Trade Agreements

Baroness Fairhead Excerpts

Thursday 14th February 2019 Lords Chamber

[The Minister of State, Department for International Trade (Baroness Fairhead) (Con)]

My Lords, with the leave of the House, I will repeat in the form of a Statement the Answer given to an Urgent Question in the other place by my right honourable friend the Secretary of State for International Trade. The Statement is as follows:

“Mr Speaker, as a member of the EU, the UK currently participates in around 40 free trade agreements with more than 70 countries. In 2018, the trade agreements in force constituted about 11% of our trade. These cover a wide variety of relationships, including: free trade agreements; economic partnership agreements with developing nations; association agreements that cover broader economic and political co-operation; and mutual recognition agreements.

The Government’s programme for providing continuity and stability for businesses, consumers and investors in our international agreements is of the utmost importance. We are committed to ensuring that those benefits are maintained, providing for a smooth transition as we leave the EU, but the best way to provide that continuity and stability is to ensure that we have a deal with the European Union so that the UK can remain covered by all those agreements during the implementation period.

We have already signed a number of agreements, including with Switzerland—the largest in terms of our trade flows, representing more than 20% of the value of all our rollover agreements. We have also signed agreements with Chile and the Faroe Islands and an economic partnership agreement with eastern and southern Africa—ESA. The text of these agreements, the Explanatory Memorandums and the parliamentary reports for them have already been laid in the Libraries of both Houses.

As we leave the EU, we have no intention of making our developing country partners worse off, as the Opposition would have us do, and it is important for the prosperity of their people that we maintain our trading relationships so that they have the opportunity to lift themselves out of poverty. We have recently reached agreements with Israel and the Palestinian Authority, and we intend to sign those agreements shortly. We have also signed mutual recognition agreements with Australia and New Zealand and will be closing two with the United States soon. A number of negotiations are at an advanced stage. All international negotiations—indeed, any negotiations—tend to go down to the wire, and I would expect nothing less from these agreements. That is the way that countries do business.

To put the economic value of the agreements in perspective, the countries covered by 20 of the smallest agreements account for just 0.8% of the UK’s total trade. For those countries where we may not be able to get a full agreement signed by exit day, it is responsible to ensure that we have contingencies in place should we end up in a no-deal scenario. That is exactly what my department, alongside the Foreign Office and the Department for International Development, is doing. We will shortly be updating businesses and the House about progress on these agreements and will continue to inform the House as soon as further agreements are signed”.

[Lord Stevenson of Balmacara (Lab)]

My Lords, I am grateful to the Minister for repeating as a Statement the Answer to the UQ in the other place yesterday. The mystery which this Statement is supposed to address is why there is such secrecy about progress on the rollover of existing EU FTAs. It was always going to be much harder than was ever promised; it was always going to take time, and it has; and, as the Minister said, it was always going to be up to the last minute, so we should not be surprised by anything that has been leaked to the papers. Having said that, it is good to see the leaked report because it gives some clarity to what is otherwise a rather obscure situation.

If the Minister will forgive the comment, the Statement still has Micawberish undertones. It has been clear for many months that, at best, only a very small number of agreements will be in force if we leave without a deal on 29 March. It is also becoming clearer that the focus on these 40 EU FTAs with 70 or so countries is a bit of a distraction. Even counting the Japan agreement that recently came into force, although it takes a number of years to have its full effect, we are talking about 16% of our overall gross imports and about the same—16.5%—of our gross exports, so it is a small proportion of our overall trade.

If you go a bit further into these EU FTAs, over 80% of their value is provided by some six of them. Obviously, they are important but they are not that important, particularly when you go further into what they comprise. The much-vaunted Swiss agreement accounts for a very large proportion of the six that provide 80% of the value but it is in a very restricted sector—pearls, precious metals and jewellery. Therefore, we have to understand a much wider issue. The majority of the EU FTA agreements and the ones that account for 80% of their value deal with precious metals, pearls, jewellery and mineral fuels. They do not supply food or medicines—the sorts of things that will be in short supply if we crash out on 29 March.

To focus a little more on the wider context, can the Minister now confirm clearly to the House that, if there is a withdrawal agreement, after 29 March 2019 the UK will be a third country, no longer participating as an EU member, and that it will have to rely on the EU’s promise to notify its current partners that the UK is to be treated as a member state? But of course that will be entirely up to the countries concerned and, as things stand, a very small number of the agreements with those countries will be in place on 29 March.

If there is no deal and we leave on WTO terms, the crucial question that is missing from this whole discussion is: what tariffs will be applied when we leave? Can the Minister confirm when we will get some information about the tariff rates that will be applied? We gathered from the exchanges yesterday in another place that the much-touted story over the weekend that the Government would go for zero tariffs has no credibility. The Minister in the other place said that that would not be the case. Can the Minister also confirm that the Government will announce the tariffs very shortly? If so, when will that be?

[Baroness Fairhead]

I thank the noble Lord. I think I heard two questions there. First, he asked whether it is true that if, as is the Government’s priority, we leave with a deal—that is, with a withdrawal agreement and an implementation period—the EU has to propose that the UK is treated as a partner for the purposes of these trade agreements. That is correct. I do not believe that that is a secret. My understanding is that the countries with which we have been having these discussions are happy about that and are supporting continuity on that basis. That has been the basis on which we have been proceeding.

Secondly, the noble Lord asked what tariffs would be in place in the case of no deal. Again, I stress that a lot of the focus is on getting a deal, although there is a risk of no deal. We have already started to provide information on GOV.UK and have provided technical notices to businesses with some elements of specificity and suggestions about what they can do. If it looks as though there will be no deal, clearly the Government will come forward with a day-one tariffs paper. As I imagine the noble Lord would expect, I cannot confirm the date of that but I can confirm that it will happen.

[Lord Fox (LD)]

My Lords, I join the noble Lord, Lord Stevenson, in thanking the Minister for bringing this Question to the Floor. As the Statement makes clear, these deals account for around 11%—or 16% if you include Japan—of our total trade. That figure pales into insignificance when compared with the 48% of trade that we have with the European Union; nevertheless, it is important, and it is important to the companies that trade on that basis. It is important too because it is something of an act of faith. The Secretary of State was very clear that these deals would be easy and that they would be in place on the stroke of midnight, or one second after midnight. He was unequivocal and confident.

In Committee on the Trade Bill, my noble friend Lord Purvis of Tweed pressed the Government time and again to come forward with details of the progress on these deals. However, the Government did not give any and it is very regrettable that we are having this discussion due to a leak. The details having leaked, it seems that the Secretary of State’s bulletproof confidence is slipping.

In answer yesterday to the Member for Eddisbury in the other place, the Secretary of State said:

“The Government are assessing where we are with each of the agreements. Where we believe that it will not be possible fully to replicate, we will set out a technical notice in the coming days”.—[Official Report, Commons, 13/2/19; col. 895.]


Additionally, in answer to my right honourable friend Tom Brake, he said that he would now keep Parliament updated on progress “in the coming days”. Can the Minister tell us on which day this update will be forthcoming?

[Baroness Fairhead]

My Lords, I can only repeat the Statement from my right honourable friend the Secretary of State for International Trade. The update will be given shortly—as he said, in the coming week.

[Baroness McIntosh of Pickering (Con)]

My Lords, I am most grateful to have the opportunity to raise what was debated in the other place yesterday. The noble Lord, Lord Stevenson, asked about tariffs. What will the mechanism be for setting the tariffs? Will a statutory instrument be brought before both Houses to set them?

On a different matter, I am personally very enthusiastic about the Faroes and would like to put down a marker about that. I am probably one of the few people to have visited the Faroe Islands. I am slightly concerned that the Faroes account for 0% of our trade when we have £60 million of exports and £229 million of imports.

[Baroness Fairhead]

My Lords, in terms of tariff-setting, there are the powers under the Taxation (Cross-border Trade) Bill. With regard to the Faroe Islands, I think that the figure of 0% has been rounded. We are talking about the total amount of trade to the UK but I agree with my noble friend that the trade agreement with the Faroe Islands, as well as many other smaller trade agreements, is vital.

[Lord Anderson of Swansea (Lab)]

My Lords, I too am very excited about the prospects of doubling or tripling our trade with the Faroe Islands. Can the Minister confirm that the facile optimism of the Secretary of State must surely now melt as he sees the reduction in our negotiating power when we are on our own compared with having the weight of the EU behind us, particularly in relation to the big hitters. Each of them—Japan, the US and India—will demand concessions, some of which might be painful for us; for example, it is clear that India will demand concessions on visas. That will be unpalatable to many Brexiteers.

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[Baroness Fairhead]

I can only say to the noble Lord that we will remain the fifth-largest trading nation in the world. Third countries are very keen to work with us and to have access to our products, and they are very keen to make sure that they can export their goods to us. There is also the argument that in dealing with one country we will be able to focus on areas of particular interest to this country. I highlight in particular the service industry, which makes up 80% of our GDP.

Trade Bill

Baroness Fairhead Excerpts

Committee: 3rd sitting (Hansard): House of Lords
Wednesday 30th January 2019 Lords Chamber

[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?

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[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.

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[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.

--- Later in debate ---

[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.

--- Later in debate ---

[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.

Brexit: EU Free Trade Agreements

Baroness Fairhead Excerpts

Thursday 24th January 2019 Lords Chamber

[The Minister of State, Department for International Trade (Baroness Fairhead) (Con)]

My Lords, with the leave of the House I will repeat as a Statement an Answer given to an Urgent Question in the other place by my honourable friend the Minister for Trade Policy. The Statement is as follows:

“Mr Speaker, as a member of the EU, the UK currently participates in around 50 free trade agreements with over 70 countries. These free trade agreements cover a wide variety of relationships, including economic partnership agreements with developing nations; association agreements, which cover broader economic and political co-operation; trade agreements with countries that are closely aligned with the EU, such as Turkey and Switzerland; and more conventional free trade agreements.

Businesses in the UK, EU and partner countries are eligible for a range of preferential market access opportunities under the terms of these free trade agreements. These can include, but are not limited to, preferential duties for goods. This includes reductions in import tariffs across a wide range of products; quotas for reduced or nil rates of payable duties; quotas for more relaxed rules of origin requirements; enhanced market access for service providers; access to public procurement opportunities across a range of sectors; and improved protections for intellectual property. For continuity and stability for businesses, consumers and investors, we are committed to ensuring these benefits are maintained, providing a smooth transition as we leave the EU.

The Department for International Trade, the Foreign Office and the Department of International Development are currently working with partner countries to prepare to maintain existing trading relationships”.

[Lord Stevenson of Balmacara (Lab)]

My Lords, I am grateful to the Minister for repeating in the form of a Statement the Answer given to the Urgent Question in another place. The Government have made it clear that prudence dictates that sensible planning should be undertaken as we are only some 10 weeks from leaving under a no-deal scenario—except, apparently, in the Department for International Trade. Yesterday in Committee, the Minister said that while the Government have been engaging actively with the countries which currently have a free trade agreement in the variety of forms that it takes with the EU, she could not say what steps are necessary in each of those countries to roll over their agreements to the UK, how many are ready to do that and how many are not. This seems incredible.

If we do crash out on 29 March, we will not be in a free trade agreement, a customs union or a preferential agreement with any of these countries. Have the Government told these countries what tariff rates the UK will apply from one second after 11 pm on 29 March 2019? More importantly, have they told UK businesses what the rules will be? If not, why not?

[Baroness Fairhead]

My Lords, I thank the noble Lord for the question. The Government have been clear. We are aiming to have a deal and an implementation period. On that basis we are confident of the continuity. My honourable friend Minister Hollingbery said in another place that he was confident that most of those 40 agreements would be continued.

[Lord Purvis of Tweed (LD)]

My Lords, they can be continued only if they are ratified both by this Parliament and the third-country parliament. Revelations from the Government yesterday in Committee on the Trade Bill highlight the fact that, even if we have an agreement and even if the EU asks those countries to treat the UK as a continuing member of the EU for the purposes of trade treaties, the Government do not currently know whether or not they will. That leaves a very large question mark—even if we leave with an agreement. If we leave without an agreement on WTO terms, we know through the objections already lodged in Geneva to our goods and now our services schedules that we are likely to leave without any certified schedules under WTO rules, adding even more instability and uncertainty. We know already the consequence of leaving on WTO rules. From day one it would be a tripling of the tariff rates to our trading partners. But we now know that leaving with an agreement also has major uncertainty. Will the Government now, as a matter of urgency, update their impact assessment, already published, to take into consideration these new facts? Will they honour the clear vote of this House to have an urgent update and a policy statement on how the Government intend to take forward their future trading relationships? This House voted for it: when will the Government honour that commitment?

[Baroness Fairhead]

To clarify, I said in the debate that it was for those third countries to determine what their processes are. Some are not public knowledge. I did not say that we did not know. With regard to the WTO rules, it is true that we have submitted our schedules and they have not been certified. However, countries can operate on an uncertified schedule. The EU currently operates on an uncertified schedule. In terms of more information about the process, I said in the debate that I would reflect on the clear desire from this House for more information. I have taken that back to my department.

[Baroness McIntosh of Pickering (Con)]

My Lords, will my noble friend respond to the question put both yesterday and this morning by the noble Lord, Lord Stevenson, on what the tariffs will actually be, so that we can have a level of certainty going out from Parliament to businesses that are directly concerned? Can she elaborate a little more on the process? For example, yesterday she mentioned the process of signing the agreement with Switzerland. When will that free trade agreement come into effect? How long will the processes of the respective parliaments take, both in Switzerland and here?

[Baroness Fairhead]

On any tariff rates, I repeat that this Government are clear in their aim to have a deal and an implementation period. There is of course a chance of no deal. There will come a time when we know the exact basis on which we are to leave. When that moment is clearer, the DIT will come forward with its day-one tariff schedules. I say again that we hope that that does not happen because we will have a deal. I can confirm that the Switzerland agreement has been initialled; it is expected to be signed very shortly. As my noble friend will know, the continuity agreement will wait until we have left the EU, because it is at that time that it becomes relevant.

[Lord Liddle (Lab)]

My Lords, does the Minister agree—I am not suggesting that it is her personal fault—that this represents a massive failure of policy on the part of the British Government? The Secretary of State, Mr Liam Fox, and Mr George Hollingbery gave assurances to the other place that the 40 agreements would be novated by the proposed leaving date. Hardly any of it has happened. Surely this is a demonstration of the failure of government policy, and an apology from the Government is required for letting us down on this aspect of Brexit, as on so many others.

[Baroness Fairhead]

My Lords, the Government’s policy remains to have a deal and an implementation period. If that is pursued, there is confidence that those agreements can be continued. That is in the interests of our businesses and our consumers. My urge would be that we find a way to a deal, so that that process can happen in a clear way. As for no deal, I have been clear in this House that timing is extraordinarily tight and our confidence would be much greater if there was an implementation period.

[Lord Lansley (Con)]

My Lords, as my noble friend the Minister rightly said, participating in the withdrawal agreement in a treaty with the European Union will enable us to be treated as if we are continuing in the free trade agreements currently in place between the European Union and third countries. We will participate in those through the mechanism of the withdrawal agreement. However, does she agree that many of those third countries are not keen to publish what they regard as their arrangements with the United Kingdom in the event of no deal, not least because they do not know what our relationship with the European Union will look like immediately after a no-deal exit? Under the most favoured nation rules, they would expect in the short term to be able to benefit from whatever arrangements we arrived at with the European Union.

[Baroness Fairhead]

I thank my noble friend for that question. He is absolutely right. An example referred to in another place was Turkey. As your Lordships will know, Turkey does not have a normal free trade agreement; it is part of a customs union. Therefore, it is particularly difficult to agree continuity with Turkey until we know the exact terms of the relationship with the EU.

[Baroness Altmann (Con)]

My Lords, I have every sympathy with the position my noble friend finds herself in, which none of us would wish to be in, but can she confirm that if we were to leave with no deal, that would be a choice that the Government could have avoided by revocation of Article 50, which is in their gift? Will she also confirm that the former Brexit Secretary claimed in an article the weekend before last that leaving with no deal would be the way to make Britain a global free-trading nation? Leaving with no deal actually has the impact of losing all the free trade deals we currently have with our nearest neighbours and, it would appear, losing the trade deals we have with non-EU countries as well. Indeed, it would be a monumental act of protectionism for this country to leave with no deal.

[Baroness Fairhead]

I thank my noble friend. My right honourable friend the Prime Minister has been very clear about her attitude towards Article 50, so I do not want to take that one on. As for leaving without a deal, I question that there would be no free trade agreements. As I have said, the Switzerland one has already been initialled and is expected to be signed, and we are making good progress on a number of trade agreements. Let me be clear that most of our trade with the US, which is approximately one-fifth of our trade, is on WTO rules.

Trade Bill

Baroness Fairhead Excerpts

Committee: 2nd sitting (Hansard - continued): House of Lords
Wednesday 23rd January 2019 Lords Chamber

In the continuity agreements that are being negotiated as we stand here, and which have to be completed in a matter of days, which kind of resolution system are we embedding? Will it be one that is changing literally as we speak, so that the EU may well be in a very different place during the lifetime of the continuity agreement—and probably in a much better place, because everybody I have spoken to thinks that the new shape of the investment court system is far superior—or are we locking ourselves into the old system? Where are we positioning ourselves in the general debate—which is very important because we are a trading country—about how these issues will be handled and the multilateral potential for future trading arrangements? I hope the Minister will address these issues. It is pertinent to continuity as well as to long-term agreements.

[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.

--- Later in debate ---

[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.

--- Later in debate ---

[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

Baroness Fairhead Excerpts

Committee: 2nd sitting (Hansard): House of Lords
Wednesday 23rd January 2019 Lords Chamber

[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?

[Viscount Hailsham (Con)]

“I will write to the noble Lord”?

[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.

--- Later in debate ---

[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.

--- Later in debate ---

Amendment 19 puts in place much greater clarity about the agreements, their scope, their impact on the United Kingdom, their impact if there is no agreement, and a current status register. That is absolutely doable by the Government. There is no confidentiality risk, no governance risk; we will not put any of our relationships with third countries at risk by doing so. In fact, it will enhance the relationships. I have been offended by hearing Dr Fox blame other countries for not acting quickly enough because, as he said this morning, they do not believe that there will be a new deal—presumably they were also on the conference call with the Chancellor of the Exchequer who said that Parliament will block no deal. Blaming other countries for not moving quickly enough is simply not acceptable. This information needs to be made public and Parliament needs much greater transparency—in fact, it does not need greater transparency, it just needs transparency.

[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.

--- Later in debate ---

[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.

--- Later in debate ---

[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.

--- Later in debate ---

[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.

Trade Bill

Baroness Fairhead Excerpts

Monday 21st January 2019 Lords Chamber

While these amendments deal with the standards and conditions that UK trade agreements must comply with, my noble friend Lady Young and the noble Baroness, Lady McIntosh, also raised the question of the process whereby these deals will be assessed and measured—the framework around compliance, which has so far not been clarified by the Government. Parliament needs a strong voice in this process. International trade offers opportunities for prosperity and benefit to the economy, but that cannot be at the expense of domestic standards in food, animal welfare and the environment or of international best ethics and practice.

[The Minister of State, Department for International Trade (Baroness Fairhead) (Con)]

My Lords, the richness and intensity of this debate demonstrates the expertise in this Committee and the importance of getting this right. I assure the Committee that the Government are committed to upholding and strengthening our high standards in food safety, the environment and animal welfare as we leave the EU. In her Florence speech, my right honourable friend the Prime Minister reconfirmed this, saying 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”.

The European Union (Withdrawal) Act 2018 will not only provide a functioning statute book on the day we leave the EU but will ensure that all existing EU laws on standards continue to apply in the UK. Leaving the EU means we now have a unique opportunity to design a set of policies to drive environmental improvement with a powerful and permanent impact tailored to the needs of our country.

Amendment 8 was tabled by the noble Lord, Lord Purvis of Tweed, and was spoken to by the noble Lord, Lord Grantchester. I reassure noble Lords that this amendment is not necessary. The process of exiting the EU will not alter the UK’s commitment to upholding international laws and our international commitments. This includes commitments on climate change and the sustainable development goals. The UK is a world leader in our strong commitment to human rights, labour and environmental standards around the world. We will continue proudly to comply with our international obligations, a point I am happy to reiterate.

Additionally, my right honourable friend the Secretary of State stated during the passage of the Trade Bill in the other place that our aim in undertaking this transition programme is to seek continuity of effect of existing trade agreements. This is not an opportunity to renegotiate terms. We are clear that, given the time pressure to have these agreements in place before we exit, there is neither the intention nor the opportunity for the UK Government or our trading partners to change the effects of the existing agreements. This is a technical exercise to ensure continuity in trading relationships. It is not an opportunity to renegotiate the current agreements. As my noble friend Lady Neville-Rolfe said, we have to make sure that we do not make it overly cumbersome. Third parties to whom we have talked on all the continuity agreements have stressed their interest in continuity; it is in our mutual interest. That is where the hypothetical hits reality: this is in their interest and the interest of their consumers and businesses.

The noble Lord, Lord Purvis, referred to investor protection dispute settlements. There is a later group of amendments in this Trade Bill debate relevant to that and, in the interests of time, I wonder whether we can move discussion of that to then. I see that the noble Lord is happy with that suggestion.

Turning to Amendment 9, let me reassure the House that the scope of the Trade Bill is to ensure the continuity of effect of existing EU trade deals. The noble Lord, Lord Kerr, asked about standards in deals with India and China. I reiterate that the power in Clause 2 could not be used to implement a trade agreement with those countries because the EU does not have trade agreements with them and the Clause 2 power is limited to countries with which we have a trade agreement.

As the Clause 2 power is intended only as a vehicle for changing UK law as a result of our entry into continuity trade agreements, it is clear that it will not be used to make changes to UK standards. This is in line with public commitments that the Prime Minister and Ministers from across Government, including from Defra and DIT, have made on the maintenance of the current standards. It would not be logical for the UK to lower our rigorous levels of protection in order to secure a trade deal, as demand for UK exports is based on our reputation for quality. As the Secretary of State for International Trade said:

“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. High standards and high quality are what our global customers demand, and that is what we should provide”.—[Official Report, 6/7/17; col. 1365.]


My noble friend Lady Hooper stressed that powerfully.

My noble friend Lady Byford talked about future free trade agreements but they are not part of the Bill. This is all about continuity of the existing ones. We will bring forward proposals for future free trade agreements in the coming weeks, and I am happy to reiterate the commitment made in the other place by the Secretary of State for International Trade that Parliament will have the ability to inform and scrutinise those agreements in a timely and appropriate manner.

We want to achieve the same outcome of maintaining our standards, but if we were to amend the Bill in this way, we would be likely to delay ratification of agreements—something that neither we nor our partner countries want. We appreciate the concern about scrutiny of agreements. On earlier amendments we covered the scrutiny procedures at length and the need to make sure that the House has the ability to look at these continuity trade agreements. The amendment would duplicate some of that process. I would argue that, particularly given the time pressure, there will be good opportunities for Parliament to scrutinise the trade agreements that are being transitioned.

Amendment 10, tabled by my noble friend Lady Neville-Rolfe, would ensure that the Clause 2 power would not be able to make provisions in international agreements that restricted the ability of public sector employees to deliver public services. I hope that I have already been clear that the Clause 2 power will not be used to do such things, as it will be used only to deliver continuity. These changes would require reopening negotiations with third countries and that would constitute a change in policy, which would not be continuity. I reassure my noble friend that the UK Government, not our trade partners, will continue to make decisions about public services. Public sector jobs are under no threat whatever from this agreement or any other.

[Baroness Kramer]

The Minister has just said that our public services are not at threat from this agreement or any other, but the United States has been very clear that its two primary objectives in a free trade deal with the UK are access to the full range of public services and for there to be a private option. It has been very clear about that—one can talk to any of the healthcare companies. That surely falls into the category of other agreements that she has just described.

--- Later in debate ---

[Baroness Fairhead]

I would refer to the Comprehensive Economic and Trade Agreement with Canada, for example. Nothing in CETA prevents the UK regulating in the pursuit of legitimate public policy objectives, such as in relation to the NHS, whose protection is of the utmost importance for this Government. We will continue to ensure that decisions about public services are made by UK Governments, not our trade partners. Moreover, rather than negatively impacting the public sector, our trade continuity programme will safeguard jobs and support our public services.

[Baroness Neville-Rolfe]

I completely understand what my noble friend the Minister says about the United States. That is for the future, not for today. Before we get to Report, it would be helpful to be clear about whether there are provisions in the other agreements that we are rolling over that might have a deleterious effect on this choice that we want British Governments to be able to make on whether to put a procurement project into the public sector or the private sector. I suspect that the answer is that there is not a problem at all, but it would be good to have that clarified.

[Baroness Fairhead]

I can clarify that the UK’s public health sector is protected by specific exceptions and reservations in all EU trade agreements. As we leave the EU, the UK will continue to ensure that those rigorous protections are included. My noble friend Lady Neville-Rolfe alluded to this when referring to the mistakes that were made in TTIP. The noble Lords, Lord Fox and Lord Grantchester, also talked about the importance of making sure that those specific exemptions and reservations continue, which they will.

[Baroness Jones of Moulsecoomb]

I apologise for interrupting the Minister when she has gone past what I was particularly concerned about, which is the protections on health, animal welfare and that sort of thing. The Minister talked again about intentions—“The Government intend”—but I did not hear her say, “The Government will do this”, that they will allow these protections to continue to exist. It is all about intentions, not reality.

[Baroness Fairhead]

I am seeking to reassure the House because what we are agreeing in the withdrawal agreement is that all those obligations that we are party to come over as a result of the EU withdrawal Act. We remain parties to exactly the same international commitments made before, during and after we leave the EU. Nothing in that changes. I am trying to convey that this is about continuity of the existing obligations. We are not changing them; they are therefore being brought across as they stand.

I turn now to Amendment 13, tabled by the noble Baroness, Lady Henig, and Amendment 14, tabled by my noble friend Lady McIntosh, which focus again on standards. Amendment 13 restricts the use of the Clause 2 power if it has the effect of lowering market standards for agricultural products below EU standards. Amendment 14 extends this to animal health, hygiene or welfare standards for agricultural products. I hope noble Lords will let me try to address any concerns over trade agreements leading to a change in standards for those agricultural products.

Our trade agreements must work not only for UK consumers, businesses and farmers but also for the environment. The global demand for British products is based on our high standards; people buy British not because it is cheaper but because of its high quality. To disregard standards would be to undermine the future of our farmers and of the British exporters. The Government have already announced a new environment (principles and governance) Bill to ensure environmental protections will not be weakened as we leave the EU. We have finished a consultation on a new body, which promises to hold the Government to account on the environment, and have published our 25-year environment plan which sets out our goals.

[Baroness Young of Old Scone]

There is one small flaw in the short term, which is that we will not have that Bill completed or the new agency established if we leave the EU at the end of March. How will the Government ensure that the duties and responsibilities which that organisation and that Bill would have delivered are not lost sight of during the period—which we do not know the length of—before they come in to being?

[Baroness Fairhead]

The noble Baroness raises an important point. That is why we are seeking an agreement and implementation period which will allow that timing. I can say that the Government will establish our own world-leading green governance body, the “Office for Environmental Protection”, or OEP, to champion and uphold environmental standards in England.

[Baroness Kramer]

I am sorry, but I have a question for the Minister—this may be my mistake in not having followed other legislation closely enough. My understanding is that this will have far fewer teeth than its existing European counterpart, so that it can say things, but it cannot in any way enforce. I understand that the British Government demanded that it should not have enforcement powers.

[Baroness Fairhead]

My understanding is that the OEP will be an independent statutory environmental body that will hold the Government to account on environmental standards once we leave the EU.

[Baroness Kramer]

I think the Minister understands that there is a difference. It is often said that this body can hold the Government to account, for example through an affirmative statutory instrument. It cannot actually stop the Government doing anything, because there is no mechanism that enables it to enforce against the Government. My understanding is that this is a different example; this new body will not be able to enforce. That is completely different from its current equivalent in the European Union. I would hope that the Minister at least recognises this, even if she defends it and says that the difference does not matter. I would be interested to know why she might think it does not matter, but I hope that at least she recognises it.

--- Later in debate ---

[Baroness Young of Old Scone]

That well illustrates the fact that the Minister and the Government should not pray in aid a body not yet agreed by Parliament or approved in terms of its powers and responsibilities, and which is not going to be in existence for some time. It is probably not very safe for the Government to assume that that body will necessarily go in the direction that they want it to.

[Baroness Fairhead]

I thank my noble friend Lady Byford for saying those words. This is a Bill, and the whole purpose of it going through will be that it gets scrutinised. These concerns and changes will be raised, and it will go through in the usual way. I am happy to write to the noble Baroness, Lady Kramer, about where we are on the Bill but, like all legislation, when it is going through that is the right time to challenge it, and that Bill will be challenged in the same way as I would expect others to be.

The Secretary of State for Environment, Food and Rural Affairs said last year:

“I have been very clear that Brexit will not lead to a lowering of our high food, animal welfare and environmental standards. This will remain at the heart of our approach as we negotiate both with the EU and with new trading partners around the world”.

[Baroness McIntosh of Pickering]

The whole point of this group of amendments is to have that commitment written into the Bill. Does the Minister agree to do that? Otherwise I think we might revisit this issue on Report.

[Baroness Fairhead]

The view of the Government is that it is very clear under the withdrawal Act, as well as under our existing international commitments, that we do not need to add them in because it will happen as a result of the withdrawal Act and would therefore be an unnecessary addition. We have made it clear on animal sentience, for example, that we will continue to maintain and enhance our reputation and ensure that any necessary change required to UK law is made in a rigorous, comprehensive way to ensure that animal sentience is recognised after we leave the UK.

Clause 2, as I keep stressing, is to enable the continuity of the existing relationships. It is to ensure that we can continue the effect of the existing EU third-country agreements that the UK already participates in as an EU member.

[Baroness Jones of Moulsecoomb]

If the Government agree with everything that we are saying, why not put it in the Bill? Why not make it specific so there is absolutely no confusion?

--- Later in debate ---

[Baroness Fairhead]

My guidance is that it is because it will already happen as a result of the withdrawal Act so it is unnecessary. There is also the risk of including some but maybe leaving one out. That is my understanding, but clearly this may be a matter that we take up on Report.

The vast majority of these EU agreements are already in operation and have not resulted in a lowering of standards on animal welfare, the environment or food safety. The powers in the Trade Bill will be used not to lower standards but only to implement obligations. As I said before, it is not the intention—nor do we have the opportunity or time—to make changes; it really is about rolling over. I can hear from the mood of the House that this may not satisfy or reassure, but it is certainly the guidance that we have had. I am sure that this will get brought up again on Report.

I will move on to Amendment 15, tabled by the noble Baroness, Lady Jones, and supported by the noble Baroness, Lady Young. The EU has pushed to include trade and sustainable development chapters, including provisions on environmental protections, in its free trade agreements since the free trade agreement completed with South Korea. In general, these point to commonly held international standards on environmental protection, agreed through multilateral environmental agreements, and commit each party not to reduce these protections in a manner affecting trade. Again, these commitments will be retained as we transition these agreements. However, these commitments do not prevent us improving our protections as we see fit. The UK will be bound by international multilateral environmental agreements to which it is party and we are committed to upholding those obligations. We will continue to collaborate with our European and global partners to protect our environment.

The withdrawal agreement contains non-regression clauses on environmental and labour standards. The UK already has some of the highest standards in the world in place and noble Lords should be confident that we will maintain high regulatory environmental standards once we leave the EU. A reciprocal non-regression commitment would mean that neither party could lower its regulatory standards below current levels. The UK will maintain its high regulatory standards for the environment and we are committed, as I said, to upholding our obligations.

With reference to Amendment 15, I reassure the noble Baroness, Lady Jones, that the Government will ensure that our high environmental protections are maintained. We will also transition all EU FTAs, including the provisions on environmental protections provided within these and the commitments not to reduce our commitment to international standards. I hope that this reassures the noble Baroness and the noble Baroness, Lady Young of Old Scone, who sought an answer on this.

Turning to the concerns raised on standards in Amendment 25, this amendment would ensure the UK could ratify trade agreements with third countries only if those agreements ensured that imports complied with food safety, environmental and animal welfare standards set in primary and subordinate UK legislation. I have already pointed to the requirements of the CRaG, which ensures that Parliament can block trade agreements. As a result, we are absolutely clear that all existing commitments relating to standards and regulations will remain in place. Far from reducing standards, this Bill is about preserving the beneficial arrangements that consumers and businesses enjoy. This includes the high regulatory standards embedded in our existing agreements. I say again that the Bill is not about making provision for future free trade agreements; this amendment goes beyond the purpose of this Bill.

[Lord Fox]

I am sorry, I know it is late. To use CRaG as the safety net for this seems to be rather the wrong way around. We should be getting any future agreement right, rather than relying on the CRaG process to fix it. I think perhaps the Minister should look at this the other way around and get it right the first time.

[Baroness Fairhead]

Earlier in the debate, we went through the process for agreeing these continuity agreements. We have not talked about the scrutiny for future trade agreements, but maybe there was some confusion in how I articulated this.

The noble Lord, Lord Kerr, and my noble friend Lady Byford raised a number of important points about future free trade agreements but I think we agreed to defer those to later in Committee. We have already been clear that we will introduce bespoke legislation as necessary to implement those future free trade agreements. The Secretary of State for International Trade has already launched four consultations on prospective future trade agreements and announced that the Government will introduce bespoke primary legislation as necessary to implement these.

Turning to Amendment 26, tabled by the noble Baroness, Lady Jones, the Government have listened to representations from stakeholders both within and outside Parliament on this point. In response, the Government have already amended the legislation in the other place so that the interests of producers are explicitly stated as one of the factors for consideration, just as the new clause before us seeks to do. This completed the list of core considerations when setting the tariff, while not making it unmanageably long.

Trade Bill

Baroness Fairhead Excerpts

Committee: 1st sitting (Hansarad): House of Lords
Monday 21st January 2019 Lords Chamber

[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.

--- Later in debate ---

[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.

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[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.

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[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.

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[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.

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[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.

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[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 Barriers (Revocation) (EU Exit) Regulations 2018

Baroness Fairhead Excerpts

Wednesday 28th November 2018 Lords Chamber

Moved by

[Baroness Fairhead]

That the draft Regulations laid before the House on 22 October be approved.

[The Minister of State, Department for International Trade (Baroness Fairhead) (Con)]

My Lords, these regulations revoke the EU Trade Barriers Regulation 2015/1843 under Section 8 of the European Union (Withdrawal) Act 2018. The EU Trade Barriers Regulation sets up a process for businesses, trade associations or member states to report trade barriers in non-EU countries to the European Commission. Cases have ranged from burdensome customs procedures to discriminatory pricing systems. The Commission assesses the measure and makes proposals for resolution—for instance, raising it in bilateral discussions or at the World Trade Organization. It should be noted that this covers unlawful trade barriers only.

After we leave the European Union, the work on trade barriers will fall to the British Government. It is important that we get this right. Trade barriers cost the UK economy billions of pounds in exporting opportunities worldwide, and non-tariff barriers on average add up to three times as much as tariffs to the cost of traded goods. That is why one of the Department for International Trade’s key objectives is to open markets and why our export strategy details the types of barriers businesses face when exporting and the government support that will be available. It is therefore crucial that businesses can continue to report them. But that only makes it even more crucial that the system for reporting them works effectively, and there is limited evidence of the success of the statutory process.

We do not believe the current Trade Barriers Regulation is fit for purpose in the new UK context. It is complex and costly for businesses, making it slow and infrequently used. It sets a high threshold to be met before an investigation is initiated. This high threshold acts as a disincentive to firms, particularly small firms, reporting market access barriers. The Trade Barriers Regulation requires a complaint to provide detailed evidence that obstacles to trade actionable under international rules are causing injury or adverse trade effects. Just gathering this evidence requires significant amounts of complex legal and economic analysis to be conducted by firms or trade associations. All this is required just for an investigation to be triggered and a report to be written. This is a higher threshold than the Government wish to set for a potential non-tariff barrier to be examined in the first place.

However, amending this threshold would be a change in policy, and thus not within the scope of the powers granted under the European Union (Withdrawal) Act. We would therefore need primary legislation to provide the legislative authority to have a new threshold for reporting trade barriers under a UK replacement of the EU Trade Barriers Regulation. Moreover, it does not create an obligation on the Government to resolve trade barriers. Creating such an obligation would again be a substantive change of policy, again needing primary legislation. The Government have therefore decided not to replicate the Trade Barriers Regulation, and instead to introduce a materially enhanced non-statutory system.

In the EU’s own evaluation of the Trade Barriers Regulation in 2005, a potential TBR user indicated that, while it believed it had a sufficiently sound case, it was discouraged from proceeding to file because of the volume of additional information requested by the European Commission during the pre-initiation phase. In the same report, one of the important EU trade associations commented that there is a large discrepancy between the TBR as a market-opening instrument and the reality faced by complainants in making a complaint. This leads to a lot of frustration for companies or industries that want solutions to market barriers.

The Trade Barriers Regulation, as it stands, provides for a five-step process: the complaint is submitted; the Commission has 45 days to determine whether to investigate; the Commission announces this decision in the Official Journal of the European Union; the Commission actually investigates; and a report is submitted to the trade barriers committee. It is drawn-out and complex. Businesses are required to submit lengthy reports, involving detailed economic and legal analysis for which small organisations just do not have the resources. It is also almost entirely superfluous. All the regulation does is to commit the Commission to investigate and write a report. There is no requirement to take action. In practice, the regulation has been almost entirely bypassed. Around 70 new barriers were reported to the EU last year. On just one of those did the businesses involved choose to use the statutory process; the rest were submitted informally. Indeed, in the last 10 years there has been just one UK application. There is no evidence that those submitted informally were any less likely to be resolved.

Businesses are already revealing their preference for a non-statutory process. So we propose a new, non-statutory process to improve the approach rather than continuing to use a less effective one. Our non-statutory approach will be accessible and user-friendly, with a simple online form on www.great.gov.uk for businesses to fill in. This is already well under way and will be ready for 29 March 2019. Because it is non-statutory, it will also be a flexible process. UK exporters will be able to tell the Government of the full range of barriers they face, including ones that breach the letter and spirit of international agreements. The Government will then use the full range of available tools to tackle these barriers: economic diplomacy, regulatory dialogues, WTO dispute settlements and, if necessary, committees. It will also be a two-way process. It has been designed with the objective of better understanding the trade barriers that businesses face so that we can target the Government’s effort more effectively.

We will, of course, provide reports to businesses and Parliament within the bounds of commercial confidentiality. In due course, the Government will be able to share information with businesses on where barriers exist or—just as importantly—have been removed. That will help businesses make decisions. We are absolutely clear that reports of non-tariff barriers will not disappear into a vacuum and that we will give both parliamentary oversight and feedback to businesses on barriers they report. We are expanding the market access team in the DIT to support this work, with a designated regional point of contact for each of the nine DIT global regions. Her Majesty’s Trade Commissioners overseas will spearhead and champion action on market access across our nine regions overseas. Of course, this will be accessible and available to all parts of the UK.

We are upgrading our capacity to deal with market access barriers, including the IT infrastructure to share information on market access barriers faced by UK businesses. This will enable better collaboration and information-sharing.

As the UK delivers an independent trade policy for the first time in 40 years, we are committed to ensuring that our businesses have as many exporting opportunities as possible. Part of that means helping to resolve trade barriers as effectively as possible. I welcome the opportunity for full scrutiny of this statutory instrument and of the Government’s new approach to tackling trade barriers. I look forward to hearing noble Lords’ contributions. I beg to move.

--- Later in debate ---

[Lord Stevenson of Balmacara (Lab)]

My Lords, I am grateful to the Minister for her detailed introduction to the SI. I agree almost entirely with the approach of the noble Lord, Lord Fox, and will follow a number of his points.

I am intrigued by this SI. The noble Baroness was right to point out that it does not do what the other SIs are trying to do, which is to replicate in a UK context what is currently happening because of our membership of the EU. I do not quite follow the logic. We are considering these SIs today in such large numbers because they transpose whereas this SI dismantles. The Government’s argument is that we cannot amend it but we can dismantle it. I do not get the logic of that. It seems that the Government could not do anything about it because anything they wanted to do would require primary legislation. That rather suggests that the Trade Bill, which is in limbo, is not appropriate for that. However, it seems to me to fit entirely within the parameters of the Trade Bill. I understand what the noble Baroness is saying but I do not get where we are going.

My second complaint is that the figures I have do not square with the figures that the noble Baroness used. I have just looked at the list of trade barriers which are currently reported to the Commission and, on a quick count, there appear to be about 1,000—there are 116 in agriculture and fisheries alone. If you count them by country—which I can do even as I speak—you will find that many of them are interesting countries, including the USA, which have a substantial number of trade barriers.

I am hearing a different story from the other side of the Dispatch Box about a pathetic structure which is hardly used and has industry turning away in droves. As the numbers show, however, that is not what seems to be happening; there are live cases covering a range of issues that play to this question of non-tariff barriers. It seems rather odd that we are trying to dismantle it. Those are my opening points. It is a system which the Government have taken against. They have decided in principle, for reasons I do not follow, that it would be much better if we were not part of the TBR scheme, or any TBR scheme, as we leave the EU, if we have to, on 29 March.

As the noble Lord, Lord Fox, said, there are clearly issues about trade barriers and how we are going to resolve them. Surely it must be the objective of the Government to make sure that we have a robust system in place to support our businesses and workers, who will otherwise be affected badly by countries which have decided, for reasons best known to themselves, that barriers should be erected. Given the new world order, in which might is right and where protections and tariffs are rife, we verge on the prospect of a very dangerous set of trade wars. It therefore must be appropriate for the UK Government to think hard about this, and it is not obvious that the right way to do it is to dismantle something that has some merit.

Why would the Government decide to replace the present statutory scheme, without formal consultation or proper notification, with a non-statutory reporting mechanism, which seems at its heart to simply rely on emails sent to local ambassadors in the hope that they will be able to do something about it? That does not seem to pass the test of a serious approach to supporting exporting.

I am intrigued why this responsibility—which clearly is not the flavour of the month within the department—is not given, to be beefed up and made more effective, to one of the two bodies that the Government will rely on if the Trade Bill ever goes forward. The Trade Remedies Authority deals with exactly these issues. Why does it not have this responsibility? If there is some doubt about whether it has the range or the skills to do it, the CMA will also be looking, through its state aid function, at similar areas. There is a perfectly good way of taking on this responsibility outside the department. Taking it outside the Department for Trade will give hope to those industries that do not naturally relate to BEIS or other departments such as Agriculture that the new body will set up expertise.

The Minister said that feedback on the effectiveness of the trade barriers regulatory system has been mixed. Without a formal impact statement being available—or maybe an informal one, as we have heard in other SIs—and without knowing what an adequate definition of “mixed” is, there are rather confusing messages coming back. “Mixed” does not mean a unanimity of views, so I take it that there were some dissenting voices. Would it not be sensible to set out clearly what the objective of the trade barriers system should be, what system is required to countermand these things, and to set up a proper consultation to come up with a solution that will command the support of those who have to be involved in it?

The argument seems also to rely on the fact that even though there is this system, it does not achieve very much and has rarely been used. The information I have—I do not know whether it is true—is that when the Confederation of European Paper Industries lodged a complaint that measures imposed by Turkey on the imports of certain varieties of paper were inconsistent with both the WTO and the EU-Turkey customs arrangements, Turkey immediately withdrew the unfair measures because of possible action through the statutory system. Even though it does not have a set of sanctions or a court behind it, the fact that this was formal and statutory-based was sufficient to get action. I do not understand why what might be a developing, long-term programme will be abandoned when the UK might have need of it.

If we are to get rid of it, what about the things that are present and still of value? The Minister did not give any detail. There is a market access advisory committee which monitors arrangements and puts forward recommendations, and there are lists published. Who will do that when we move into this new, semi-informal system? In particular, how will we organise in the UK the variable geometry that arises when different departments have responsibilities here? I do not think the issues that will be affecting Defra—such as the transport of live animals—will be in any way cognate with some of the other issues that have been raised. How will that be managed? In particular, in the future we will have a situation where the devolved Administrations—Scotland, Wales, and Northern Ireland if ever re-formed—will have direct trade responsibilities. How will their complaints be organised? Will that be done on an informal basis, and has that been cleared with the devolved Administrations? I suspect that they will have concerns about that. While we are on the topic of consultations, in the absence of a properly constituted market access advisory committee, where in the system will representatives, consumers, trade unions and businesses be able to feed in views and advice about this non-statutory system? Will this be done in some informal way, through Facebook perhaps?

The trade barriers regulations are only one area of EU legislation that deal with trade barriers and dumping. This SI before the House is part of a process, so where are the other pieces of EU legislation that deal with dumping and other matters? Specifically, what about Regulation (EU) 2016/1036 about protection against dumped imports and Regulation (EU) 2016/1037 on protection against subsidised imports? Can we expect those, and, if so, roughly what is the timescale?

There is also a transitional issue. There are a number of complaints apparently already in the system from the UK. What will happen to those if they have not been completed by 29 March 2019 and we have to leave the EU with no deal? What happens if there is a transition period? These are two separate issues. I put it to the Minister that the department should be issuing advice about those currently engaged. Even though they are small numbers, the issues are substantial.

I end by suggesting to the Minister that, rather than revoking the regulation, it might have been a good idea to make a greater effort to investigate whether the current system was truly effective and whether the fact that the statutory element was not used very often was a sign that it was working rather well, rather than the opposite. I generally agree with the noble Lord, Lord Fox, on this: this SI is somewhat undercooked.

[Baroness Fairhead]

My Lords, I thank your Lordships for your contributions today. This has been an interesting debate in a particular area and I will try my best to cover all the points that were made. I start with the point made by the noble Lords, Lord Fox and Lord Stevenson of Balmacara, about why we are revoking. Essentially it is because, as I laid out in the briefing, there is a very complex process to submit and all it requires the Commission to do is to investigate and produce a report—it has no teeth or requirement to solve anything. What is the logic of revoking rather than amending? The amendment, as I said, concerns primary legislation—that is our advice. When you look at amending to create primary legislation with the force of just creating a report, you wonder why you would do that. Many countries have exclusively non-statutory approaches, including Australia and New Zealand.

--- Later in debate ---

[Lord Stevenson of Balmacara]

I understand the point the Minister is making, although it was not really at the heart of what I asked. It would be helpful if she could explain what would be the difference. She talked about the informal ways, but let us take the Turkey example. As I understand it, that was properly documented, sent in, appropriately registered, taken up by the European Union and was formally there. Therefore, it is the threat—rather than the practice of it—that the EU might take a range of sanctions and not necessarily just do a report that seems to have caused the change of heart in Turkey. In the new system, what is it—emails to the ambassador?

[Baroness Fairhead]

Definitely not. What happens when this goes to the MAAC—Market Access Advisory Committee—is similar to what will happen when it goes to the market access team, which is the new team set up inside the DIT. All concerns and market access issues can be raised on an online site and, as I tried to explain, they will be reported on. The concerns will go back to businesses and particular sectors and will also come before this House. So within the bounds of commercial confidentiality, the concerns will be logged as specifically as possible. In fact, it will be similar to the current approach: the areas will be reported on and will not just stay in the ether.

[Lord Fox]

From that answer, it is still not clear what they will plug into. Perhaps the Minister can help on that. Improving the resources from three or four people to 20 people sounds impressive—until you think about the scale of the task. If the Minister’s wonderful online system will gather in more issues, as it is supposed to, there will be a lot of work to do.

There is a large variety of sectors. For example, rules of origin will be a major issue around non-tariff barriers in the food sector; we have not mentioned those dreaded words. The department will need tremendous ability to analyse and substantiate any claim around that. Automotive and aerospace are industries that I know better—and chemicals. All those industries have immense specialisation in them and a great number of legal issues around them. The reason this process becomes complicated quickly in its TBR mode is that there are those complications. Simply having an online form will not remove that complication. So understanding the scale of the resource, it seems that, unless nobody bothers to do this, 20 people will soon be insufficient. Attracting sufficient expertise to address that issue will be a real challenge.

[Baroness Fairhead]

Again, the noble Lord makes good points. The market access team will be made up of 20 people, as I said. That is similar to the number of people on the Market Access Advisory Committee, which exists currently for all EU nations. There are 28 people there—one for each EU nation—as against 20 who will focus just on the UK.

The new digital system will be online and accessible to all businesses. I will come on to engagement in a moment, but we have had feedback from discussions at the round table of businesses that there is unanimous support for the new approach. Businesses see it as a way to make sure that the system is accessible and that more information can flow in a less restricted way, eventually becoming a two-way process.

I will touch briefly on engagement and consultation. As I said, the TBR process has been used very rarely, so we reached out to organisations that have used the process or contemplated doing so. We sought their feedback on the most effective way to use it. We engaged with businesses on the right approach to the online service. They have had an active role in user testing to make sure that the external-facing side is fit for purpose. We reached out to and included stakeholders from the full range of sectors, including food and drink, pharmaceuticals, alcoholic beverages and automotive; they all attended the round table. We also spoke to those who had been actively involved in TBRs. We also engaged with stakeholders who fed into the design of the service. All that engagement had the aim of making sure that we had something that businesses thought was the right support for them in terms of the market access barriers that they see.

The noble Lord, Lord Fox, made an important point about the power of the UK and its capability to influence. This is not new to us. On trade missions, I often push back at some of the trade regulations and non-tariff barriers. We can see significant successes in pushing back on regulations on a UK-only basis. For example, Taiwan removed the barriers on pork from the UK. That was done not on an EU basis but on a UK bilateral basis with Taiwan. Similarly, the Chinese block on UK beef was also pushed back. So we have the ability to push back on such regulations.

The noble Lord, Lord Stevenson, was concerned about mixed feedback. The broad majority of businesses were comfortable with this non-statutory approach and supported it unanimously. Even the entity that was more interested in continuing with a statutory option appeared pretty sanguine about moving to this approach and could see some real benefits. My understanding from the impact statement is that neither the TBR approach nor the new approach regulates business, so no impact assessment is needed. However, I hope that I have conveyed our significant engagement with all parties that we think would be interested in the approach.

I truly appreciate the challenge we face here. I hope that I have given noble Lords some confidence in what is being created, because it will support British businesses and help them push back the barriers. The approach has been designed with the objective of being business-led. With this in mind, I ask noble Lords to support this instrument.

Motion agreed.

European Union (Definition of Treaties) (Economic Partnership Agreements and Trade Agreement) (Eastern and Southern Africa States, Southern African Development Community States, Ghana and Ecuador) Order 2018

Baroness Fairhead Excerpts

Tuesday 27th November 2018 Lords Chamber

Moved by

[Baroness Fairhead]

That the draft Order laid before the House on 19 July be approved.

[The Minister of State, Department for International Trade (Baroness Fairhead) (Con)]

My Lords, this order designates the economic partnership agreements with the Southern African Development Community, eastern and southern African states and Ghana and the protocol of Ecuador’s accession to the EU-Andean agreement as EU treaties pursuant to Section 1(3) of the European Communities Act 1972. This is a necessary step towards UK ratification of the agreements and works alongside the process of laying the treaty before Parliament for 21 days, as set out in the Constitutional Reform and Governance Act 2010, known as the CRaG Act.

The noble Lord, Lord Stevenson of Balmacara, has tabled an amendment to the Motion. I welcome the opportunity to set out the Government’s support for these agreements, and I will seek to respond to the points raised by the noble Lord in my opening remarks. Trade is an important tool in the fight against poverty. Over the last few decades, around 1 billion people have been lifted out of poverty, and international trade has played a very large part in bringing that about. By championing global free trade, we can help create growth and jobs across the developing world in a way that aid spending alone cannot. Before I address these agreements, I should note that they have all already been provisionally applied. They have already brought, and will continue to bring, benefits across a number of developing countries and to the UK.

I turn first to the three economic partnership agreements or EPAs. The UK is a long-standing supporter of EPAs, which differ from conventional free trade agreements in that they focus on the development needs of partner countries. Indeed, this House has already scrutinised and passed several other EPAs to date. I acknowledge the concerns raised about potential negative impacts of liberalisation on the economies of our developing country partners and the issues raised in the amendment to the Motion. As a responsible Government, we listen to such concerns and I am happy to reassure noble Lords that the agreements have taken them into account.

EPAs are deliberately and strongly asymmetrical in favour of developing countries. They give developing countries immediate duty-free access to our market, while EPA partners liberalise their markets gradually over a period of up to 25 years and to a lesser extent—protecting up to 25% of their product lines depending on their domestic situation. For example, the Seychelles, a high-income country, will liberalise 98% of tariff lines, whereas Mozambique, a least-developed country, will liberalise only 74%.

EPA partner countries have the ability to exclude their sensitive products from liberalisation, and they use it. For example, Ghana has excluded a number of agricultural goods such as meats, poultry, frozen fish and non-agricultural processed goods. EPAs also provide a range of safeguards for fledgling industries or for food security to protect African domestic products from possible EU competition. As the EPA partners gradually liberalise their markets over a period of many years, industries and consumers in Africa will benefit from cheaper inputs and consumer goods from the EU in non-sensitive sectors.

EPAs also take account of the social and economic circumstances of partner countries and provide development co-operation and assistance to help our partners address broader issues affecting trade, such as technical barriers to trade, labour rights, the environment, poor infrastructure or inefficient customs and border controls. Of course, they are negotiated agreements.

The EPAs we are considering today can deliver real benefits for manufacturers and farmers in developing countries and their communities. Specifically, they eliminate tariffs on processed and manufactured goods, keeping more of the value chain in the developing countries. They also offer simpler and more flexible rules of origin so that, when a producer in one country uses inputs from another, they do not have to pay customs duties when they export their final products to the EU. Both the southern African and eastern and southern African EPAs help regional economic integration by joining up those smaller markets.

The EPAs also bring advantages at home by reducing the cost of imports for our consumers—from Botswanan beef to South African wine. They will bring new opportunities in the future for UK exporters as EPA partners gradually liberalise their economies. We estimate that UK exports will increase over the coming years and be worth an additional £35 million annually from 2035 onwards. I am confident that the impact of these EPAs is positive for the developing nations and the UK and that local agriculture, industry and commerce will benefit and will continue to contribute to the well-being of the wider population through increased jobs and greater prosperity.

I turn now to South America and Ecuador’s accession to the EU-Andean agreement. This agreement has been in place since 2012 and last year trade to the EU increased 7% for Colombia, 16% for Peru and 20% in the first year of implementation for Ecuador. It is estimated that Ecuador’s accession will be worth £37 million annually to the UK’s GDP in 15 years’ time. For the UK specifically, the impact assessment suggests that exports have been increasing since the provisional application in early 2017. UK consumers should already be benefiting from lower prices, particularly for fruit and vegetables. I am confident that the benefits of the FTA can be enjoyed by importers and exporters of any size, with British businesses free to tap into the Ecuadorean market with even greater ease, benefiting from greater access across a range of service sectors and the government procurement market, as well as the removal of remaining tariffs in industries such as chemicals, textiles and telecoms.

--- Later in debate ---

[Lord Haskel (Lab)]

My noble friend is absolutely right to ask how trade policy agreements and treaties will be determined after we withdraw from the European Union. In fact, this is a matter that concerns your Lordships’ Constitution Committee, and it has launched an inquiry to investigate the efficacy of our role in the scrutiny of treaties and how this should be handled post Brexit. I am sure that it will welcome the Minister’s undertaking regarding consultation and engagement.

At the moment, these arrangements are scrutinised by the European Union Parliament and the Commission, and we receive them for approval as secondary legislation. The Secondary Legislation Scrutiny Committee looks at this but of course, as other noble Lords have said, there is very limited scope for comment because the arrangements have already been agreed.

I sit on the Secondary Legislation Scrutiny Committee and our work is to see how these treaties slot in and work with UK law. We had two examples at our meeting yesterday. One dealt with CITES, the arrangement regarding international trade in endangered species, and the other was the Nagoya agreement, which deals with animal tissues—both important matters. The purpose of the statutory instrument is to ensure that these arrangements continue after Brexit, and all the committee did was to make sure that the wording was more appropriate; it did not change anything else.

However, the Explanatory Memorandum promises a further document that will attract the affirmative procedure and transfer powers of enforcement from the Commission to the Secretary of State. So my noble friend is right: here, we are concerned only with the mechanics, not with the rights and wrongs of the arrangement.

My noble friend gave the figure of 40. A paper prepared by an experienced clerk to the Secondary Legislation Scrutiny Committee says that in the last seven years the UK has been party to 225 new treaties. By treaties, he means agreements with a specific country or with an organisation such as Euratom, or a thematic agreement such as the convention on pollutants. We have also had statutory instruments putting in place the mechanism for enforcing sanctions against other countries. For instance, we recently had one against North Korea.

The noble Baroness, Lady Sheehan, made the point that at present the principle of these arrangements is agreed elsewhere. Our work in future will be to scrutinise them from the point of view not only of UK law but of UK usage: the way we do things; compatibility with our values, way of life, standards and priorities, as other noble Lords have mentioned.

So my noble friend is absolutely right to raise this matter. These treaties will require a lot of scrutiny, consideration and careful thought. I join my noble friend in asking the Minister to come forward with proposals on how these matters will be determined after our withdrawal. I am sure that your Lordships’ Secondary Legislation Scrutiny Committee will also be interested in the Minister’s response. This is intimately bound up with my noble friend’s amendment calling on the Government for proposals on how trade policy will be determined. These treaties affect so many of the non-tariff barriers that noble Lords have raised. These non-tariff barriers are now much more important than financial tariffs, especially to a country such as ours, where services are a major part of the economy. I support my noble friend’s amendment.

[Baroness Fairhead]

I thank noble Lords for their contributions. If I breached convention, I offer my apologies particularly to the noble Lord, Lord Stevenson of Balmacara. I was aiming to address some concerns and did it in a different way. Some of these points are absolutely apposite to the SI, while others talk about the future; I will just glance on these, because I understand the issues.

The noble Lord, Lord Stevenson of Balmacara, the noble Earl, Lord Sandwich, and the noble Baroness, Lady Sheehan, talked about a number of challenges, such as the development benefits and merits of EPAs versus unilateral preferences. There is a little bit of history here, in that some of our previous unilateral preferences were deemed not to be WTO-compatible, so we had to move to a different mechanism. We have chosen EPAs because they are much more development-focused, and the aim is to promote and increase trade over time. Having studied EPAs and preferences, I have seen that not all but most countries get better access under EPAs than they would under preferences.

For example, two-thirds of markets are open to Ghana—which I visited recently—for tariff-free access under preferences, but 100% under the EPA. Its prepared fish, coffee beans and cocoa would be affected. I went to a tuna-processing factory while there and heard that they were particularly keen that we continue that EPA, because they saw the benefit. Opening up needs to be done over time, as we agreed, because these are developing countries and liberalisation takes time. In addition, we provide support through improving trade facilitation and customs rules. A lot of our development funding also supports these nations. We are here not to create foes but friends. We are here to build mature, long-term trading relationships, and to open them up asymmetrically. I am happy to confirm, by way of demonstrating that these are seen as attractive, that all parties to the EPAs have expressed an interest in rolling them over to provide continuity. If they were really so unhappy about them, I do not think they would do that.

--- Later in debate ---

[Lord Judd]

I am obviously heartened that the noble Baroness agrees there is an issue, but there is perhaps one specific aspect on which she might give us a word or two. In evolving situations, what is suitable at one point will not be suitable at another—she has alluded to this herself. We have to be careful about what may seem appropriate at one stage if, for example, a country wants to start processing its primary produce. That is quite a hot issue. Are we in favour of its development or are we not? If we are, how do we facilitate its becoming a player and marketing its manufactured and processed primary products? Such a country may become very competitive in the world economy—but then we keep hearing about how competition is a good thing. We need a bit more detail on this.

[Baroness Fairhead]

We are trying to make these countries long-term trading partners. We provide support to help build and encourage investment, and it is likely that that will increase the processing capability of some of their plants, and will, therefore, potentially create competition for some of our companies. In a sense, however, that is what we are trying to do: to bring up trade. As the noble Lord, Lord Stevenson, said, trade matters and can lift up nations. It is not about a single point in time; we are trying to encourage investment to help these nations move up and become long-term, mature trading partners that we can continue to deal with in the future.

I turn now to another area raised by the noble Lord, Lord Stevenson of Balmacara, the noble Earl and the noble Baroness, Lady Sheehan: the question of regional integration. The EU has been one of the biggest supporters of African integration and efforts to deliver a continent-wide agreement. The EU has aligned the EPAs with the existing economic and customs union, seeing that as the best way, according to the preferences of EPA partners. It is clear that they are numerous and overlapping, not by the design of the EU but because we have worked with the flow of what it has done. To try to support regional integration, we are encouraging the African states to extend to each other the same level of liberalisation. This is to make sure that they aim to prevent increased imports from the EU displacing imports from neighbouring countries.

The issue has not been raised—I can hear it coming—but the most-favoured nation clause that might result from that is specifically designed to ensure that it applies only to major economies, and that excludes most of the African nations. We are genuinely trying to work with the flow of regional integration.

On the point raised about the AfCFTA by the noble Baroness, Lady Sheehan, it is a cross- African CTA that is being worked on and, as she will know, it has taken a while. We will continue to support the efforts to do that but in the meantime we believe that EPAs are a way of allowing those countries to progress.

As to the economic benefits, because these are EPAs they are asymmetric in favour of the developing nations and that is why we are seeing limited benefits in the short and medium term to the EU countries, including the UK.

The noble Lords, Lord Haskel, Lord Judd and Lord Stevenson, the noble Earl, Lord Sandwich, and the noble Baroness, Lady Sheehan, raised the issue of parliamentary scrutiny. The noble Lord, Lord Haskel, was helpful in laying out what the current scrutiny is under the EU system. In taking forward the existing trade agreements, we have said that we will try to replicate them to provide as much continuity as possible. In the interests of providing parliamentary scrutiny, we will make sure that a report is prepared outlining any changes that have been made and provide opportunities for debates in both Houses to allow Members to comment on those change before ratification under the normal procedure. So we have tried to address the issue of trade continuity agreements.

This SI is not about future trade policy nor about our future scrutiny arrangements. As I said in my opening remarks, an Oral Statement was made in the other place by the Secretary of State, who laid out some of the ways in which we will engage. There will be a 14-week engagement across civil society, with unions and businesses, and that consultation is taking place on four potential free trade agreements. We will then create an outline approach which, again, will be made public and available to Parliament. Through that process, reports and accounts will be laid before both Houses.

In this House there are a number of Lords committees but none with a specific remit on trade policy. It is not for me to determine for the House of Lords what committee would be appropriate but, as I said, I am keen to talk to noble Lords and hear their ideas. At the moment we are working out our proposals but, ultimately, if any new committee were established it would be for the House of Lords to make its own decision on what that would be.

On the question of involving civil society on these existing EPAs, as I have said, we are continuing to engage actively with civil society. However, under the existing EU approach, there is a joint civil society engagement which takes place under the existing SADC EPA to allow those states’ approach to an effective implementation of the EPA, and it is on the implementation side where that civil society involvement is continuing.

I agree wholeheartedly with the noble Lord, Lord Stevenson of Balmacara—trade matters. We need to get that right. We remain committed to engaging further with Parliament as we develop an independent trade policy. We will continue to work with stakeholders across the UK to ensure that our policy delivers for this great nation.

I encourage noble Lords to support the UK’s ratification of these agreements, which will demonstrate to these countries the importance to the UK of agreements with them, as well as our commitment to development and global prosperity.

[Lord Stevenson of Balmacara]

It would be conventional for the Minister to persuade me to withdraw my amendment, if she could. Otherwise, the implication is that the Minister is quite happy for it to be moved.

[Baroness Fairhead]

I would be grateful if the noble Lord would withdraw his amendment.

[Lord Stevenson of Balmacara]

I am sorry about that bit of theatre. It just makes the point that the structure has to be right or we cannot get to where we want to be: a mutually agreeable situation.

I thank all speakers for participating in the debate. As I said, the aim all along was to have a debate on issues on which we agree. More about this issue unites than divides us, and it is good to have a chance of an open debate on issues of such importance. In fact, it was a special treat to have such expertise and experience represented by the noble Lords who spoke; we were able to pick up on some important points that I am sure we will want to take away and think about when we come to read Hansard.

In her contribution, the noble Baroness, Lady Sheehan, used the examples of Kenya and Tanzania. She made all the points that had been picked up elsewhere about the difficulties for two countries with common boundaries yet completely different profiles on where they want to get to as societies with different experiences and opportunities. As she said, the present arrangements are unlikely to result in regional harmony, let alone the growth in economic activity that we all want.

I will read the Minister’s second speech in Hansard quite closely. She used “we” quite a lot in relation to the way in which these treaties have developed. It is quite unusual these days to find Ministers of Her Majesty’s Government talking as if they were speaking on behalf of the organisation with which we are all involved—the EU—but I take it that she used that word in the sense of the EU trying to achieve certain aims and objectives. That may be a small point, but I enjoyed it. The EU has done some good work in this area; despite the criticisms we have all heard, there is something of value at the end of this process. We should recognise that.

However, the points made by my noble friend Lord Judd are very important. We must not fall into the trap of assuming that some sort of “Made in Brussels”—I do not mean that in a negative sense—mode of liberalisation is the right one for the range of countries we have to deal with. It must be a question of fitting what is appropriate to where the various areas and countries are. I take the point that, by working with the existing arrangements in Africa and South America, there is a better chance of those arrangements working and bringing us the benefits that we are looking for. On the other hand, it is clear from the comments I read out, which other noble Lords have mentioned, that there is some dispute about that. Again, that makes the point that this issue is important and we must not let it go by default; we must engage with it in some way. Even if we go down the routes being offered to us, the question of who assesses that and under what terms of reference—for example, what success looks like—is uncomfortable for those who spoke tonight. Perhaps the Minister could take that away.

Moving on to the future, I do not want to sound too critical but, although there was a welcome sense that engagement with Parliament is an important aspect of the work going on in the department, I did not get the impression that any of the proposals made by either myself or other noble Lords—such as my noble friend Lord Haskel on behalf of the committees he is involved in—reached out in a way that fits with the purpose of the amendment. We may need to go through the Trade Bill and pick up the points there, because there are amendments down that would certainly open up that opportunity. To make the point more fully, if all we are being offered is a bit more information, a bit more consultation at arm’s length, a bit more engagement with civic society, but no real sharing of the process of agreeing and moving forward the agenda, I do not think that fits where we are in terms of where people want to be on trade. Trade is important because it matters, and if it matters then people need to find an echo of that.

Although I mentioned them in my speech, I did not hear the Minister talk about the devolved Administrations. Clearly, it is not her departmental brief to do that, but if we do not get that right, we will all just go into a brick wall at great speed and it will not work. These matters will be devolved to these Administrations and they will have their own views. There has to be some structure, some constitutional arrangement, which gives them confidence that their justifiable and important issues will be raised as part of the process.

It may be that a Lords committee is the right solution, but I do not think that takes the trick. I will argue very forcibly in the Trade Bill that we need to think harder about what powers are given, to whom, and for what purpose, and what process will help to engage the country thereafter. There is a frustration that the lack of information and movement on this will build up. If I can leave the Minister with this, my feeling is that you cannot leave this too long. It may be that, if everything goes smoothly with the Prime Minister’s proposals, there will be a period of two years, or possibly longer, in which we can work these things out, but there is a lot of interest and expectation now and I think it would be a mistake not to recognise that going forward.

With that, and with the Minister’s strong request that I withdraw my amendment ringing in my ears, I beg leave to withdraw.

Trade Bill

Baroness Fairhead Excerpts

2nd reading (Hansard): House of Lords
Tuesday 11th September 2018 Lords Chamber

Moved by

[Baroness Fairhead]

That the Bill be now read a second time.

[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?

--- Later in debate ---

[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.

--- Later in debate ---

[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.

[Lord Liddle]

My Lords—

[Lord Liddle]

These are very, very important and key—

[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?

--- Later in debate ---

[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.

[Lord Adonis]

My Lords—

[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.

Bill read a second time and committed to a Committee of the Whole House.