EU: Trade in Goods (European Affairs Committee Report)
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The Minister of State, Foreign, Commonwealth and Development Office (Lord Ahmad of Wimbledon) (Con)
My Lords, I thank all noble Lords for their contributions to this important debate. I say to the noble Lord, Lord Kennedy, that it is always good to finish on a high, if nothing else than just in giving superficial flattery to the Minister who is responding. I am truly grateful.
I assure all noble Lords that I have listened very carefully to the debate. It reflects, as I often say from this Dispatch Box, the wise insights and detailed knowledge within your Lordships’ House. We may not always agree, and this is perhaps one of those occasions where there is a difference between the Government’s perspective and many of the contributions from noble Lords. I was therefore heartened to hear the contribution of my noble friend Lord Lamont. Nevertheless, this has been an insightful, detailed debate which reflects where the Government and our country are in facing up to the challenges. I hope that many noble Lords recognise that we believe passionately in important, constructive relationships with our partners—and, I add, friends—within the European Union.
I join the noble Earl, Lord Kinnoull, the noble Lord, Lord Kennedy, and others, in reflecting on the valuable contributions of my noble friend Lady Couttie. She challenged me regularly on the wide brief that I have but, equally, she is missed.
I begin, as other noble Lords have, by paying tribute to my noble friend Lady Chalker. It is an honour for me to be here on this occasion to respond to her final speech. She has been an inspiring individual to me as a Minister and has demonstrated that as changes occur at the top, it is good to have consistency and continuity in a ministerial role. I regard her as one of my inspirational heroes in this respect. Seeing her in her very distinguished career as a Minister, and subsequently, as a Minister myself, there have been occasions when she has been in different parts of Africa and I have received a call saying, “Tariq, tell me what I can do, what you need? I am here to help.” That has been reflective of her contribution. I align myself totally with the tribute of my noble friend Lord Lamont. Her wise insights and in-depth experience we will all sorely miss.
However, I feel it is not the last we have heard of my noble friend Lady Chalker. Indeed, my noble friend reminded me of a conversation shared with me by Kofi Annan’s daughter. She said to me, “Lord Ahmad, Nelson Mandela, when hearing of Kofi Annan’s retirement, smiled and laughed as only Nelson Mandela would, in his usual style, and said, “Kofi, you are retiring. When will you retire from retirement?” I think that applies very much to my noble friend, for she has listed what she is seeking to do. As she departs and draws the curtain on this particular stage in the House of Lords, I know she will continue to assist with great insight, experience, passion and affection the cause of international development and the many people across the world who perhaps are not as fortunate as many in our country, and, as we have heard today, the cause of children. I look forward to hearing from her about that, and I am sure that as I continue in my role, she will also remind me of my responsibilities. My noble friend, I know I speak for the whole House when I say we wish you well, and you depart this House with our best wishes and prayers.
I am grateful to all those who have participated in this debate, and I assure the noble Lord, Lord Kennedy, that I speak for many, and that although I had only one noble friend here, others have joined me on the Front Bench. We always speak with good faith, and that has to be our intention. I also assure him that it is with exactly that principle in mind that we are engaging positively with our partners in the European Union.
I am also grateful to the noble Earl, Lord Kinnoull. He has always discharged his duties with great aplomb, and we see that in this report. Many noble lords spoke about his diplomatic capability. This report follows one on a similar issue, from the noble Lord, Lord Jay, and it shows the wisdom of your Lordships in being able to align fully across the spectrum and present a report which is constructive. I assure him that the Government have engaged constructively. I thank the committee for the way in which it reviewed our responses to the 55 conclusions and recommendations in the report and our subsequent correspondence. Of course, I will reflect on this debate in detail and write where I have not been able to answer questions in the time available. I shall write to the noble Viscount, Lord Waverley, on his nine questions, rather than detain the House.
Important issues have been raised in this debate. As my noble friend Lord Lamont said, it should be forward-looking. I want to say at this juncture that notwithstanding our departure from the European Union, our relationship with the EU remains strong. It has been demonstrated at its finest through our unity of response to Russia’s illegal war in Ukraine, and that continues to be the case. I have experienced many meetings and engagements with European colleagues where we are fully aligned on the important issues and challenges that we face.
The noble Lord, Lord Hannay, reminded me not to be overly bullish in presenting a picture of the economy, and indeed our country, in terms of trade. I have reflected on his comments, and I totally accept that, as my noble friend Lord Tugendhat pointed out, collectively the EU is our largest trading partner and it is important that we have a very strong relationship. Indeed, it should not be forgotten that we are the EU’s second-largest trading partner, and a strong commercial relationship based on free trade is firmly in the interest of both sides. The noble Lords, Lord Liddle, Lord Hannay and Lord Purvis, the noble Earl, Lord Kinnoull, my noble friend Lord Lamont and others talked about various issues, from different perspectives at times, and what has been achieved since our departure from the European Union.
While trade in goods with the EU was worth £381.9 billion at current prices in 2016, according to the most recent ONS statistics it was worth £480.7 billion in the 12 months to September 2022. This represents an overall increase of 26%, and an increase of 9% when compared to pre-Covid levels, but I accept that there is more to be done. During this debate we have heard about the barriers and challenges that continue to be faced, which I will come on to, and it is important that we as a Government address those issues.
As my noble friend Lord Lamont reminded us, not everything that needs to be done is about Brexit. However, if I may offer a personal anecdote, I was reminded that during the 2019 election campaign, I asked my then five year-old, “What does Daddy do?” After naming various professions, he said, “Make a point and get Brexit done.” There are some personal reflections of a five year-old in the Ahmad household, which shows that general election slogans and campaign slogans work.
Our trade with the EU remains important, as I have said. Our low-tax, high-skilled economy has helped to ensure that the UK remains an attractive place to invest and grow a business. The UK has moved up the foreign direct investment global ranking since 2020 to become the highest recipient of foreign investment in Europe and the second highest in the world, second only to the US.
The Government recognise that, as the report indicated, the UK’s trading relationship with the EU has changed since our departure from the single market and the customs union. Of course, some businesses and their supply chains have been directly impacted and affected by this new operating environment, but the trade and co-operation agreement, which several noble Lords have mentioned, has played a critical role in securing UK-EU trade and encouraging inward investment. By the standards of free trade agreements, the TCA is very much cutting-edge. It is the world’s biggest zero-tariff, zero-quota free trade agreement and the first of its kind signed by the EU. For example, it includes provisions and sectors of UK comparative advantage such as services and digital trade. It also safeguards the regulatory freedoms that are now enabling the UK to benefit from Brexit.
On the issue of implementation, which the noble Lord, Lord Liddle, and others pointed to, the overall agreement is functioning well. All specialised committees responsible for monitoring implementation have met at least twice. The agreement’s wider network of oversight functions, including the UK-EU Parliamentary Partnership Assembly and the Civil Society Forum, have been established.
However, I accept that there remain a number of important issues that need to be fully worked through, particularly the current discussions between the EU and the UK about EU programmes such as Horizon Europe. I take on board the importance of reaching a satisfactory conclusion through these discussions, for both sides. I assure noble Lords that through direct engagement via the FCDO—as noble Lords will know, my right honourable friend the Foreign Secretary is leading on engagement concerning the Northern Ireland protocol—Ministers are routinely raising other issues of UK interest. Again, I will take back the many detailed and specific issues that have been raised by noble Lords today.
I shall share some of the other formal structures that have operated within the implementation of the TCA. We have seen exchange updates on major legislative developments, such as the discussion at the goods and trade specialised committee on the EU’s Chips Act and the carbon border adjustment mechanism. We have seen accelerated delivery of the TCA provisions, such as our exchanges with the Commission at the specialised committee on energy regarding electricity trading arrangements and co-operation in the North Sea on renewables. There are additional points but if I may, in the interests of time, I will respond in more detail to the noble Earl, Lord Kinnoull, in writing and put a copy in the Library.
We are exploiting the huge renewable potential of the region, which we also believe will boost European energy production and enhance our energy security, and of course that of Europe. Recent events have demonstrated the importance of that.
I will now address some of the points made in the report, and by noble Lords in this debate, about the implementation of the trade and co-operation agreement. First, on the impact of red tape on UK traders, particularly SMEs, which several noble Lords talked about, I share the view expressed by the noble Viscount about the importance of SMEs in being part and parcel—the real backbone—of the British economy. Various other noble Lords raised this issue, including the noble Lords, Lord Liddle and Lord Hannay.
I will list what the Government are doing specifically to support SMEs. The Government have provided £20 million via the SME Brexit support fund to help SMEs adjust to new customs, rules of origin and VAT rules when trading with the EU. HMRC has also produced a useful step-by-step guide to help customers understand the process for importing goods into the UK; this can be found on the Government’s website. HMRC’s customs grant scheme paid out more than £69 million to support businesses with recruitment, employee training and IT to help with customs declarations. All the other work that we have done around business readiness is also available to SMEs.
The refreshed export strategy will focus on the range of barriers to exporting reported by SMEs directly, from costs and lack of knowledge to constraints in capacity and lack of contacts. It will target interventions across the exporter journey, as part of a new single integrated ecosystem of export support, built around the new export support service that was launched in October.
The SME Brexit support fund, which was mentioned, was intended to be closed and has now closed as scheduled. The fund was offered by the Government and granted up to £2,000 per organisation between March and June 2021 to support SMEs to adjust to new customs, rules of origin and VAT rules when trading with the EU. To date, approximately £8.4 million has been offered to businesses, enabling more than 4,100 businesses to pay for practical support, including professional advice. This is important, and I assure noble Lords that I welcome insights, experience and practical examples, as were provided in this debate, about where noble Lords feel the Government should continue to focus.
SPS was raised by many noble Lords, including the noble Lords, Lord Liddle, Lord Kennedy, Lord Hannay and Lord Purvis. There are of course legitimate concerns around the EU’s application of SPS rules, and the Government very much share them. It is clear that the UK continues to maintain among the highest standards of biosecurity and food safety in the world. I assure noble Lords, including the noble Earl—I note the report and the issues he highlighted—that we will continue to work through the SPS specialised committee to challenge the disproportionate restrictions on high-quality UK exports, such as seed potatoes and certain shellfish.
Noble Lords also raised the steps that the Government are taking to safeguard the UK’s biosecurity in the absence of the remaining SPS controls. Goods from the EU are of course currently subject to full customs requirements. However, due to the staged introduction of controls, which several noble Lords pointed to, some controls are yet to be brought in for EU products. These are safety and security declarations for standard goods, as well as certification and check requirements for non-high risk SPS products. High-risk SPS goods are subject to certification, pre-notification and checks. As the target operating model is prepared for publication, so too will be the dates for bringing in the remaining controls on EU goods.
The noble Lords, Lord Liddle and Lord Hannay, talked about dynamic alignment. As we proposed during the TCA negotiations, we remain open to an SPS agreement with the EU based on regulatory equivalence, given both sides’ records and commitment to high SPS standards. As highlighted in the committee’s report, the EU has agreements of this kind with other third countries, such as New Zealand. But we are clear that we cannot accept an SPS agreement based on dynamic alignment to EU rules, like the EU-Swiss model, which several noble Lords pointed to.
Lord Purvis of Tweed (LD)
Does that clear position apply to all parts of the United Kingdom, including Northern Ireland?
Lord Ahmad of Wimbledon (Con)
My Lords, we are in ongoing discussions with EU partners on Northern Ireland issues. I will not answer specifically but, as I have said repeatedly, the important thing is that our discussions on the Northern Ireland protocol ensure the workings and efficiencies of both single markets, considering the impact not just on the European Union single market but on the UK single market, which clearly is not working under the current agreements.
Another issue outstanding is the continuing absence of a number of envisaged technical working groups. The trade and co-operation agreement provides for regulatory co-operation in a number of sectors that the EU has not yet established, including organics, motor vehicles and medicines.
I have already covered the update on the UK’s future border control regime and the targeted operating model in my answers to previous comments. As I said, I will provide a more detailed assessment of the questions raised by the noble Earl in a letter.
Turning to the Northern Ireland protocol, on which the noble Lord, Lord Purvis, just interjected, I can assure the noble Lords, Lord Rogan and Lord Hannay, that talks are ongoing with the European Commission to solve the real problems arising from the implementation of the protocol. Having been part of some of the conversations, I can assure noble Lords that conversations currently taking place with the European Union and the Commission, and specifically the talks between my right honourable friend and Commissioner Šefčovič, are taking place in a very constructive and collaborative spirit, and it remains our hope and preference that the talks conclude with tangible progress that ultimately addresses the concerns of all communities within Northern Ireland.
On the issue of retained law—I will come on to the creative industries and tourism in a moment—the noble Baroness, Lady Brinton, was of course correct. I will write to her specifically. There are wonderful briefs available, and one seeks to have a working knowledge when responding to debates, but on some of her specific questions I will write to her. However, His Majesty’s Government have processes in place to monitor the economic and business impacts of regulatory divergence between the UK and the EU and whether that divergence is UK or EU-led. Analytical frameworks and guidance have been issued to departments when making assessments of regulatory changes to help us understand any potential impacts. The Government have also published a comprehensive list of retained EU law, which will be available at the retained EU law dashboard. I know this will be the subject of various discussions but, as I said to the noble Baroness, I will write specifically on the questions she raised.
A point was raised about tourism by the noble Baroness, Lady Wheatcroft. I accept that challenges are posed on free movement, et cetera, but it is interesting to look at some of the specific figures. In 2015 tourism numbers into the UK were 35.1 million. In 2022 it was 29.7 million. However, the forecast from VisitBritain for 2023 looks at a return to around the 35 million mark. Of course, there could be improvements—I totally accept the point that the noble Baroness raised—and there are issues that need to be addressed because of the changes that many companies within the tourism industry now face, including on issues of workers and ensuring that sufficient services can be provided, but I certainly take encouragement from VisitBritain’s figures, which present a positive picture.
In conclusion, I once again thank all noble Lords for their detailed insights; some specific questions have been raised. Turning very quickly to the creative industries, as I promised—they have not been forgotten—I was asked quite specifically about what has been done. I heard the valuable contributions made by the noble Viscount, Lord Stansgate, the noble Lord, Lord Berkeley, and the noble Earl, Lord Clancarty. We of course recognise that it has changed for workers in the creative sector in the EU, who have had to adapt to new requirements. I have heard very clearly the specific challenges raised by noble Lords in this respect.
Since the end of the transition period, the Government have worked closely with industry to help UK artists adapt to this new regulatory environment, including by engaging with EU member states on their entry requirements for touring artists. I am informed that the vast majority of member states have confirmed that UK musicians and performers do not need visas or work permits for some short-term touring. I know that the Government looked specifically at providing support; some work was done over the summer looking at hauliers and what could be achieved for their processes. I will look at the specific issues that noble Lords have highlighted and talk to my colleagues across government to see what other specific issues and areas we can address directly. I assure noble Lords that the Government are seized of and recognise the challenges that noble Lords have highlighted in that sector. I also take on board the issues of transition in zoo visits and how it has led to educational insights for both shadow Ministers and Ministers on some of the challenges that specific industries and companies are facing.
In welcoming the report and our continued co-operation with the committee, we look forward to seeing how we can continue to engage constructively with it by taking on its recommendations and reporting, as has been demonstrated today. I end where I started: stressing the importance of our co-operation, partnership and friendship with the European Union. Sometimes it is immensely challenging to demonstrate the importance of that but the war in Ukraine has done just that. The European Union is, and will remain, a major geostrategic ally, partner and friend of the United Kingdom. The UK’s departure from the European Union was always going to present challenges that would take time to work through. However, it is important that we address those challenges collectively, collaboratively and pragmatically. I assure noble Lords that His Majesty’s Government are committed to addressing those issues through dialogue, wherever possible, and are committed to a respectful and mature partnership and friendship with the EU that benefits all the people of both Europe and the United Kingdom.