have to—I hope we do not—apply remedies on the basis of an investigation with UK, rather than EU, data.
Baroness Fairhead
My Lords, I thank the noble Baroness, Lady Brown of Cambridge, and the noble Earl, Lord Kinnoull, for tabling their amendments and clarifying in advance their concerns with me and the ministerial team.
Before I respond fully to the amendments, I will take the opportunity to draw your Lordships’ attention to the steps that the Government have taken to ensure that the UK is ready to deliver a fully operational trade remedies system by exit day. The Government have brought forward legislation under the Taxation (Cross-border Trade) Act 2018 to establish the UK’s trade remedies system in the event that we leave the EU without a withdrawal agreement. These regulations also temporarily confer trade remedy functions on the Secretary of State until the Trade Remedies Authority, the TRA, is legally established.
Staff already recruited to DIT with the intention of transferring to the TRA on Royal Assent of the Bill, including those trained as investigators—the key function of this body—will carry out their functions as the Trade Remedies Investigations Directorate within the department. The directorate started work on 6 March and will deliver trade remedies functions in house pending legal establishment of the TRA.
Let me repeat that this arrangement will only be temporary. As noble Lords will appreciate, this is a necessary and pragmatic operational contingency to ensure continuity of protection for UK businesses. This must remain the Government’s priority. It is right that we plan for all eventualities, including where, for whatever reason, the TRA is not legally established under the Bill by 29 March.
Baroness Brown of Cambridge
I thank the Minister for her detailed response. It is very encouraging to hear of progress with the implementation of the trade remedies system and with the work being done to ensure that, should we need it, provisions will be in place to support industry in this way on exit day should the TRA not be legally established by that point.
It was also good to hear the Minister say that the Government intend that we will act decisively on injury to domestic manufacturers, such as our ceramics industry, and I thank her for the reassurance that the intent of the Act is that there will be—I shall put it in inverted commas—“special consideration” for hurt to manufacturers when the economic interest test is applied. I am very comfortable with the strong reassurance she has given.
On Amendment 32, I accept the argument that there will be a large number of SIs containing a great deal of technical detail and that that is the reason for the negative procedure. I still have concerns that some very important issues will come through under the negative procedure. Trade remedy issues will be some of them, so it is with some reluctance that I shall not move Amendment 32. I beg leave to withdraw Amendment 31.
“Collection of export information on international education
(1) The Office for National Statistics (or anyone acting on their behalf) must collect and publish detailed information on the export earnings from non-UK-domiciled students which should include—(a) fee income,(b) living cost expenditure,(c) research and other similar contracts,(d) education products and services for non-UK-domiciled students,(e) education related travel and tourism services,(f) tourism expenditure by visitors linked to non-UK-domiciled students. (2) For the purposes of subsection (1) non-UK-domiciled students includes all non-UK domiciled students studying in the United Kingdom, including but not limited to—(a) all non-UK-domiciled students studying at education providers on the Tier 4 sponsor list including schools, English language providers, further education colleges, embedded colleges, private providers and universities,(b) all non-UK domiciled students studying on a short-term study visa at a provider with approved accreditation including those on student mobility programmes.(3) Information published for the purposes of subsection (1) must be broken down with regard to—(a) the regions and nations of the United Kingdom,(b) levels of study including school, further education, higher education, and English language provision,(c) subjects which facilitate entry into jobs on the shortage occupation list.(4) Within one month of publication of information under subsection (1), the Secretary of State must publish a target for future export earnings from non-UK-domiciled students which, as a percentage of the global market, must equal or exceed the level reported by the Office for National Statistics.”
Baroness O'Neill of Bengarve (CB)
My Lords, in the absence of my noble friends Lord Bilimoria and Lord Hannay, I shall move Amendment 33. This is yet another amendment on trade in the cultural industries, which have become a very important export sector, with the distinctive feature that some of the exports, in particular educational services, bring people to this country rather us sending goods to other countries.
The amendment seeks to improve the statistical basis for estimating the value of overseas students coming to this country. At present, the way it is estimated is not very satisfactory. Statistics are produced by the ONS, which calculated it as £7.2 billion, and by the DfE, which calculated it as £19.9 billion. That is quite a big gap. The aim of the amendment is to improve the statistics, making it easier to set an export target for this sector. There is a clear need for complete and unambiguous information. Although the students do the travelling, the educational services are a valuable export in which this country has an important place. We have targets set, but it does not make very much sense to set targets until one has clarity about the metrics. This amendment is about the metrics and getting the target right. I beg to move.
The Earl of Kinnoull
My Lords, I was added as the fourth batsman. I have only one thing to add to the very clear presentation made by my noble friend Lady O’Neill, which is that noble Lords will note paragraph (f) of subsection (1) of the proposed new clause. It would mean that some estimate of the tourism expenditure of visitors to students studying in the UK would be included in the statistical information. This information is being collected in Australia and the Australians have discovered that it is quite a big economic driver. That has led them to feel that they have a jewel in the crown of educational exports, and they are trying to grow it. The more we understand the numbers and statistics of the mighty business we have, the more we would be likely to feed it and help it. I bring that to the House’s attention.
Viscount Younger of Leckie
My Lords, the Government welcome international students, who make a valuable contribution to the UK economically and culturally. They bring greater diversity to university and college campuses and an international dimension to the experience of all students. They also stimulate demand for courses and add to the UK’s impressive research capacity. In the longer term, they offer the prospect of productive business, political, cultural and research links. Of course, they also bring welcome income to UK universities and our wider economy.
We are pleased that the UK remains a highly attractive destination for international students. UK higher education institutions hosted almost 460,000 EU and non-EU students in 2017-18, the highest number on record. There remains no limit on the number of students who can study here, and there are no plans to introduce one.
In the Higher Education and Research Act, there is provision for a faster and simpler route for high-quality new providers to enter the sector and gain degree-awarding powers. This allows the sector to diversify and strengthen its international offer, providing even better opportunities to students from all over the world.
The Department for Education currently publishes data on the value of UK education exports annually. These statistics cover education exports and transnational activity relating to higher education, further education, schools, English language training and products and services. I am grateful for the comments made by the noble Lord, Lord Fox, the noble Earl, Lord Kinnoull, and the noble Baroness, Lady O’Neill. It is important to look at the statistics, and I will start by giving a view of the ones that we already publish. The latest education exports data publication was dated January 2019. It set out that total education exports and transnational education activity were estimated to be worth almost £20 billion in 2016. International students at higher education institutions contributed £11.9 billion in exports through living expenditure and tuition fees alone that year. This accounts for around 60% of the total value of education exports and activity.
Baroness O'Neill of Bengarve
I thank the Minister for a very interesting reply and, of course, for the publication of the new document, which I look forward to; I understand that it is due imminently. To get the statistics right is not a simple matter: they interact in quite difficult ways with the metrics that we use for our own domestic students and for quality control. It is surely important to get this right and, since I hear the note of optimism that an attempt will be made to get it right, I beg leave to withdraw the amendment.
“Conditions of commencement
The provisions in Parts 1 to 3 of this Act may only come into force if—
(a) a withdrawal agreement and a framework for the future relationship have been approved by a resolution of the House of Commons on a motion moved by a Minister of the Crown for the purposes of section 13(1)(b) of the European Union (Withdrawal) Act 2018, or(b) the House of Commons has passed a motion “That this House approves of the United Kingdom leaving the European Union without a withdrawal agreement and a framework for the future relationship”.”
Lord Stevenson of Balmacara
My Lords, when I first joined your Lordships’ House, I was given tutelage in the ways and proceedings of this House. Indeed, I had a watcher who held hands with me, as it were, right through my opening period. One of the first things he said to me was, “When you get a new Bill, look at the commencement clauses, because they tell you how serious the Government are about their intentions”. Hidden in the interstices of the commencement clauses there is often a very good clue about how things happen. Some of the powers in a Bill come into effect immediately the Bill receives Royal Assent. Quite a few do not, and for them usually various elements come forward under regulatory procedures which are sometimes difficult to guess but which are very important to follow through to their logical conclusion. Nine years ago that was seared on my brain as an important thing, and I have never had the opportunity to do anything about it until today. I am therefore delighted to bring forward my first amendment on a commencement clause—and what an amendment it is.
As we speak, Divisions are happening in another place that will bear to some extent on the future of this Bill in its entirety, because consideration is being given to the question of whether there will be no deal. We have anticipated some of the thinking on that by wondering whether it would be sensible to give regard to the question of whether this Bill in its entirety had a commencement at all in relation to whether the other place had actually resolved that measures that would be affected by the legislation contained in this Bill had been given satisfactory agreement by the House of Commons.
There are two parts to this. Either a withdrawal agreement and framework for the future relationship with the EU must have been approved by a resolution of the House of Commons in a move by a Minister under Section 13(1)(b) of the European Union (Withdrawal) Act 2018, or the House of Commons must have passed a Motion that it approves of the United Kingdom leaving the European Union without a withdrawal agreement or a framework for a future relationship. These are quite tight and narrow constraints on the ability of this Bill to come into force. They are important because, in a sense, they tie the whole of the debates about our future relationship and trade in the widest context to the question of what exactly the Government intend for the future of the country in relation to the withdrawal Act.
The whole process can take effect only on the formal passing of a Motion or Motions by the House of Commons. This may not be the night on which such a Motion takes place. I understand that the amendments selected for discussion today do not fulfil the criterion set out in the withdrawal Act as being binding on the Government, although they will give us a clear view about where things will go. But we have been saying this for ages. Indeed, my credibility is shredded by the number of projections I have given to my family about what I thought was happening, all of which have turned out to be wrong. I am not proposing to go further tonight than simply saying that activity is happening that may have a bearing the future of this amendment. With that, I recommend to your Lordships’ House that we seriously consider this amendment. If necessary, I would like to test the opinion of the House.
Lord Kerr of Kinlochard
My name is on this amendment, which seems to be an extremely sensible one. I support what has just been said. I had no mentor when I came into this House, and I had no one to hold my hand, so, as will be obvious to all, I am lost, particularly on the details of commencement. But it seems to me that one of the virtues of this amendment is that it would rule out proceeding in the event of an accidental no deal. An accidental no deal is still a real possibility. But any form of no deal would be an act of self-harm, which I hope will be rejected very strongly in a very few minutes.
I was very sorry to see that some members of the Government were proposing to vote for self-harm, which is very odd. The doctrine of Cabinet responsibility seems to have fallen by the wayside on an issue as important as this, where it is impossible to have a government line which all the Cabinet would stick to. It seems to me that, since Sir Robert Walpole’s time, the defining characteristic of British Cabinet government is Cabinet responsibility shared by a group of friends who can command a majority in the House of Commons. It seems that both of these conditions are not met. I am not sure how relevant that point is to the amendment in my name and that of the noble Lord, Lord Stevenson of Balmacara, so I will say merely that I support it.
Lord Purvis of Tweed
My Lords, as we move towards the final stages of Report, it is right that we reflect briefly on why we have this Bill. Primarily it is here in case there is a no-deal Brexit. It includes many of the provisions that the Government told us would have to be in place before exit day for preparedness in case there was a no-deal exit. That was the intention in January 2018, when the Commons first debated this Bill, and we received it in September.
It was still the Government’s intention then that there would be plenty of time to put this legislation on to the statute book in order for there to be a framework for the slew of continuity agreements that we would all be considering. So far we have three, representing 0.3% of UK exports, and we will be debating them later today. If we are going in the direction of putting this Bill on the statute book in order to facilitate a no-deal Brexit, it is right that it is an intentional decision by the House of Commons that that is indeed the path that we should go down.
If the noble Lord, Lord Stevenson, presses this amendment, we will support it, because it is unconscionable, to use the Attorney-General’s word, that we will somehow at this stage find ourselves inadvertently in a no-deal scenario. However, we will have to reflect to some extent on what the House of Commons decides. The noble Lord, Lord Kerr, is absolutely right: not only has Cabinet collective responsibility now been ditched but there is not even any kind of collective responsibility within the Treasury. Today, the Chancellor talked about the shock to the economy and the deeply damaging elements of a no-deal Brexit. His deputy disagrees with him and will be in a different Division Lobby in the other place this evening.
Therefore, whatever the House of Commons decides, it is right that we provide a degree of certainty in this legislation, so that we cannot accidentally go down the path of a no-deal Brexit. If this Bill is to be enforced to provide that framework, it will have to be on the basis of a majority in another place specifically asking for it, and that is why this amendment is justified. As I said, if the noble Lord presses it, we will happily support it.
Lord Lansley
My Lords, I profoundly believe that we should not leave the European Union without a deal in place, but making this amendment to the Bill would not prevent that. Such an outcome would have to be stopped in another place with legislation or through the revocation of Article 50, and this amendment does not bear on that. Unfortunately, in that unhappy event, the amendment would remove from us the power to implement, for example, the agreement that has been reached with Switzerland. It is not ideal, but it is there. It has been entered into in good faith by us and by the Swiss on the basis that, in the event of no deal, we have to have that measure available.
I am afraid that it is also not true, as the noble Lord, Lord Purvis of Tweed, suggests it is, that the Bill is entirely occasioned for the eventuality of no deal. It enables us, for example, to establish the Trade Remedies Authority—we have just heard about the valuable work that it is doing—and it implements the Agreement on Government Procurement, which is a very large-scale issue for British services companies and others which want to be able to bid internationally under the WTO for such contracts. The amendment would stop this Bill coming into force, and we would therefore be unable to ratify the international Agreement on Government Procurement in the way that we were intending, and it would deprive businesses of the opportunities that that would provide. Much as I heartily concur with the intention behind the amendment, it would not have the effect that is sought.
Lord Purvis of Tweed
I just want to make a point about the ability to have the regulations on the Swiss agreement. The Government are not using the likely regulatory powers under this Bill to ratify the Swiss agreement, so I do not think that the noble Lord is accurate on that point. They are using the CRaG process, not this Bill.
Lord Lansley
My noble friend the Minister may know what their intentions are but, as I understand it, in a number of instances—and I think the Swiss are among them—they will use what are effectively not just bilateral agreements with the Swiss but the opportunity to roll over the EU-Swiss agreements into UK-Swiss agreements, and the power here is available for that purpose.
Lord Mackay of Clashfern
My Lords, it is also worth pointing out that, in the event of an accidental no deal—which I hope will not happen—the amendment moved by the noble Lord, Lord Hain, this afternoon would be relevant as well.
Baroness Fairhead
I thank the noble Lords, Lord Stevenson of Balmacara and Lord Kerr of Kinlochard. I am particularly delighted to be at the Dispatch Box to answer the inaugural commencement amendment from the noble Lord, Lord Stevenson.
We have had extensive debates on the Trade Bill, during which I believe all sides have acknowledged the importance of its provisions. I do not believe that this House disagrees with the underlying principles of the Bill. As my noble friend Lord Lansley pointed out, it is not just for a no-deal situation; it is to cover whatever the outcome of the negotiations with the EU might be. I hope and trust that your Lordships will acknowledge the need for any responsible Government to bring forward these provisions.
The Trade Bill covers four important areas for consumers and businesses. This House has debated them and is well rehearsed in them, and I do not propose to repeat the key ones in detail here today. The fundamental point which I hope your Lordships will consider carefully is that, if we do not enact this Bill in a timely fashion, that will have a direct and adverse impact not just on consumers but on businesses.
I am very aware that there are activities elsewhere at this hour that might have a bearing on this debate, but I remind noble Lords of the comment of my noble friend Lord Lansley that, if passed, this amendment could have very serious consequences for the UK. If a vote is passed in the other place ruling out no deal but no Motion is approved in favour of a withdrawal agreement, the default position at law is that the UK will leave the EU at 11 pm on 29 March. As a number of your Lordships have said, it would be an accidental no deal; it is not what the Government want, which is to have a deal. However, if that happens, the effect of the amendment would be to prevent the commencement of the substantive provisions of this Bill, and I do not believe that that is the intention of the noble Lords who are proposing it. Nevertheless, that is what would happen. The UK would leave the EU without a deal and without any of the protections offered by the Bill. I do not believe that anyone wants to see that.
The noble Lord, Lord Kerr, commented that the amendment would rule out an accidental no deal. We do not believe that it would; it would merely have the unintended consequence that, if there were to be an accidental no deal, the provisions would be prevented from coming into force. If the other place voted tonight in favour of no deal, the requirements in paragraph (b) proposed in the amendment would have been met. This would mean that the precondition for commencement would be satisfied, so the amendment would be rendered redundant by events.
Furthermore, as far as I am aware, no business groups or other representative organisations have indicated support for the amendment. In fact, many support the need to enact these provisions. For example, the CBI has stated that it remains,
“strongly supportive of the initiative to set up a Trade Remedies Authority”.
Similarly, the British Ceramic Confederation has stated:
“It is clear that we need a TRA, and it is certainly welcome that the Bill establishes one”.
We have heard cross-party support for continuity in both Houses of Parliament, and the International Trade Select Committee also confirmed that it struggled to find a witness who would speak against it.
I acknowledge, and understand, that passions and views are strongly held about whether this country should remain a member of the EU or leave. However, this should not distract from the core role of Parliament and of your Lordships’ House to ensure the best for this country’s people and businesses. No matter how strongly your Lordships feel about these issues, ultimately it must be a matter for the elected representatives in the other place to make a decision about the steps this country takes at this important moment in our nation’s history. This should not distract us from this Bill’s content, the importance of these provisions and the desire of consumers and businesses to see these vital provisions enacted.
During scrutiny of this Bill, the House has shown itself at its best, holding the Government to account and working with the Government to improve the legislation. However, for the reasons I have stated, we do not feel that there is a call for this amendment. I would therefore hope that the noble Lord, Lord Stevenson, feels able to withdraw instead of pressing to a vote.
Lord Stevenson of Balmacara
I am grateful to the Minister for responding as she has done. I pay tribute to her and her team for the considerable work they have done in trying to make sure that we get through this Bill and try to iron out the differences between us.
I think we will disagree on this. I have received information that the other place has voted 312 to 308 against a no-deal exit. We at least have that information in our hand as we think further about how this amendment might play out.
In response to the noble Lord, Lord Lansley, for whom I have a great respect and whose knowledge and experience have been very useful to the Committee and have informed our debates throughout the process of this Bill, we have already joined the GPA. That has gone through. The regulation-making power in the Bill is to make regulations about future changes in the GPA, not about the GPA itself. I disagree with him that we need this at this time. It may be necessary in future, but there may be other opportunities.
As has already been said, most of the establishing framework for the TRA is in another Bill already in place. As the Minister said, the Government have already introduced the regulations that give effect to the powers necessary for that to operate effectively. They are already through the House. The actual power in this Bill is not necessary. Many of its powers are not. They were appropriate earlier but not so now. I do not think we are talking about the substance of this. In some senses, this is a bit of a wake-up call to the Government, as well as a broader message to the wider community. On that basis, I would like to test the opinion of the House.
“COMMITTEE ON TRADE AGREEMENTSRecommendation in relation to ratification1_ The report under section (Parliamentary approval of trade agreements)(6) must include—(a) an account of the Committee’s consultation with—(i) each devolved authority,(ii) public bodies, businesses, consumer groups, trade unions and non-governmental organisations which, in the opinion of the Committee, have a relevant interest,(iii) the public, and(iv) equivalent bodies in the other signatory states;(b) an assessment of the qualitative and quantitative impact of the proposed trade agreement on—(i) the economy, broken down by the different parts of the United Kingdom and different regions of England,(ii) the environment,(iii) human rights standards,(iv) labour standards,(v) individuals with protected characteristics under section 4 of the Equalities Act 2010,in the United Kingdom;(c) an assessment of the qualitative and quantitative impact of the proposed trade agreement on—(i) the economy,(ii) the environment,(iii) human rights standards,(iv) labour standards,(v) individuals with protected characteristics under section 4 of the Equalities Act 2010,in any other state which is a proposed signatory to the agreement.2_ The report under subsection (6) of section (Parliamentary approval of trade agreements) must include an assessment of the extent to which the provisions of the proposed agreement conflict with, or are consistent with—(a) the provisions of international treaties ratified by the United Kingdom;(b) the provisions of the Sustainable Development Goals adopted by the United Nations General Assembly on 25 September 2015; (c) the provisions of the United Nations Guiding Principles on Business and Human Rights;(d) domestic human rights law;(e) international human rights law and international humanitarian law;(f) the United Kingdom’s obligations on workers’ rights and labour standards as established by the United Kingdom’s commitments under the International Labour Organisation’s fundamental conventions including but not limited to the Declaration on Fundamental Rights at Work;(g) obligations relating to animal sentience by which the United Kingdom is bound, or any principles relating to animal sentience to which the United Kingdom adheres, and any provision in domestic law (including retained EU law) relating to animal welfare standards and the welfare of animals in the production of food and the wider supply chain practice;(h) the principle of eliminating poverty;(i) the United Kingdom’s environmental obligations in international law;(j) the offences in section 1 of the Modern Slavery Act 2015 (slavery, servitude and forced or compulsory labour);(k) the sovereignty of Parliament;(l) the legal authority of UK courts;(m) the rule of law;(n) the principle of equality before the law.”
Baroness Fairhead
Baroness Fairhead
Lord Lansley
Lord Lansley
My Lords, it is a pleasure to be the back-marker on Report. Amendment 59 inserts text into the schedule that sets up the process for appointments to the Trade Remedies Authority, so that the chair can be appointed by the Secretary of State,
“following a report from the International Trade Committee of the House of Commons”.
In effect, this includes the chair of the Trade Remedies Authority in the list of appointments that are subject to pre-appointment scrutiny.
I do not do this lightly. There are about 1,000 senior public appointments, only 50 of which are subject to pre-appointment hearings by Select Committees. The Cabinet Office guidance on this was amended then reissued in January. Paragraph 8 sets out three criteria, the first of which says that such appointments should be for,
“posts which play a key role in regulation of actions by Government”.
This clearly must be satisfied as it determines one of the essential roles of the Department for International Trade in investigating and recommending trade remedies. Secondly, the appointments must be,
“posts which play a key role in protecting and safeguarding the public’s rights and interests in relation to the actions and decisions of Government”.
This instance may not be about the public, but certainly it ticks the box for the business community, which would regard the TRA as one of the most important bodies impacting on its interests in relation to the actions of the Government. Thirdly, the guidance says that appointments subject to pre-appointment hearings must be,
“posts in organisations that have a major impact on public life or the lives of the public where it is vital for the reputation and credibility of that organisation that the post holder acts, and is seen to act, independently of Ministers and the Government”.
Noble Lords will recall that, at a much earlier stage, we debated whether this body should be independent. The Government, having looked around the world, decided that the Trade Remedies Authority should be independent, and seen to be independent. We have three ticks in the box. This is clearly an important appointment; for the Department for International Trade, it must be regarded as the most important appointment. I do not know of any other posts that it is presently asked to scrutinise prior to appointment. This seems a perfectly reasonable way to proceed; nor does it constrain Ministers too far, as we have discovered. Ministers have to consult and liaise with Select Committees, respond to them and take account of what they have said, but they do not have to do what a Select Committee says and in quite a number of instances have not done so. Ministers can still make the appointments that they consider to be the right ones. I do not feel that I am holding the Government back from doing what they need to do. I am just encouraging them to include this appointment in that list. I beg to move.
Lord Stevenson of Balmacara
I support the noble Lord, Lord Lansley, and congratulate him on the succinctness with which he has made his point. I have been confused for some time as to why the department might resist this. He has made the points exactly as I would have done. This is a key role with a public-facing responsibility and will hold the Government to account on issues of great importance. Indeed, it is the only body that the DIT will have as a marker; it behoves the department to raise the TRA to the appropriate level so that it is seen to have the importance that the department claims for it. For these reasons, it is absolutely right that we have an established routine that the person selected by the Minister to be the chair of this body—we are not expecting the same to happen for the chief executive or more junior staff, just the chair—should be seen by the International Trade Committee. As he says, it is a courtesy in some senses because the Minister can still appoint should they wish to do so. I support the amendment.
Baroness Brown of Cambridge
My Lords, Amendment 60 is in my name and those of my noble friend Lord Kinnoull and the noble Baroness, Lady McIntosh of Pickering. I also support Amendment 59.
The UK needs a strong and independent Trade Remedies Authority with a balanced membership to investigate alleged dumping and subsidy cases and to recommend remedies. Schedule 4 to the Trade Bill defines the membership of the TRA and its governance. As I have said before, and as the noble Lord, Lord Lansley, emphasised in moving Amendment 59, while both Clause 10 and Schedule 4 make the independence of the TRA a clear objective, this does not sit entirely comfortably with the chair and the non-executives being appointed entirely at the discretion of the Secretary of State.
The governance model of the Office for Students in the Higher Education and Research Act 2017 seems to offer a good model for delivering both independence and balance, and this is the model that has been used in drafting this updated amendment. It would require the Secretary of State to have regard to the desirability of members having between them experience in a number of relevant areas, including UK manufacturing, trade unions, consumers, regional economic growth, regulatory systems and international trade disputes.
The Government have suggested that the TRA should be managed by trade remedies experts rather than by stakeholders with vested interests, in order to be independent. However, the chief executive designate has already told a Commons Select Committee that she is not a trade remedies expert. A properly balanced group of non-executive stakeholders, supported by expert executives, could be effective, independent and balanced. I look forward to hearing from the Minister how the Government will ensure the combination of independence and balanced and relevant expertise that this important body requires.
The Earl of Kinnoull
My Lords, Amendment 60 is also in my name. I too have problems with the TRA as currently constituted, in that arguably it lacks independence and balance. It is in looking for independence and balance that the amendment has evolved. Amendment 59 very much deals with the independence point, and on that basis I strongly support it.
In Committee, I said that independence is important, because the TRA needs to be seen to be not a mere cipher for the British state but something which has its own life. There is a problem when one looks at Schedule 4 and sees that the chair is appointed by the Secretary of State, as are all the non-executive directors. The Secretary of State gets the chance to approve the CEO. The non-executive directors will always be in the majority and the Secretary of State has the power to remove them. On top of that, paragraph 34 of Schedule 4, entitled “Guidance”, says that the TRA must have regard to the Secretary of State’s guidance, which seems to me to mean instructions. It seems to be wrongly titled. Therefore, I worry that the independence bit of my beef is not coped with sufficiently. I look forward to hearing something from the Minister to assuage my concerns.
Balance is incredibly important. This cannot be an effective body if there is no balance—balance of experience and background. The point is obvious. Nowhere in Schedule 4 do I see anything that gives rise to a feeling that there would be balance, but I look forward to being corrected on that point.
Baroness Neville-Rolfe (Con)
My Lords, I rise simply to say that I do not particularly agree with Amendment 60. It is necessary to have expertise in the TRA. As I said on an earlier occasion, I am not convinced that having a completely separate authority is sensible. The European Union seems to do a very good job on trade negotiations. That, as I recall from my experience as a civil servant, a Minister and a businessperson, was done in-house. I ask the Minister to pause before agreeing to these amendments without thinking about them a little further.
Baroness Fairhead
My Lords, I thank noble Lords for their continued engagement with the work to establish the Trade Remedies Authority. I trust that I am able to provide reassurance that we are taking proper steps to set up this important body in the right way.
I turn first to Amendment 59, tabled by my noble friend Lord Lansley and the noble Lord, Lord Stevenson of Balmacara. We listened carefully to the points made by them and other noble Lords in Committee about how best to ensure that the senior leadership is as independent as possible. This includes the appropriate role for the International Trade Committee. That is why I am pleased to announce that the Secretary of State is content for the International Trade Committee to conduct a pre-commencement hearing of the TRA chair. This hearing will take place after the Secretary of State has appointed the TRA chair, but before the chair has taken up their position. I further reassure the House that this offer of a pre-commencement hearing by the International Trade Committee will apply to all future TRA chairs, not just the first one. We hope that this will ensure that the ITC has the appropriate role in scrutinising any individual appointed to that position.
I turn now to Amendment 60, for which I thank the noble Baroness, Lady Brown of Cambridge, and the noble Earl, Lord Kinnoull. There are three key issues at hand that I would like to address. The first point is independence. Having had discussions with the noble Baroness and the noble Earl, I will say that independence really matters. We are committed to creating an independent TRA that all our stakeholders can trust and that will be seen as an independent body by third countries. We have taken clear steps to achieve this, including establishing it as a non-departmental public body in the first place, which is different from other organisations around the world, and giving it the appropriate separation from Ministers. We are ensuring that it has an independent board. That is why the Secretary of State will be required to follow the tried and tested Cabinet Office Governance Code on Public Appointments when appointing all non-executive TRA board members.
As this House will be aware, that code enshrines the independence of those members by explicitly stating:
“All public appointments should be governed by the principle of appointment on merit”.
TRA board members must be appointed based on their ability, not the stakeholder group or interest that they represent. The Commissioner for Public Appointments will regulate all non-executive appointments to the TRA, providing independent assurance that the Secretary of State follows the code’s strict rules on making such appointments based on merit and the public interest. While TRA non-executives may well have had experience representing certain stakeholders, we believe that that alone cannot be the reason why they are appointed. To do otherwise would jeopardise the true independence of the board, particularly as this is an investigative body.
The noble Baroness, Lady Brown, referred to the Higher Education and Research Act 2017. We do not feel that it is appropriate to draw parallels between the TRA and the Office for Students. The primary function of the Office for Students is to protect the interests of students, whereas the TRA has been set up to protect UK industry from unfair trading practices, which it will do by undertaking independent and impartial technical investigations into whether these practices have occurred. While this will ensure that manufacturers are protected against unfair trading practices, the TRA has not been set up specifically to protect the interests of those manufacturers or other groups.
The second point relates to skills and experience. I assure your Lordships that we are committed to making sure that the members are best placed to oversee this new function. That is why, when appointing the non-executive members of the TRA, the Secretary of State will have regard to ensuring that the board has the right balance of skills and range of experience. I will do more than pause, as requested by my noble friend Lady Neville-Rolfe. She has wide experience of sitting on boards in both the public and private world, and it is having that right balance and mix of skills and experiences that is most important. Moreover, this process does not happen behind closed doors. To ensure transparency, the requisite skills and experience for each non-executive appointment will be set out in individual TRA job descriptions that will be published in accordance with standard practice.
The noble Earl, Lord Kinnoull, raised a question about the TRA having regard to guidance, and we have included clear statutory restrictions on the Secretary of State’s ability to issue guidance to the TRA. That includes setting out specific circumstances in which the Secretary of State can publish guidance. For example, they cannot publish guidance in relation to a specific case. That is also why the Secretary of State must consult the TRA before publishing guidance, and explicitly have regard to its independence, impartiality and expertise.
These skills and experience requirements include, among others, strong and effective leadership, astute business awareness and an understanding of the complex domestic and international trading environment which the TRA will be operating in. However, we believe that specifying a detailed list of desired experience in statute risks restricting the Secretary of State’s ability to appoint individuals, and the chair and the board’s ability to appoint executives with other relevant experience not detailed here. It suggests that only those criteria listed in legislation are desirable, and may inadvertently displace others. That could create a problem if, in the future, a TRA non-executive was needed to fill a skills or experience gap not covered on the list.
On stakeholders, let me reassure the House that we understand the need to ensure that stakeholders’ interests are accounted for properly. We have also taken clear steps to ensure this. That is why the TRA chair’s job description, and terms and conditions, make clear that he or she will be expected to communicate with stakeholders and incorporate their perspectives into TRA board discussions where appropriate.
We specifically recognise the importance of the devolved Administrations in building the UK’s independent trade policy. That is why we have made several key commitments to ensure they, too, have an appropriate relationship with the TRA and DIT. These include sharing the TRA’s annual report with each devolved Administration, seeking suggestions for the optimal way to recruit TRA non-executives, and suggesting to the TRA chair that the board undergoes specific devolution-focused training. The Welsh Government of course have passed a supplementary legislative consent Motion in the Welsh Assembly, indicating their support for the TRA provisions in this Bill.
As we are reaching the end of Report, I will make some concluding remarks. This stage has provided us with a valuable opportunity to test and improve the detail of this important Bill. I thank your Lordships for that and look forward to Third Reading next week. Having said that, I respectfully ask the noble Lord to withdraw his amendment.
Lord Lansley
My Lords, I am most grateful to the Minister for her response to this short debate. It is fitting that we have further evidence in her response of the constructive and positive way in which Ministers have listened to the debate and sought to meet the concerns raised. That has been evident throughout our discussions.
I apologise—I should have declared an interest. I am the UK co-chair of the UK-Japan 21st Century Group, and in that context Sir David Wright, who is the chair-designate of the Trade Remedies Authority, was a member of that board and a former ambassador to Japan, so I know him. It will be evident from those who know him that the purpose of this discussion is not in any way to question his suitability for the post—far from it—but rather the process by which his successors are to be appointed in years to come. In that context I was grateful for the specific nature of the assurance my noble friend was able to give.
The difference between a pre-appointment hearing, in circumstances where the Secretary of State is minded to appoint somebody who is then seen by the Select Committee, and a pre-commencement hearing, where the Secretary of State has appointed somebody but the post has not been taken up, is a distinction without a difference in circumstances where the Secretary of State could proceed in any case. There is a benefit in such appointments being taken up by those seen by Parliament as well as by the Executive, not least having been seen positively in the context, not of trying to second-guess the Secretary of State’s choice of the right person but of understanding at the outset, before somebody takes up the post, how they propose to approach it, their suitability for the tasks, and what objectives they are looking for—what kind of outcomes they are hoping to achieve. In that respect, what my noble friend was able to say adequately and fully meets the purposes that I was raising in my amendment, so I beg leave to withdraw it.
Trade Bill
Wednesday 20th March 2019
(5 years, 8 months ago)
Lords ChamberRead Full debate Trade Bill 2017-19 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 167-I Marshalled list for Third Reading (PDF) - (19 Mar 2019)
Lord Taylor of Holbeach (Con)
My Lords, I have it in command from Her Majesty the Queen to acquaint the House that Her Majesty, having been informed of the purport of the Bill, has consented to place her prerogative, as far as it is affected by the Bill, at the disposal of Parliament for the purposes of the Bill.
Clause 2: Implementation of international trade agreements
Amendment 1
Baroness Fairhead
The Minister of State, Department for International Trade (Baroness Fairhead) (Con)
My Lords, I am bringing forward amendments designed to maintain UK levels of statutory protection when implementing continuity trade agreements using the power in Clause 2 of the Trade Bill. The fact that I am able to do so is testament to the cross-party working that makes this House so valuable, and I have no doubt that this process has enhanced the legislation. I will speak to this amendment first and will respond to the amendments tabled by the noble Lord, Lord Stevenson of Balmacara, and my noble friend Lady McIntosh of Pickering once we have heard their contributions.
The Government are clear that we will maintain our domestic standards as the UK leaves the EU—an objective shared by so many of your Lordships. As we have stressed during its passage through this House, the fundamental aim of the Trade Bill is to achieve continuity in our trading relationships. A key aspect of that continuity is to ensure that UK statutory protections are maintained. These protections are highly valued by our businesses and consumers and are an important component of the UK’s offer to the world.
Noble Lords will recall the productive debate on this issue on Report on 6 March. We have since held constructive discussions with a number of noble Lords—including the noble Baronesses, Lady Jones of Moulsecoomb and Lady Henig, the noble Lords, Lord Stevenson and Lord Purvis of Tweed, and my noble friend Lady McIntosh—about how we can best reflect our shared objectives. I will now describe how we have achieved this.
This amendment restricts use of the power in Clause 2. It makes it clear that the power can be used only in a way that is consistent with the maintenance of UK levels of statutory protection in the listed areas. The term “UK levels of statutory protection” covers all UK domestic legislation relating to the protection of human, animal or plant life or health; animal welfare; environmental protection; and employment and labour. This includes retained EU legislation that is being brought into our domestic law as we leave the European Union. I will explain in a little more detail why we have fixed on the wording of these four categories.
First, we have chosen the formulation “protection of human, animal or plant life or health” because it is a broad description that includes, but is not limited to, the areas of food safety and public health. The purpose of this is to safeguard all legislative protections affecting human, animal or plant health. It may also be helpful to observe that this form of words is well understood in the WTO context, thus ensuring consistency with our wider international obligations.
Secondly, this amendment will ensure that environmental protection is secured. This is in line with the Government’s position on the environment, as reflected in the draft environment (principles and governance) Bill. Thirdly, it also ensures that the UK’s animal welfare legislation will be protected. Our animal welfare protections are held in high regard across the world, and we are clear that our trade policy should maintain them.
Lastly, we are making a statutory commitment in this amendment to uphold employment and labour protections. The Prime Minister is clear that we will not only protect existing workers’ rights but will, in time, seek to build on them. I again thank all noble Lords who have helped to shape this amendment. It achieves an important goal, which is both consistent with our trade policy and an improvement to the Bill.
Baroness Jones of Moulsecoomb (GP)
My Lords, I find myself in unfamiliar territory—I might even say unknown territory—here, because I am supporting a government amendment. I am grateful to the Minister for having tabled the amendment, which is a rewritten version of some amendments from Report and Committee. We now have in the Bill protection for environmental, employment and animal welfare standards. That is a real success. Obviously, it does not go as far as I would like, but I am not sure how many Members of your Lordships’ House would support me on all the things that I would like to see in legislation.
I would like to check the phrasing in new subsection (4A), which I find a bit convoluted. Was that intentional? I would appreciate the Minister explaining the reasoning behind it. In particular, is she completely satisfied that it replicates the full extent of the Government’s promises about protecting standards and leaving the environment in a better state than we found it?
Those questions aside, this amendment is a very important development, and I hope that it provides a framework that the Government will build on in their future legislation—for example, in the Agriculture Bill, the Fisheries Bill and the environment Bill. It has taken a lot to get to this point. The Commons considered the issue in its consideration of the Bill, and it has taken your Lordships’ House until Third Reading to come to any kind of resolution beyond warm words. I hope that the Minister will confirm today that we will not have to battle over this in future Bills, and that it will be government policy to write it into legislation from day one.
Many Greens and progressives have been highly critical of international trade and globalisation because it has, to date, represented a race to the bottom. The failure of TTIP, for example, shows the level of public feeling against shadowy trade deals that threaten our hard-won standards. Some of the proponents of Brexit, of course, have suggested that the biggest advantage of leaving the EU is that we can have a bonfire of “red tape” so that we can strike new trade deals. Many of us shudder in fear at that prospect.
This amendment stops that thinking in its tracks. This really is the baseline level of protection that we should have in our trade deals. Our negotiators should be going into trade talks with these very clear red lines that cannot be up for debate. Going forward, I will be working with noble Lords to enshrine the principle of non-regression in the environment Bill and other Bills, so that the only way is up for environmental standards. I realise that the environment Bill is outside the Minister’s brief, but I would appreciate it if she could encourage her ministerial colleagues to pre-empt all our amendments by writing this stuff into the Bill in the first place.
As the Minister has described repeatedly in this process, British standards are highly regarded across the world and are part of our British brand. I thank all the people who have written to me and supported my work on the Bill. Compassion in World Farming was particularly helpful, alongside the Trade Justice Movement, Greener UK and Liberty. The noble Lord, Lord Stevenson, has worked hard outside the Chamber to negotiate with the Minister to get us to this point—and it has been great fun to work with two passionate campaigners here in your Lordships’ House, the noble Baronesses, Lady Henig and Lady McIntosh of Pickering. Of course, I also repeat my thanks to the Minister and her officials for their generous time spent discussing these issues and bringing us to where we are today. This is the first step on a long journey, but I am happy to support the Government’s amendment today.
Baroness McIntosh of Pickering (Con)
My Lords, it is a great pleasure to follow a fellow campaigner and the sole Green Party representative in this place. I congratulate the Minister on taking her first Bill through this House and thank her for the graciousness and openness that she has demonstrated in the meetings and exchanges that we have had. I thank the noble Baronesses, Lady Jones and Lady Henig, for supporting my amendment and for reaching common ground on this issue, as we have witnessed today. I also thank the noble Lord, Lord Stevenson, for showing his support, for his charm and graciousness and for not roaming in the gloaming as we did last week on the mobile phones SI. Above all, I acknowledge the work of the Minister in this regard.
I hope the Minister will not think me churlish of the spirit that she has shown in the text of the amendment, but it would be remiss of me not to say why I have tabled Amendment 4 for the purposes of debate today. I accept that it is a matter of language and semantics but, in the law, language is important. I understood her to say that guidance would be issued once the Bill had received Royal Assent, but guidance does not have statutory effect and I wonder what its legal status be. I do not take issue with her as much as the parliamentary and legal draftsmen in this regard.
As the Minister said in moving her amendment, we wish to maintain domestic standards when we leave the European Union. I point to the retained EU law—which I think we now call primary or principal law—on sanitary and phytosanitary requirements, in which it is generally understood that standards of food safety are paramount. That has been reflected in the campaign carried out by all the farming organisations, not least the NFU. However, the wording of the World Trade Organization and its committees states that:
“For all of these agreements, the WTO encourages international standards as it believes they are ‘less likely to be challenged legally in the WTO than if it sets its own standards’”.
That is the reason for tabling the amendment. It is a serious omission.
My noble friend said that proposed new subsection (4B)(a) to (d) covered food safety but, having seen epidemics almost every 10 years such as BSE, foot and mouth disease and the horsemeat scandal that could easily have been a food safety issue, I think that it is better to get it on the statute book.
I reiterate what the Minister said: there have been constructive discussions which have permitted us to coalesce around her Amendments 1 and 2. However, as the noble Baroness, Lady Jones of Moulsecoomb, has done, I put down a marker that we will return to this issue when the Agriculture Bill reaches this House. However, I again thank the Minister and congratulate her on getting us so far to Third Reading.
Baroness Deech (CB)
My Lords, perhaps I may make what I hope are reassuring noises about food safety. There has been much discussion here about the fear that our food safety will decline once we have left Europe. Across Europe there are 23 million cases of food poisoning a year and 5,000 deaths.
In the global food security index we tie, at number three, with the USA. Only Ireland and Singapore are ahead of us. Most European countries are way down that list, including, for example, Poland and Bulgaria. In other words, they should be keeping up with us. We would have an awful long way to fall before our food safety record could be compared with the very low standards prevailing in much of Europe. While one welcomes this amendment, in practice there is very little to worry about.
The Earl of Lytton (CB)
My Lords, this is the first time I have intervened on this Bill and I do so without any interests to declare, although back in the 1980s we had great discussions about the criteria for dealing with protected areas in the United Kingdom. This was because in the classification of the International Union for the Conservation of Nature, UK national parks were regarded not as category 1 protected areas but as multi-use areas. The meaning of national park here was different from what it was in the United States, Australia or many other countries.
There used to be a three-legged approach to what happened in protected areas in the UK, based on the principles of environmental, economic and social balance. It seemed to me then—and still does—that that encapsulates all that one might expect without skewing the outcome in one direction or another. None of the four items in proposed new subsection (4B) in Amendment 2 refers to business economics or to the leisure and cultural activities of those who may be living and working in protected areas. This is an omission of some significance in regard to protected areas in the UK. Can the Minister say, therefore, whether the three-legged approach is still meant to be encapsulated in the four-legged one in proposed new subsection (4B)?
Lord Krebs (CB)
My Lords, I join the noble Baronesses, Lady Jones of Moulsecoomb and Lady McIntosh of Pickering, in congratulating the Minister on her work in bringing forward this amendment, which commits us to maintaining high standards of food production, welfare and environmental protection. I have, however, a few questions that I hope the Minister may be able to answer and thereby clarify certain small areas of concern.
The first question is on whether Amendment 2 applies only to trade deals that are rolled over from existing EU third-country deals, or to all future trade deals. Secondly, does Amendment 2 include all provisions in rolled-over regulations? My third question is about the phrase “levels of statutory protection”—does that include levels set out in policy guidance? Fourthly, following a comment by the noble Baroness, Lady Jones of Moulsecoomb, can the Government provide at this stage a commitment to non-regression on standards?
As an addendum, I echo a point made by my noble friend Lady Deech: the high standards of food safety in this country are at least in part attributable to the role of the Food Standards Agency, of which I had the privilege of standing as its first chairman. My final question to the Minister is: can she reassure this House that after Brexit the independence and powers of the Food Standards Agency will not be eroded, and will continue to provide regulatory effectiveness—and reassurance to the public that our high standards of food safety will be effectively assessed and managed by an independent body?
Lord Purvis of Tweed (LD)
My Lords, those who have followed the progress of the Bill in this House will have seen that the Government have acted with integrity in recognising that some of us felt that an extra level of protection for the continuity agreements should be recognised in statute. Across the House, we are genuinely grateful to the Minister for the manner in which she has responded.
I shall raise a couple of points for clarification. I welcome the amendments. The House will be aware that, in the early stages of our consideration, the amendments that I tabled, which were supported by other noble Lords, sought that our obligations under the international agreements in these areas be recognised. From the discussions we have had with the Minister and the Government, we now have the Government’s settled view, which is to maintain UK levels of statutory protection. That is satisfactory, but aligning ourselves to the obligations in the international agreements would have addressed the point made by the noble Lord, Lord Krebs, about the different agencies and bodies operating under the obligations of the international agreements rather than those that have been transferred into UK statutory or regulatory provision. I understand that the former is harder to do and the latter is clearer in legislation.
We need clarification about maintaining UK levels of statutory protection. The level of statutory protection in Scotland or Wales in some of these areas may be higher than the level in England, and in some of these areas there will be interaction with devolved legislation. In some areas there will be Scottish legislation or Welsh regulations and English regulations applying only to England. Which is considered of higher status? We do not know yet. I will be interested in the Government’s view.
My second point perhaps addresses the point made by the noble Lord, Lord Krebs. We know that these regulations will be for the continuity agreement, and by definition they will be limited to the agreements to which we are already signatories and which we have already put into UK legislation. I agree with the noble Baroness, Lady Jones, and other noble Lords that this sets the framework we would like to see in the non-regression provisions in future trade agreements. In the Urgent Question just before this debate, the noble and learned Lord, Lord Keen of Elie, was very keen to use the words “mandate in Parliament” with reference to the position of UK Ministers and making decisions with the European Union. In the way forward for these regulations, we are in effect starting to see an emerging set of parameters for a mandate for future trade agreements.
I have added my name to Amendment 3 on human rights. The complexity and sophistication of trade agreements are such that human rights are a key element that needs protection. Whether they relate to our commitments on modern slavery or to supply-train issues of human trafficking, trade agreements and our trading relationship with other countries bring in elements of human rights beyond purely trading relationships. That is why I was happy to put my name to this amendment, so that the Government can clarify how human rights are captured within it. The helpful briefing from the Equality and Human Rights Commission indicated that while the Human Rights Act 1998 does not fall within the scope of the delegated powers in this area, it is broadly satisfied with maintaining current levels of protection. It believes that sets a wider precedent that can be taken into consideration on issues such as human rights. I will be grateful if the Minister can confirm that the Government agree with that interpretation. It would be a great reassurance for us that human rights provisions are maintained in the continuity agreements and will set a precedent for future trade agreements.
I welcome the Government not only listening but acting in bringing forward their amendment.
Lord Stevenson of Balmacara (Lab)
My Lords, I would also like to thank the Minister for introducing this amendment and the following one—Amendment 2 —which she also spoke to. That amendment combines the thinking from Report stage Amendments 3 and 4 with further discussions that the Minister alluded to, which took place offline. These discussions have led to a broader understanding, reflected in the debate today, that it is worth having a clear and unambiguous statement in the Bill about our current standards for activities including,
“the protection of human, animal or plant life or health … animal welfare … environmental protection … employment and labour”,
and—to pick up the point made by the noble Lord, Lord Krebs—ensuring no regression can occur as result of trade deals which are being rolled forward. The lead name on this amendment is the government Minister’s, and she has been joined by the Green, Labour and Conservative parties in that. This suggests that we have struck a feeling in the House that needs to be reflected in the wording.
Having said that, there is an amendment in my name, which I would like to raise for discussion although I will not press it, and there is an amendment on food safety in the name of the noble Baroness, Lady McIntosh, which has already been referred to. That points to three things that I would like to get on the record.
In working through how to address the non-regression of standards in trade conversion, the officials—with whom we had good and robust discussions—pointed out very strongly not only the need to ensure that the list provided in the final legislation was rooted in statute and justiciable but that it would fit with the WTO regulations, to which it was being addressed at least in part. The wording before us would perhaps not normally be expected in this House, given the argument being made here that good standards already exist and should not be diluted; that better ones should be adopted in some cases, if they exist; and that we should look forward to an increase in the quality provided through this system. It meets the difficulty that words such as “standards” are apparently not admissible in the way we were trying to use them, and, as I have said, the WTO language is somewhat different.
Having said that, the reason for having the amendment on human rights—which the noble Lord, Lord Purvis, has joined and spoke to earlier—was simply that, if the argument is made that statutory protections require or can benefit from a statement allowing that to be seen very clearly on the front of the Bill, why does that not apply to human rights? With food safety, one can never be more vigilant than we already are. None the less, we should make sure that it is available for future reference that this matter was considered and thought to be so important that it was part of that arrangement. I am sure that the Minister will want to respond to both of those points when she comes to them. As I have said, we will not be pressing this amendment.
I think this is a good day for the issues that people such as the noble Baronesses, Lady Jones and McIntosh, have campaigned for. My noble friend Lady Henig has also been very persistent in making sure that we got something about that into the Bill. I am very happy to support that.
Lord Pannick (CB)
My Lords, I would like to add to what the noble Lord has said on human rights. I thank him for bringing forward the amendment specifically to add human rights, but I am satisfied with his decision not to move it. The powers conferred on Ministers under Clause 2 would not, as I understand it, permit Ministers to act in breach of the Human Rights Act—primary legislation—in any event. I would be very grateful if the Minister could confirm that understanding. It would also be inappropriate to include human rights in the main amendment because many pieces of legislation do not expressly refer to human rights. This is because we have primary legislation, which has a particular force. Therefore, including human rights in the amendment to Clause 2 might possibly cast doubt in those other areas.
Baroness Fairhead
My Lords, I turn first to Amendment 3, tabled by the noble Lords, Lord Stevenson of Balmacara and Lord Purvis of Tweed, and the noble Baroness, Lady Jones of Moulsecoomb. I thank them for their contributions to the debate, and for the detailed and—as the noble Lord, Lord Stevenson, correctly said—robust discussions that we have had on this critically important matter.
Let us be clear that the protection of human rights is important; in fact, it is fundamental. That is why it has been given its own legislative framework through the Human Rights Act, as the noble Lord, Lord Pannick, stated. Not only that, but we have been consistent and are clear about our position on human rights as we leave the EU. Simply put, we will continue to uphold human rights and meet our obligations under the European Convention on Human Rights. The rights set out in the ECHR are already effectively and extensively protected in our domestic law by the Human Rights Act. The effect of Section 6 of the Human Rights Act is that regulations made under Clause 2 must be consistent with ECHR rights. Further, Ministers are required by Section 19 of the Human Rights Act to make a statement about a Bill’s compatibility with the European Convention on Human Rights, and this appears on the face of the Bill.
I am happy to confirm to the noble Lord, Lord Pannick, that there is no power under the Bill to modify the Human Rights Act, because there is no power to modify any primary legislation which is not retained EU law. That is made clear by Clause 2(5)(a) of the Bill. Regulations under Clause 2 must therefore be consistent with maintaining the UK levels of statutory protection provided by the Human Rights Act, and no amendment is necessary to provide that. This is why the Government consider it neither necessary nor appropriate to include human rights in the list of protections in our amendment to the Bill.
In fact—noble Lords have referred to this—we were worried that including human rights in the list could have unforeseen, unintended and, frankly, unwelcome consequences. It might, for example, suggest that the Clause 2 power could have modified our domestic human rights protections but for such an explicit reference. We are clear that that is not possible. It could also have implied that existing powers in other legislation, where there is no such express restriction, could be used in a way that is not consistent with our domestic human rights protections. Again, we are clear that they cannot. I thank the noble Lord, Lord Pannick, for his agreement on this; I know that his expertise carries enormous weight in these matters.
I turn now to Amendment 4, tabled by my noble friend Lady McIntosh of Pickering and the noble Baronesses, Lady Jones and Lady Henig. The Government agree with the spirit of this amendment: we must maintain UK statutory protections for food safety, including the protection granted by retained direct EU legislation. I am grateful to the noble Baroness, Lady Deech, for confirming in hard data the excellence of our standards. That is testament to the standards that we have in the UK. As I have previously said, and for the reasons I have given, we propose the broad formulation of,
“the protection of human, animal or plant life or health”.
I appreciate that this House will want to have confidence that this category includes food safety, and I am happy to provide that. The whole purpose of food safety regulation is to provide protection for human life and health. I am also happy to commit to publishing guidance that explains that this broad term should be read as encompassing all EU food safety and public health laws that will be retained in UK law, as well as being compatible with our international obligations.
The noble Baroness, Lady Jones, asked whether proposed subsection (4A) reflects the Government’s commitment to the environment. The UK is committed to upholding its high environmental standards around the world. As with other EU trade agreements, our aim is to replicate the effect of the existing agreements, restricting any changes to technical fixes deemed necessary. The UK continues to be a global leader on climate action, as demonstrated by our ratification of the Paris agreement last November, and as part of the UK’s Climate Change Act agreement of the UK’s fifth carbon budget in July 2016. The 2008 Climate Change Act commits the UK to reducing our greenhouse gas emissions by at least 80% by 2050 over the 1990 levels. We want to ensure that economic growth, development and environmental protection can go hand in hand. Wherever UK legislation protects the environment, this amendment requires that our Clause 2 regulations are consistent with maintaining that protection.
The noble Baroness, Lady Jones, also asked about the wording in proposed subsection (4A)—she asked about the protection of protections. I am advised by our lawyers that, in drafting legislation—and I believe this to be true—it is important to be legally precise, even where this means that a clause might sound slightly odd on a plain-English reading. Our amendment effectively sets up a two-stage test. First, do Clause 2 regulations make provision in any of the listed areas? Secondly, if so, is that provision consistent with maintaining UK levels of statutory protection in that area?
I turn to other questions asked by noble Lords. The noble Lord, Lord Purvis, asked about the impact of the government amendment in devolved areas. Proposed subsection (4C) makes clear that the protections given through this provision apply to the levels of protection that have effect in the UK or part of the UK which are in place when the regulations are laid. If higher levels of protection are in place in Scotland, Wales or Northern Ireland, these will be the levels that are maintained.
The noble Earl, Lord Lytton, asked how businesses and economic factors will be taken into account in the exercise of these provisions. This amendment is all about maintaining UK levels of protection in continuity trade agreements. We therefore think that this is outside that, because this is all about continuity.
Lord Judd (Lab)
My Lords, I declare an interest, as recorded in the register. I was very interested in the remarks of the noble Earl, Lord Lytton. The Government, of course, have constantly been committed: indeed, it has been on the face of relevant legislation. In any disputes about the national parks, scenic beauty and kindred issues take precedence. Will the Minister reassure us that what she is saying takes that point on board?
Baroness Fairhead
I am happy to make it clear that whatever exists now will continue to exist. This really is regarding continuity of the trade agreements that we are replicating as we leave the EU.
The noble Lord, Lord Krebs, asked some very specific questions that I will try to answer. The first was whether these applied only to the continuity trade deals, and the answer to that is yes. He asked whether it included all the provisions in transitioned trade agreements. The answer to that is yes: it includes all the provisions that we implement in our domestic law using the Clause 2 power. He asked whether the level of statutory protection includes published guidance, and the answer is that it includes all protections provided under primary legislation, subordinate legislation or retained direct EU legislation. Just to be clear, it includes all guidance that has statutory force.
I believe that the final question concerned the Food Standards Agency. It is our intention that it will continue to provide effective public reassurance. Again, the answer to that is correct. We might talk about the Food Standards Agency a little later on a following amendment.
I hope that I have addressed the questions, and I am very grateful for the constructive debate and the support the amendment has been given. Having addressed the two amendments, I ask the noble Lord and the noble Baroness not to press their amendments. I commend the amendment to the House.
Baroness Fairhead
“(4A) If regulations under subsection (1) include provision in any of the areas listed in subsection (4B), the provision must be consistent with maintaining UK levels of statutory protection in that area.(4B) The areas referred to in subsection (4A) are—(a) the protection of human, animal or plant life or health;(b) animal welfare;(c) environmental protection;(d) employment and labour.(4C) “UK levels of statutory protection” means levels of protection provided for by or under any—(a) primary legislation,(b) subordinate legislation, or(c) retained direct EU legislation,which has effect in the United Kingdom, or the part of the United Kingdom in which the regulations have effect, on the date on which a draft of the regulations is laid.”
Baroness Fairhead
Baroness Fairhead
My Lords, this group covers Amendments 5 and 6. I will speak first to government Amendment 5. I will then respond to any additional points that the noble Lord, Lord Pannick, makes on his Amendment 6.
We had a valuable discussion in this House on Report on 6 March about what the powers in Clause 2 can and cannot be used for, prompted by the amendment proposed by the noble and learned Lord, Lord Judge, and the noble Lords, Lord Pannick and Lord Beith. That amendment was withdrawn, and I subsequently wrote to and met interested Lords to clarify the matter further and to consider how their concerns could be addressed without casting doubt on the meaning of other powers across our statute book.
Before addressing the detail of the Government’s amendment, it might assist the House if I confirm for the record that the Government entirely agree that it is not appropriate for Explanatory Notes to be used as a means to confine broad ministerial powers. Furthermore, the Government agree that the rule in Pepper v Hart cannot and should not be relied on to clarify unclear drafting. As I think one noble and learned Lord said in our meeting, Pepper v Hart is a judicial solution to legislative failings and should not be used to justify those failings. I am happy to have this opportunity to put on the record, for the avoidance of doubt, that the Government do not seek to rely on Pepper v Hart in the context of Clause 2. I was happy to confirm this in the letter that I wrote to the noble and learned Lord, Lord Judge, and other noble Lords who took part on Report. I have placed copies in the Libraries of both Houses.
Lord Davies of Stamford (Lab)
The noble Baroness said that the Government did not intend to rely on Pepper v Hart to deal with any issues that arise from the Trade Bill, which is very welcome indeed. Do the Government intend to use Pepper v Hart in other areas to clarify legislation in a way that they particularly want?
Baroness Fairhead
My Lords, I hope that the statement I made is entirely clear—we accept that Explanatory Notes should not be used to clarify legislation in that way.
Lord Davies of Stamford
I asked a question about Pepper v Hart, not about Explanatory Notes. They are two different issues.
Baroness Fairhead
I can confirm that the Government do not intend to use Pepper v Hart in the way that the noble Lord suggested we might. I hope that is clear to noble, and noble and learned, Lords.
I turn now to Amendment 5 and the considerations behind it. The power in Clause 2 cannot be exercised to create or extend criminal offences, impose fees, amend primary legislation—other than retained EU law—or create new public bodies. This is based on long-standing principles about the statutory construction of powers and on well-established legislative presumptions. These make it clear that certain things cannot be done by secondary legislation, unless they are expressly provided for in the enabling Act.
However, on the point about criminal offences, I am grateful for the very constructive discussions with noble Lords. These have led the Government to bring forward an amendment that would improve this Bill in a way that does not cast doubt on other powers in existing enactments. The Government’s amendment is simple but, we believe, effective. It inserts the word “civil” into Clause 2(5)(d) so the text means that this power to implement continuity trade agreements may be used only to make provisions for civil penalties for failing to comply with the regulations. The explicit reference to civil penalties, without mention of criminal offences, makes it clear that the power may not be used to make or extend criminal offences. I trust that these words, alongside the government amendment, will provide reassurance to your Lordships.
Lord Judge (CB)
My Lords, I first thank the Minister for her positive approach to the issues we raised in debate. In passing, I thank the noble Lord, Lord Stevenson, for helping us to sort ourselves out. The statement in the House today follows the exact terms of a letter that the Minister kindly wrote to me on 11 March. I welcome it. In the circumstances I just want to highlight why we brought this amendment before the House last time. It was to expose two constitutional heresies. The first was that Explanatory Notes may be used for the purposes of construing legislation. We thought that was a heresy. The Government had sent us a letter which told us that this was what they were going to be used for. The second heresy—which was in the same letter—was that Pepper v Hart could be relied on to clarify unclear drafting. The whole point of legislation is that it should be clear. Pepper v Hart is a last resort when this House or the other place has made a mess of the legislation.
I do not think it is necessary, or would be helpful to the House, to repeat what the Minister said. She said that she was referring to the letter. She lifted what she said to the House directly from the letter. With that, I think that for all times in the future—at any rate for the next considerable number of years—we can work on the basis that those two constitutional heresies shall be, and have been, consigned to the dustbin of constitutional oblivion. Can we please forget about it from now on?
I want to make a separate point to the Minister. I am afraid that events moved rather fast and I missed the boat on this. If I had thought about it sooner I would have had an amendment in to Clause 2(5) to exclude the words “among other things”. The fact that I missed the bus does not mean that I may not come on it if it comes into fresh or different legislation. If it is being thought of as a possibility for fresh or new legislation, I urge the Minister to make all her colleagues understand the way the Government approached the Healthcare—I cannot remember which of the many words followed that word—Act that we enacted last night omitted the words “for example”. Those words give far too wide a power to the Minister. I shall come back to “among other things” if the phrase ever returns, so forgive me. However, in view of the assurances from the Minister, the clarity of her observations to the House today and the amendment that would meet the concerns we advanced in relation to statutory construction, so far as I am concerned I do not propose to move my amendment.
Lord Pannick
My Lords, I too thank the Minister. She has devoted considerable time and effort to meeting those of us who signed the previous amendment and expressed concern about this matter, and she has addressed our concerns in a very positive manner. I say to the noble Lord, Lord Davies of Stamford, that I—and, I understand, my noble and learned friend Lord Judge—understand the Minister to be making a general statement: this is not a statement confined to the particular provisions of the Bill but a general statement about the Government’s view relating to Pepper v Hart and the use of Explanatory Notes. I very much welcome that statement, which, as the Minister said, is precisely what she said to us in the letter she wrote.
All this exemplifies a concern that your Lordships’ Constitution Committee, under the distinguished chairmanship of the noble Baroness, Lady Taylor of Bolton, expressed. My noble and learned friend Lord Judge, the noble Lord, Lord Beith—who was also party to the amendment on Report—and I have all expressed concern about the tendency of the Government to bring forward in legislation very broad powers and then to rely upon the good will and the good faith of the Minister in their exercise. We have repeatedly urged that Bills should not be so drafted and I think we have the support of the House in making those points regularly and consistently. We will continue to do so, I am sure, and it would be very helpful if other Ministers would understand that concern, as the Minister undoubtedly does, and ensure that legislation is tightly drafted so that proper parliamentary controls can take place.
Lord Wakeham (Con)
Perhaps I might say a word, because I was the Chief Whip in the Commons when the Pepper v Hart decision was taken. What the Minister has said is of great advantage to her, because the difficulty I had then was that Ministers were being inhibited from giving proper explanations of Bills, because their advisers were telling them they might be infringing on Pepper v Hart and doing all sorts of things. So the fact that this matter has been cleared up after many years is a great advantage and I congratulate the Minister on doing it.
Lord Davies of Stamford
My Lords, I think the whole House—and indeed the country—should be very grateful to the noble and learned Lord, Lord Judge, and the noble Lord, Lord Pannick, for having raised this important matter, the effect of which goes way beyond this Trade Bill. I am very concerned that the assurances that have been given this afternoon by the Minister apply generally to all legislation and not just to this Bill. Perhaps I misunderstood the way that the Minister expressed herself on that: perhaps when she sums up she can once again make it absolutely clear.
Obviously, if it were the case that Explanatory Notes or ministerial Statements under the Pepper v Hart doctrine could be interpreted by the courts as being the equivalent of legislation, two appalling things would happen. One is that the Government would become extremely lazy in their drafting of legislation, because they could say, “Well, we can get it all right in the ministerial Statement in the House”, or something of that sort. The second, even more serious issue would be that a lot of legislation—the Explanatory Notes concerned or the ministerial Statements—would not be subject to analysis, debate and amendment by the two Houses of Parliament. That would be an absolutely disgraceful and tragic end to this particular tendency. So what has happened this afternoon is extremely important.
It is very important that what the Minister has said to the House this afternoon should be brought to the attention of all members of the Government. Once again, I would be very grateful to her if she would just repeat that these statements—I asked her specifically about the Pepper v Hart issue, but it applies to Explanatory Notes as well—apply generally to all legislation and are not tied in any sense to this particular Bill. This just happens, by accident, to be an occasion when we have two very distinguished noble and learned Lords taking part in the debate who spotted this issue, which if it had not been dealt with could have led to very serious consequences.
Lord Mackay of Clashfern (Con)
My Lords, as I think the only person in the Chamber who participated in Pepper v Hart, it is right to say that the decision of the majority in that case was that statements made by the mover of an amendment or a provision explaining how that provision was supposed to operate could be referred to in a case of ambiguity in order to resolve the true meaning of the phrase. I did not agree with that for reasons which I set out and with which I will not bother your Lordships now. The decision in Pepper v Hart still stands as the legal decision. I venture to hope that it will not be used very often because it is only in a case of ambiguity that it should be used at all. If you look at the detail of Pepper v Hart, you will see that statements relied upon as being explanatory leave a certain amount to be desired.
Baroness Neville-Rolfe (Con)
As far as I am concerned, the train has left the station. Obviously, I come from a business background and there are ambiguities in legislation. I have had experience of Pepper v Hart being quite useful in cases where it has not been clear, in a technical regulation, what is needed. What my noble and learned friend has said suggests that it still sits there so that you can look at what was originally said by, for example, a Minister taking a Bill through, helping the courts to clarify what is being said. I hope that the huge constitutional change that we are presiding over today does not take that away completely because, if so, we are passing something for a wider area than the Trade Bill without having looked at all the ramifications.
Lord Lisvane (CB)
My Lords, I do not wish to detain your Lordships unnecessarily, but in a previous life I spent three years as the Clerk of Legislation at the north end of this building. One of the duties of the Clerk of Legislation is to read through the Explanatory Notes and approve them for every government Bill. A key part of that process is ensuring that there is no advocacy or advertising of the merits of a part of a Bill in the Explanatory Notes. Another factor to be taken into account is when Explanatory Notes tend to give an interpretation or an additional gloss on something that actually ought to be on the face of the Bill. With that background, I thoroughly welcome the exchanges of the past few minutes.
Baroness Fairhead
My Lords, I thank the noble Lord, Lord Pannick, for reflecting his experience in this debate and for the constructive and clear conversations that we have had. I am happy to confirm to the noble Lord, Lord Davies of Stamford, and to the House that I was making a general statement. I also confirm to my noble friend Lady Neville-Rolfe that I will listen to the words of the noble and learned Lord, Lord Judge, who said that the important issue here is for clear legislation not lazy legislation, and that this is used only as a last resort and should not be relied upon.
Lord Pannick
Perhaps I might ask the Minister to confirm that, contrary to some of the comments that have been made, she is not introducing some major constitutional change today but that the rule in Pepper v Hart remains; it is a rule of law. All that she is confirming, as I understand it—the noble and learned Lord, Lord Judge, will say if he disagrees—is that the existence of the Pepper v Hart rule that in the case of ambiguity the courts can look at what was said by the mover of an amendment or a particular provision does not justify ambiguous legislation. It does not justify loose drafting. I think that that is all that the Minister is confirming.
Baroness Fairhead
I am happy to confirm that that is exactly what I meant. I do not, I believe, have the power to overturn Pepper v Hart, nor am I minded to do so. However, I want to confirm as a general statement exactly what the noble Lord, Lord Pannick, has articulated. It has been of huge benefit to the House to address, as the noble and learned Lord, Lord Judge, mentioned, two heresies and I am grateful to my noble and learned friend Lord Mackay of Clashfern, who has supported us in getting to this stage. I also thank my noble friend Lord Wakeham for his words of welcome, and I have taken on board the comments of the noble Lord, Lord Lisvane. I am happy to take back, through the officials, the request of the noble and learned Lord, Lord Judge, to reflect to my colleagues continuing concern over phrases such as “among other things”.
The work on this amendment has been an illustration of the very best of the experience of this House. I hope that the detailed reassurances I have provided will allow the noble Lord, Lord Pannick, not to move his Amendment 6.
“UK participation in EU and EEA organisations
(1) The Secretary of State must seek to negotiate an international trade agreement with the EU which will enable the United Kingdom to continue, after exit day, to co-operate closely with the bodies listed in subsection (2).(2) The bodies are— (a) the European Medicines Agency;(b) the European Chemicals Agency; (c) the European Aviation Safety Agency;(d) the European Maritime Safety Agency;(e) the European Network of Transmission System Operators for Electricity;(f) the European Network of Transmission System Operators for Gas.”
Lord Stevenson of Balmacara
My Lords, I thank those who have supported me in bringing forward this amendment. Its history is that we debated it in Committee and again on Report, and have had a number of discussions on the issues it raised. The original concern was that in the other place an amendment was moved to the original Bill to insert the European Medicines Agency as a body with which the Government should seek to make arrangements in the event of a no-deal exit. The feeling was that that was rather too narrow in scope, and did not raise the wider issues about which other bodies might be appropriate for consideration. After discussion, we therefore came up with the proposal represented in Amendment 7. The second version of it on Report included a slightly longer list, but I have been persuaded that we should restrict the amendment to the list currently before your Lordships’ House. I would be grateful if it could be considered. I beg to move.
Baroness Fairhead
My Lords, the Government are grateful to the noble Lord, Lord Stevenson of Balmacara, who has worked tirelessly and constructively to find common ground between what he is aiming to achieve with this amendment and a position the Government can support.
As I said on Report on this issue on 13 March, the Government recognise that a deep and special relationship with the EU is likely to involve close co-operation with certain EU agencies and bodies. The Government also recognise that a close partnership with an EU body or agency may help to reduce non-tariff barriers to trade. That is why we will carefully consider how to develop such partnerships within the breadth of our future relationship with the EU.
There are six bodies listed in this amendment: the European Medicines Agency, the European Chemicals Agency, the European Aviation Safety Agency, the European Maritime Safety Agency and the two European networks of transmission system operators. The Government and the EU have already agreed, as expressed in the political declaration, to explore future co-operation with all of them.
The Government are working to find the best arrangement for the UK regarding other EU agencies and bodies. The decision to seek co-operation with an EU agency or body must be made only after careful consideration, bearing in mind the context of the UK’s overall aims for the future relationship and negotiations with the EU. The future of our relationship with EFSA, the European Food Safety Authority, and EUIPO, the European Union Intellectual Property Office, will be shaped by forthcoming UK-EU negotiations.
As we negotiate our future relationship with the EU, the Government are determined to agree ambitious provisions to help businesses protect their intellectual property rights. Indeed, in the political declaration, the UK and the EU commit to establishing,
“a mechanism for cooperation and exchange of information on intellectual property issues of mutual interest”.
In this regard, the UK would seek an appropriate level of co-operation with the EU and relevant agencies, such as the EUIPO.
The UK has a long tradition of close collaboration with EFSA, which we greatly value and hope to continue in the future. We recognise the important work of EFSA in providing scientific advice and guidance, and believe it would be mutually beneficial for the EU and UK to continue to co-operate in the sharing of knowledge and information. A close relationship between EFSA and the UK would support the joint ambitions of the EU and the UK for food and feed safety. However, it would be unwise to stipulate in UK law exactly how we want to co-operate with the EU in these areas, given the implications it could have for the wider balance of rights and obligations we are seeking for the future.
The amendment in the name of the noble Lord, Lord Stevenson, therefore reflects the position set out in the political declaration. His constructive approach to this issue exemplifies the positive tone of many of the debates and meetings we have had with a great number of your Lordships over the last few weeks. The Government are therefore content to support this amendment.
Lord Stevenson of Balmacara
I am grateful to the noble Baroness for her kind words and, more importantly, for accepting the amendment as drafted. I commend the amendment to the House.
“Convention about Ministers of the Crown legislating on devolved matters
(1) Regulations made under section 1(1) by a Minister of the Crown may not normally make provision which would be within the devolved competence of a devolved authority unless—(a) so far as they contain provision which would be within the devolved competence of the Scottish Ministers (within the meaning given in paragraph 7 of Schedule 2), the Scottish Ministers consent, or(b) so far as they contain provision which would be within the devolved competence of the Welsh Ministers (within the meaning given in paragraph 8 of Schedule 2), the Welsh Ministers consent, or(c) so far as they contain provision which would be within the devolved competence of a Northern Ireland department (within the meaning given in paragraph 9 of Schedule 2), the Northern Ireland department has given consent.(2) Regulations made under section 2(1) by a Minister of the Crown may not normally make provision which would be within the devolved competence of a devolved authority unless— (a) so far as they contain provision which would be within the devolved competence of the Scottish Ministers (within the meaning given in paragraph 7 of Schedule 2), the Scottish Ministers consent, or(b) so far as they contain provision which would be within the devolved competence of the Welsh Ministers (within the meaning given in paragraph 8 of Schedule 2), the Welsh Ministers consent, or(c) so far as they contain provision which would be within the devolved competence of a Northern Ireland department (within the meaning given in paragraph 9 of Schedule 2), the Northern Ireland department has given consent.”
The Deputy Speaker (Lord Rogan) (UUP)
After Clause 13, Amendment 8, the noble Lord, Lord Stevenson of Bara—
Lord Stevenson of Balmacara
It is Balmacara. It means “the town from which the Macraes come”—Macrae being my mother’s maiden name. I thought the House might enjoy that little moment of clarity.
Amendment 8 in my name and that of the noble Lord, Lord Purvis of Tweed, comes from a concern that the regulatory power-making in the Bill as originally drafted would cause difficulties for the relationships that should exist between the UK Parliament and the devolved Administrations. There have been two developments since the original amendment went down. First, the continuing debate on a series of matters involving trade issues to be brought back to the devolved Administrations has yet to be resolved in discussions between the UK Ministers and devolved Administration Ministers. Also, the Healthcare (International Arrangements) Bill, which recently went through your Lordships’ House, was subject to an amendment that seemed to suggest that there was a requirement in most of the legislation coming forward, particularly this Bill, to reflect how, and on what basis, Ministers of the UK Parliament could engage with the devolved Administrations over how regulations should be framed and consulted on, and under what conditions consent would be given.
Since this seemed to involve a number of different issues, not just those related to trade, the noble Viscount, Lord Younger, kindly held a meeting at which we were able to discuss this in more detail, attended by myself, the noble Lord, Lord Purvis, and the noble and learned Lord, Lord Hope. I think we got a long way on that issue in trying to understand how these various matters came together. I think the broad position that affects all these issues is set out in the Scotland Act 2016 and in comparable primary legislation affecting Wales and Northern Ireland.
In respect of the possibility of having a convention that would echo that relating to regulations that will need to be made under the powers given under primary legislation, I think the noble Lord has something to say that will be helpful in resolving whether Amendment 8 is required. I beg to move.
Lord Purvis of Tweed
My Lords, I was interested to hear the clarification of the title of the noble Lord, Lord Stevenson. The House will not be interested, but my title of “Tweed” is because of the river, not because I have a penchant for tweed suits outside this place, which most colleagues from England assume is the case. However, because my title is from the Tweed, because I am from the border and live on the border, and because I was a Member of the Scottish Parliament for the Borders, the legislative competence interaction on trade agreements is of significance, not just for Borderers but for the relationship with the devolved Administrations. I am therefore very happy to add my name to this amendment.
In so doing, I also recognise the patience of the noble Viscount, Lord Younger, in meeting us and hearing our case for the need for an extra level of clarification on the interaction of the areas where discussions continue with the devolved Administrations. In some areas, there is disagreement over where the legislative competences of areas that had been EU areas of legislation will lie, when they are repatriated, if we leave the European Union. As the noble Lord, Lord Stevenson, said, the Scotland Act’s approach to devolution is that if those powers are not spelled out in the Act’s reservations, they are recognised as fully devolved to the Scottish Parliament. This is about how the order-making powers in the Bill interact with those powers. Clarity on the areas of interaction between the devolved competences would be helpful.
Finally, clarity would be helpful in looking at those areas of legislative competence where there are ongoing discussions: agricultural support, organic farming, animal health and traceability, animal welfare, chemical regulations, state aid and food labelling. All are likely to be important not just for continuity agreements but for future trade agreements. Some of these issues are politically sensitive, so getting the required clarity on how they will be legislated for in trade agreements is important. It would be regrettable if the competences ended up in the Supreme Court for dispute; further clarification on current interaction is desirable. I know that the Minister will probably not be able to answer my questions entirely but I look forward to his response to this short debate. I hope he can add an extra level of clarification, which would be satisfactory at this stage.
Lord Wigley (PC)
My Lords, I too welcome the amendment. I apologise for taking so little part in the Bill’s progress since participating at Second Reading. This intermittent pattern has been due largely to being stretched on Brexit matters across many different committees and calls.
I support the comments of the noble Lord, Lord Purvis, on the devolution situation. The position in Wales is different from that in Scotland because of the different natures of the devolution Acts—no doubt the Minister is well aware of those. However, similar issues can arise, particularly in the contexts of agriculture, procurement and competition law. Those areas are sensitive and there are strong feelings in the devolved regimes on the powers they can exercise. No doubt many other issues will arise.
I do not think that we can answer this matter by strict legislation. The most important thing by far is the attitude of Governments towards dealing with each other. It is important that, when issues arise and are flagged up at this end, something is done early enough to get a constructive response from Cardiff or Edinburgh. Likewise, it is important that the devolved regimes are encouraged to flag up issues that arise, and that there is a mechanism to deal with them before they become polarised and unnecessarily political. To that extent, I believe that most of the work on this will have to be undertaken on a day by day, month by month basis after the legislation comes into force. Having said that, I support the amendment.
Viscount Younger of Leckie (Con)
My Lords, I thank the noble Lord, Lord Stevenson of Balmacara, for moving Amendment 8 and for our fruitful discussions since Report, together with the noble Lord, Lord Purvis, and the noble and learned Lord, Lord Hope, who is not in his place at the moment. I hope to provide some extra clarity on the interaction between the UK Government and the devolved Administrations.
It might help if I summarise my understanding of the amendment’s purpose. It would require the Government to seek the consent of the devolved Administrations when making regulations under Clauses 1 and 2. As we have said, it is the Government’s intention always to consult and seek the consent of the devolved Administrations when exercising the powers in this Bill in areas of devolved competence. We want to form a trade policy that works for the whole of the UK. However, there are good reasons why we do not want to amend the Trade Bill either to extend the operation of the Sewel convention or to replicate the recent amendment to the healthcare Bill, as proposed by the noble Lord.
Let me just touch on the Healthcare Bill. The noble Lord, Lord Stevenson, suggested during the debate on this issue on Report, on 13 March, that a recent amendment to the Bill strengthened the case for what is being proposed here. However, there is a significant difference, both between the powers in the two Bills and between the texts of the two amendments.
First, the concurrent powers in the Trade Bill allow for devolved Administrations themselves to legislate in areas of devolved competence. As mentioned last week, should the UK Government use the powers of the Trade Bill to legislate for the whole of the UK, it will be for the purposes of legislative efficiency, following consultation with the devolved Administrations. The Healthcare Bill does not provide for this: it does not delegate any powers to devolved Administrations. Introducing consultation requirements in lieu of a power for the devolved Administrations to legislate for themselves is understandable—but this clearly is not the case for the Trade Bill.
Secondly, the amendment to the Healthcare Bill introduced a requirement to consult the devolved Administrations, whereas Amendment 8 would require the UK Government to secure the consent of the relevant devolved Administration before legislating in areas of devolved competence. As is well recognised in your Lordships’ House, to “consult” and to “secure consent” are very different concepts.
I turn to the Scotland and Wales Acts, which already enshrine the Sewel convention in legislation. I am happy to restate this Government’s continued commitment to this convention in relation to all future primary legislation. However, it has been suggested that this amendment would put regulations under the Trade Bill in the same position as Westminster primary legislation under the Scotland and Wales Acts. It must be recognised that those provisions were passed in a very different context and in recognition of an accepted political convention relating to primary legislation. Moreover, as the Supreme Court has recognised, those provisions were carefully worded in a way that demonstrated Parliament’s clear intention that they should not be justiciable.
This amendment, however, goes further by effectively proposing an extension of this convention to apply to secondary legislation. It does so in a way that does not reflect the language of the Scotland and Wales Acts provisions, which would risk making the term “not normally” into a legal test. As I stated on Report, I do not believe that it is the intention of this House to introduce new legal uncertainty to our statute book—especially when that could ultimately obstruct the programme of continuity that this Bill seeks to deliver, to the detriment of the UK as a whole.
I would like to touch now on Section 12 of the EU withdrawal Act and its interplay with the Trade Bill.
Lord Wigley
Does the Minister accept that the problem as seen from the devolved regimes is that, very often, consultation does not amount to very much indeed? That is why the word “consent” is very much more powerful. If consultation was something that was driven with the intention of having a meeting of minds, rather than just sending a message down and forgetting about it, there might be a better chance of getting that form of words to be applicable.
Viscount Younger of Leckie
The word “consultation” is well known and well respected. I would like to pick up on what the noble Lord said earlier about the fact that there is much interaction, and consultation, going on; and it generally works very well. I would also like to say how well it has worked in respect of Wales. It is a term that is well recognised and works well.
Turning back to Section 12, I am aware of the letter from the Scottish Government Cabinet Secretary, Mike Russell, which noble Lords have referred to in earlier exchanges and which raises a specific concern in the third paragraph about the effect of Section 12 regulations on the Scottish Government’s ability to exercise powers in the Trade Bill. I am disappointed that, unlike the Welsh Government, the Scottish Government have not seen fit to recommend consent to the Trade Bill. I would like to make it clear that any frameworks-related restrictions on the devolved Administrations’ use of the powers apply only if a Section 12 regulation is first in place.
Due to the collaborative and constructive work that is taking place to establish UK common frameworks once we leave the EU, the UK Government have not yet identified a need to bring forward any Section 12 regulations. The Government have committed to work with the devolved Administrations in the preparation of any Section 12 regulations that would maintain existing frameworks. This was set out in the Inter-governmental Agreement on the European Union (Withdrawal) Bill and the Establishment of Common Frameworks, which ensures that those regulations are subject to scrutiny by the devolved legislatures and the UK Parliament.
In addition, I can reassure your Lordships that, were a Section 12 regulation in place that would restrict the power of the devolved Administrations to use Clauses 1 and 2, the Government’s commitment always to consult would remain. As we have repeatedly said, the UK Government remain committed to the principle of not legislating in devolved areas without seeking the agreement of the respective devolved Administrations. The UK Government have been working productively and collaboratively with the devolved Administrations on a number of fronts, including the development of common frameworks. As a result of this work, the UK Government and the devolved Administrations recently agreed to this joint statement:
“On the basis of the significant joint progress on future frameworks, and the continued collaboration to ensure the statute book is ready for exit day, the UK Government has concluded that it does not need to bring forward any section 12 regulations at this juncture.
On this basis, the Scottish and Welsh Governments continue to commit to not diverging in ways that would cut across future frameworks, where it has been agreed they are necessary or where discussions continue.
UK Government officials are working with devolved administration officials to revise the Common Frameworks analysis and take into account progress on framework areas since March 2018. We anticipate publishing a further iteration of this analysis shortly”.
To conclude, I hope that I have demonstrated that the amendment is unnecessary. The Government are committed to not normally using the powers in the Trade Bill to legislate in areas of devolved competence without the consent of the relevant devolved Administration—and certainly not without first consulting them. I believe that this is proportionate and appropriate to the powers as they currently stand, which have received consent from the National Assembly for Wales, as I said earlier. If passed, this amendment would depart significantly from this. I therefore ask that Amendment 8 be withdrawn.
Lord Stevenson of Balmacara
I am very grateful to the Minister for his words and for being so explicit about the conditions under which powers can be exercised and how they would be affected, both by the current legislative framework and by Amendment 8 if it were inserted into the Bill. Having said that, however, your Lordships’ House has heard from the noble Lords, Lord Purvis and Lord Wigley, that these are matters of substantial importance in general terms, and particularly when viewed from the perspective of the devolved Administrations.
I hope that behind the words issued today there is a real and deep commitment across the whole of government to make sure that the lessons from the unfortunate experiences in the withdrawal Bill, now Act, and not repeated in this legislation—but obviously touching on it—will be learned in a way that will mean that we can make progress together. In that context, the Government getting their act together and issuing another statement about these matters as early as possible would be a considerable help to all concerned.
However, the point is well made that there is a well thought-through argument in the Bill, which bears exactly on the issues that the amendment sought to arrange. The commitment given openly by the Minister at the Dispatch Box, confirming that it is the Government’s intention to ensure that full, meaningful consultation should be the mode adopted and that there would always be a requirement to obtain consent where possible from the devolved Administrations, makes it very clear that the amendment is not required. On that basis, I beg leave to withdraw it.
Baroness Fairhead
My Lords, I request the indulgence of the House to say a few words to express my sincere gratitude. I begin by thanking all those who have participated in our debates on this Bill. As has already been mentioned, this is the first Bill I have steered through your Lordships’ House. It has been a rewarding and constructive—although, I have to confess, at times challenging—experience. Your Lordships have spoken eloquently and with great knowledge about the changes you thought necessary to improve key provisions of this Bill—for example, the need for post-implementation assessment of continuity trade agreements, maintaining UK levels of protection when the power in Clause 2 is used, and clarifying the scope of the Clause 2 power in relation to civil penalties. The Government listened, agreed and responded, and I have no doubt whatever that this Bill is improved as a result. A further important change was the confirmation that the chair of the TRA would be subject to a pre-commencement hearing by the International Trade Committee.
I turn to individual contributions, starting with my noble friends Lord Bates and Lord Younger. They have been towers of strength, their support has been invaluable, and I am hugely in their debt. I also pay particular respect to the noble Lords who have set aside some of their valuable time over the past few weeks to meet me and my colleagues and discuss these important issues, so that together we could ensure that the Bill reflected the genuine intent of this House. I thank in particular the noble Lords, Lord Stevenson of Balmacara, Lord McNicol of West Kilbride and Lord Grantchester; and the noble Lords, Lord Purvis of Tweed and Lord Fox, and the noble Baroness, Lady Kramer. I also thank my noble friends Lady Neville-Rolfe, Lady McIntosh of Pickering and Lord Lansley, and my noble and learned friend Lord Mackay of Clashfern. I thank the noble and learned Lord, Lord Judge, the noble Lords, Lord Pannick, Lord Wilson of Dinton and Lord Beith, the noble Baronesses, Lady Jones of Moulsecoomb, Lady Henig, Lady Brown of Cambridge and Lady Deech, and the noble Earl, the Earl of Kinnoull, for their constructive approach. In particular, I single out the noble Lord, Lord Stevenson, for his tireless efforts and his contribution to achieving a better Bill. My noble friend Lady McIntosh has already referred to his charm and graciousness; I would add his effectiveness and his integrity.
This has been very much a team effort. Behind the scenes, the extraordinary Bill team have put in an unbelievable amount of effort. My thanks go to them, to my private office, and to all officials who have provided support. They have taken on an exceptional workload and have demonstrated huge expertise and commitment—but I have to give a special award to the Bill manager, Suzanne Greaves. She has been spectacular. Finally, I thank the doorkeepers, the clerks and all the staff, because their patience and professionalism has been unwavering.
To conclude, I have now seen at first hand the value that I have long known that this House adds to the legislative process. There may be aspects of the Bill as it leaves this place with which the Government do not agree, but I really believe that your Lordships can be justly proud, and we should all be proud, of the contribution made here to this important piece of legislation. I am immensely grateful to you all.
Lord Stevenson of Balmacara
My Lords, it usually falls to me to embarrass Ministers, not the other way round. I felt myself blush just then, and I hope it was not caught too closely on television—but I thank the Minister very much indeed for her comments.
Leading on a Bill in your Lordships’ House, whether in a government position or in opposition, is an honour and a privilege—but those who have done it before will know what I mean when I say that it can take over your life. It is not just the bad dreams and the nightmares of waking up and thinking, “Did I actually say that?” or “Did I forget that amendment?”; it is all the other work that goes with it: meetings with third parties who feel that they should participate in the Bill, and in our case—this may not be true of the Government—talking to our colleagues in the Commons, and to other groups in this House that have to be involved. It is well known that it is simply not possible to improve a Bill unless those of all parties, and none, join together to see what the public interest requires.
There are also meetings with the clerks, and Back-Bench liaison on our side, and voting strategy meetings. There is a lot going on, and that does not get any less as we come towards the end of the process. It gets to the point where you eat, sleep and dream the Bill. That is fine when it takes six weeks, but it is not fine if it takes six months, as this Bill has done, to get through to its final process.
There are pluses too. Working on a Bill means working intensively with colleagues. I do not just mean my noble friends Lord Grantchester and Lord McNicol, and our extraordinarily hard-working legislative assistant Ben Wood; it also means working with the Bill team. I agree that all credit is due to Suzanne Greaves and her team, because they have been fantastic to us as well as to Ministers, giving us information and responding, to a very high standard, to often ridiculous requests at very short notice. Ministers, including the noble Lord, Lord Bates, and the noble Viscount, Lord Younger, have been excellent at the Dispatch Box, both in what they have said but also in saying it very quickly. That is, I believe, often the hallmark of a good Minister.
I am sure I speak for the whole House when I congratulate the noble Baroness, Lady Fairhead, on what is, extraordinarily, her first Bill. She has it brought it to the House with consummate skill and considerable confidence. She ensured that we met regularly outside the Chamber for the meetings we have referred to, which were robust but extremely good and fruitful. We made progress and we were given all the information we needed.
We did not always agree—the Minister has acknowledged that—but where we differed, we did so only after all avenues for compromise had been explored and we proceeded on the basis of mutual respect for each other’s point of view. In doing that, we upheld the best standards of this House.
Lord Purvis of Tweed
My Lords, at this awards ceremony I am delighted to be nominated for best supporting actor. I, too, thank the Members of the Government Front Bench for their patience and their willingness to engage. The Minister said this was the first Bill she has taken through. This is the first time I have been on a Bill’s scrutiny team, although I have had the privilege of taking through a Private Member’s Bill.
The Minister and I now know more about World Trade Organization terminology than we ever wanted to know. We hope it will become useful in the future. The Bill arrived in this House eight months ago. It started its considerations 15 months ago and the Trade Bill 2017 is now the Trade Bill 2017-19. That demonstrates that it has been a long process. The Minister said in her speech at Second Reading on 11 September that this was merely,
“fundamentally a pragmatic and, in most parts, a technical Bill”.—[Official Report, 11/9/18; col. 2204.]
We have had to scrutinise many technicalities and the Minister has been pragmatic in the way she has responded. She also said that the Bill was about continuity and certainty. These two things have been lacking on Brexit over the last months. On this Bill we have been unaccustomed to having such a large attendance in the House as there is now; given the next Statement on Brexit preparedness, I am sure it is in the context of this Bill having to be in place to provide some of that preparedness.
In thanking the Government Front Bench, and having worked closely on a cross-party basis with the noble Lords, Lord McNicol and Lord Stevenson, and others, I should also mention that I have had the stalwart support of my noble friends Lady Kramer and Lord Fox, and the unsung heroes of our Benches, Andrew Burrell and Elizabeth Plummer.
This is now a better Bill having gone through this House. We sought to enhance parliamentary power in setting the negotiating objectives and a mandate, and that is now in the Bill. We sought that consultations with the devolved Administrations would be enhanced, and that is now in the Bill. We said that there should be parliamentary approval of these continuity and ongoing agreements, and that is now in the Bill. Participating in a customs union is now in the Bill. A mobility framework for the movement of people is now in the Bill. Non-regression of standards—important across different areas from animal welfare to food standards—is now in the Bill.
The Minister said that this was a rewarding, constructive and challenging experience for her. In many regards she has met that challenge and I commend her for it. She has certainly been constructive in how she has engaged with us. The rewarding aspect will be how she can persuade her colleagues at the other end of this building to ensure that all the wise amendments that this House has passed are not overturned. We will have to see how she does on that business. If she does it, I commend her for it.