Trade Agreement between the United Kingdom of Great Britain and Northern Ireland and the Swiss Confederation

Debate between Baroness Fairhead and Lord Whitty

Wednesday 1st May 2019 Lords Chamber

[Baroness Fairhead]

My understanding is that there were conversations at official level. After the debate in this House, we made a change and shared the full text of the agreement. For all agreements in place from 20 March, they will get the full text of the treaty. Prior to that, we gave them the text when it was initialled in draft form. We are learning as we go through this process, and fully understand the importance of that involvement.

[Lord Whitty]

My Lords, I thank the Minister very much for her comprehensive reply, and underline my thanks to her officials for taking us through this process.

I do not intend to keep the House much longer; I have already indicated that I will not move this Motion to a vote. I thank everybody who has taken part in the debate. It indicates that, while this may be an umbrella agreement—and the Government clearly needed to provide a degree of continuity with what is, I repeat, our third-largest non-EU trading partner, and mainly in high-value trade—we need to ensure that the holes in that umbrella are rapidly filled, particularly in relation to the whole range of service industries, as noble Lords have raised.

Hardly anyone has disagreed with the findings on the Swiss treaty. The most wounding disagreement came from the noble Lord, Lord Kerr, who, in effect, said that we are being far too optimistic about potential future trilateral arrangements with the EU. Of course he is right—and that is the difficulty. It demonstrates that unless we can reach accommodation with the EU, the arrangements with Switzerland will be more difficult.

It will be even more difficult with the other big trade treaties. A great deal of reference has been made to the good will of both parties on this treaty, but it will not be so easy with Japan and many other countries. Unless they are played against the background of a positive arrangement with the EU, they will run into difficulties. This provides for no deal, but we hope that we will not be in that situation and will move to a broad understanding with the EU. However, if we do not, those problems will undoubtedly arise.

On the wider problem of scrutiny, Parliament has to take a decision and I am glad that the Minister has indicated that the Government are thinking about it. The noble Lord, Lord Robathan, is right that in the past Parliament did not get much involved in these matters or in treaties as a whole. However, since 2010 it has begun to get involved in treaties but, as far as trade treaties are concerned, until we leave that is a matter for the EU. The point I am making is that parliamentary scrutiny was at the EU level. It was not that the noble Lord, Lord Robathan, was asleep in the House of Commons when treaties were considered—not on that occasion anyway—but that they received the detailed involvement of the European Parliament, in a way similar to Congress’s involvement in trade agreements in the United States, as the noble Lord, Lord Kerr, pointed out.

That had the benefit of allowing time and interface with the devolved Administrations and civic society as a whole. That is the way in which we will have to approach the future pattern of our trade—not long-term continuity arrangements—and it will involve a profound rethinking of the role of Parliament in that respect. For all the reasons the Minister has just adduced, we will return to that issue. This treaty demonstrates the need for that. It also demonstrates the shortcomings of simply trying to roll over and the fact that this House and Parliament as a whole will have to return to these issues in short order—particularly if, regrettably, there is no deal. I beg leave to withdraw my Motion.

Trade Bill

Debate between Baroness Fairhead and Lord Whitty

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

[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.

European Union (Definition of Treaties) (Canada Trade Agreement) Order 2018

Debate between Baroness Fairhead and Lord Whitty

Monday 25th June 2018 Lords Chamber

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

My Lords, this order designates the EU-Canada Comprehensive Economic and Trade Agreement, or CETA, as an EU treaty pursuant to Section 1(3) of the European Communities Act 1972. This is a necessary step towards UK ratification of the agreement and part of the process to be followed in laying the treaty before Parliament for 21 days as set out in CRaG, the Constitutional Reform and Governance Act 2010. I am delighted that we have the opportunity to debate this agreement. It follows on from the thorough and constructive debate last year in the other place and the overwhelming support shown in a deferred Division. I very much hope that your Lordships will also agree to support this ambitious and progressive FTA today, and that the other place will again support the agreement when it is debated there tomorrow.

This Government are clear that CETA is a good deal for Europe and a good deal for the UK. Our total trade with Canada stood at £16.5 billion last year, up 6.4% on the previous year, and with a services surplus of £1.9 billion. CETA will improve on this already strong economic partnership. The agreement has the potential to boost our GDP by hundreds of millions of pounds a year: it will bring down trade costs by reducing burdens in the form of both tariffs and procedures; it will boost trade and investment; it will promote jobs and growth; and it will increase our ability to access Canadian goods, services and procurement markets to the benefit of a wide range of UK businesses and consumers. Canada is an important strategic partner too: as one of the Five Eyes group and a member of NATO, the Commonwealth, the G7 and the G20, we have bonds that go far beyond just our trading relationship.

As this House will know, CETA was provisionally applied in September last year, removing 98% of the tariffs previously faced by UK businesses at the Canadian border. Already, UK firms are benefiting from this. We have seen drinks exporters such as Dorset’s Black Cow Vodka and Kent-based sparkling wine producer Hush Heath Estate improve their market access and profitability following the reductions in tariff and non-tariff barriers. We are seeing new UK exporters to Canada, including Seedlip, the world’s first distilled non-alcoholic spirit. Under the agreement, Seedlip does not pay the 11% pre-CETA tariff on its product. Yorkshire-based Moordale Foods entered the Canadian market in March 2017, helped by CETA duty elimination. In services, the UK and Canadian architect bodies, ACE and CALA, have notified the EU Commission that they are in discussions on future mutual recognition.

In September last year, during her visit to Canada, my right honourable friend the Prime Minister and Prime Minister Trudeau reiterated their intention to seek to swiftly and seamlessly transition CETA to a UK-Canada deal once the UK has left the EU. To ensure as seamless a transition as possible, they formally announced a working group to take this forward. Officials from our two countries have already begun to meet to discuss transitioning CETA. It is important as a first step that we prevent a cliff edge for British and Canadian businesses. Of course, while we remain in the EU we continue to support the EU’s ambitious trade agenda. Free trade is not a zero-sum game, but rather a win-win. Ratifying CETA will send a strong message about our determination to champion the cause of free trade. This is a key part of the Government’s vision of delivering a prosperous and truly global Britain as we leave the EU. It is important to the UK that CETA is ratified successfully by all EU member states.

During the implementation period, the United Kingdom will retain access to EU free trade agreements but we will also be able to negotiate, sign and ratify new UK-only free trade agreements for the first time in more than 40 years. In doing so, we will safeguard the benefits already achieved in CETA for UK businesses and consumers and lay a foundation for an even stronger relationship.

Those areas of the agreement that were not provisionally applied in 2017 include a large part of the chapter on investment, including the new investment court system, on which there has been extensive discussion both in Parliament and in wider civil society. The UK supports the principle of investment protection and looks forward to engaging further with the Commission on the technical detail of the investment court system. We support the objectives of obtaining fair outcomes of claims, high ethical standards for arbitrators and increased transparency of tribunal hearings. Investment protection provisions protect investors from discriminatory or unfair treatment by a state. They apply only to investments in place, not to speculative future investments. We have more than 90 such agreements in place with other countries and there has never been a successful investor-state dispute settlement claim brought against the UK, nor has the threat of potential claims affected the Government’s legislative programme. Moreover, the agreement provides that member states should not reduce their labour and environmental standards to encourage trade and investment, ensuring that our high standards are not affected by this agreement.

Nothing in CETA prevents the UK regulating in the pursuit of legitimate public policy objectives—and that, of course, includes the NHS. The Government have been absolutely clear that protecting the NHS is of the utmost importance for the UK. The delivery of public health services is safeguarded in the trade in services aspects of all EU FTAs, including CETA. The UK Government will continue to ensure that decisions about public services are made by the UK and not our trading partners. This is a fundamental principle of our current and future trade policy.

On scrutiny, we have committed, through our White Paper published last year, that we will ensure appropriate parliamentary scrutiny of trade agreements as we move ahead with our independent trade policy. The Government can guarantee that Parliament will have a crucial role to play in the scrutiny and ratification of the UK’s future trade agreements and we will bring forward proposals in due course.

I welcome the opportunity to make the case for CETA today and to give the opportunity for full scrutiny of this important agreement, as the Government have done for previous EU free trade agreements. I look forward to hearing noble Lords’ contributions. I beg to move.

[Lord Whitty (Lab)]

My Lords, I certainly do not wish to oppose an agreement with Canada in this way but I have a number of questions—to some extent the noble Baroness has anticipated me—for two reasons. First, the Government have made it clear that on the one hand they regard CETA as a template for future UK-third party agreements around the world post Brexit and, on the other, they intend that CETA will be rolled over post Brexit into a UK-Canada free trade agreement. Both of those may or may not happen, but two slightly troubling points arise.

My second reason for raising this is the same as I gave in a slightly rambling intervention in a debate initiated last Thursday by the noble Baroness, Lady McIntosh of Pickering. The proponents of free trade, among whom I include myself, need to recognise that there is a negative political reaction in many countries around the world to the prospect of greater free trade. We have seen this in Britain in terms of the Brexit vote, in my opinion, and of course very strongly in America, which has effectively stymied the G7 from making a step change in terms of multilateral free trade around the world. Given that political difficulty, it is important that key sections of our population do not regard the extension of free trade as a threat to their security or to their position.