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

Debate between Earl of Kinnoull and Lord Purvis of Tweed

Wednesday 1st May 2019 Lords Chamber

[The Earl of Kinnoull (CB)]

My Lords, I congratulate the noble Lord, Lord Whitty, on tabling this Motion and providing a mechanism for the House to discuss these very important issues. I sit on the EU Select Committee and its EU Justice Sub-Committee. The reason for my mentioning the latter committee will become clearer later in my short remarks.

The noble Lord, Lord Whitty, made a good case about the size of the trading relationship between Switzerland and the UK, and a good summary of that is laid out in the Select Committee’s report of 12 March—HL Paper 315. In that summary, there is evidence of an important thing to remember in trade, and that is that services and goods are now interlinked. When you sell a good, you often have a service alongside it. Evidence of that is immediately visible because so much of the goods traded in Switzerland is precious metals, and of course a lot of that is really evidence of the physical delivery of an underlying metal trading mechanism that is going on. Therefore, any damage one does to the ability to trade services will inevitably impact on the ability to trade goods. It is incredibly important to make sure that those two things are in alignment. It is mutually beneficial to have clear arrangements for the trading of both goods and services.

I shall make only two points. My first point concerns complexity. The Swiss ambassador told us in mid-November that he had had a hand in handling more than 100 bilateral agreements that Switzerland has with the European Union, and he explained to us the sheer complexity of that beast. There is one piece of good news about that beast—I am looking at the Minister—and that is that, although the tentacles on the top of the beast are complicated, underneath the surface of the beast is a joint committee which has access to various processes and remedies which are common among the 100 or so agreements. So there is complexity on the top and simplicity on the bottom, but it is very important to marry up the goods and the services.

The complexity that we are already developing has been listed. We have the scheduled air services agreement, the carriage of passengers and goods agreement, the non-life direct insurance agreement, the trade agreement and the citizens’ rights agreement, which I shall come to in a second because the EU Justice Sub-Committee examined it. The complexities were acknowledged to us in a generous and helpful letter from the Minister to the Select Committee on 20 March. Perhaps I may take a brief loop here and say how helpful the officials in the department have been to our colleagues in the European Union Committee and how much we value the quality of that relationship. We are drinking from a firehose in learning how to scrutinise these things, and the officials are being most helpful.

Turning to the citizens’ rights agreement, as the noble Lord, Lord Whitty, has pointed out, the trade agreement contains nothing on services—there are no services provisions at all—and so far we have had two of the five agreements which contain a bit on services. We have my own home territory—non-life insurance—and I can confirm that that agreement, although I was not a scrutineer of it but it did come through the main Select Committee, is word for word the same as the successful agreement that exists between Switzerland and the EU. It is an important piece of the interconnectivity and mutualisation of insurance across Europe that has gone on for many years.

The fifth of the agreements to appear was the citizens’ rights agreement, which includes a big hunk of the freedom of movement agreement within it. Unlike the other four agreements, it is not a rollover, as the noble Lord, Lord Whitty, pointed out; in fact, it is a sort of orderly winding down of the various rights. There is a protection of the rights of the 14,000 Swiss citizens living in this country and the 14,000 British citizens living in Switzerland, and the protection of the rights of about 2,500 border officials. One of its key benefits, as was mentioned by the noble Lord, Lord Whitty, is the 90-day services provision rules, which allow me to go to Switzerland lawfully and talk about insurance with a view to selling a service and to do so for 90 days in a year. It is enormously helpful, both for Swiss people to come here and for us to go there. Suddenly to find that, in this thing that is working so well, there is a sunset clause five years out—a cliff edge—is very disappointing. It would be interesting to hear the logic for having inserted that because, if it was not needed by the EU, I do not see why we need to have one now.

We discussed with officials how Parliament might scrutinise what will be a very important decision of the joint committee to extend that five-year period. It will be an extremely important decision both for Switzerland and for the United Kingdom. They said—I shall quote from our report:

“In response, officials advised that no decisions had yet been taken on scrutiny arrangements for such a decision, given that it would not take place until five years after the specified date”.


It would be very helpful if the Minister could commit to the House that at least there will be a scrutiny mechanism, albeit that I realise that she cannot say at the moment what it would be.

Finally, I feel I must come back to the point on complexity. My mind goes back to the very interesting hour and a half we had with the Swiss ambassador who talked about complexity. It would be enormously helpful if the Minister could commit to provide consolidated guidance on the eventual list of agreements between the UK and Switzerland and to place that on the GOV.UK website. Then British businesses—and, indeed, Swiss businesses—that want to know what the deal really is will not have to look at a lot of different bits of guidance but can look in one consolidated place. That single thing would help trade between our two old and very friendly countries a lot.

[Lord Purvis of Tweed (LD)]

My Lords, we are indebted to the noble Lord, Lord Whitty, and to the other committees that have done such forensic scrutiny on this agreement for highlighting so many constructive areas for questioning by the noble Earl and the noble Lord, Lord Whitty. I have two or three questions to add and I shall emphasise a couple of points.

What we are debating today is a clear example of how it was never going to be simply a “cut and paste” or “merely technical” exercise to roll over existing agreements. Their breadth and complexity are now clear to see, especially in the context that our trading relationship and wider relationship over people, goods and services is included in 140 agreements between the EU and Switzerland, while this agreement covers only eight of them.

It is also worth noting that we have an opportunity to debate this significant measure because of the Motion tabled by the noble Lord. Before the Recess, I tabled similar amendments in relation to the three previous agreements. It surely cannot be the way forward for the only way for us to have parliamentary debate on these agreements and treaties in this House to be for Members from opposition parties to move regret Motions and amendments. There has to be a more constructive way for the Government to bring forward proposals for Parliament to have an opportunity to debate them. We made this case during the Trade Bill, and we are waiting to see whether it comes back to this House after consideration of Lords’ amendments by the other place. Some of those amendments were to try to ensure a greater degree of parliamentary scrutiny throughout the process, from the start of negotiations right through to the end and the approval of the negotiations. We took in good faith the intention expressed in the Government’s Statement about an enhanced parliamentary role in scrutiny, but that will be tested when the Government have an opportunity to consider the amendments that this House made to the Trade Bill. We are waiting to see what they will do.

As the committee indicted, this agreement raises constitutional implications about scrutiny, not only of the merits of the agreement itself but of the mechanism for amending it, about how the joint committee will operate and the noble Lord’s significant point about MoUs. There is quite a lot of leeway for the Government to have trade agreements through memoranda of understanding if domestic legislation does not need to be amended, but it could be very broad leeway when it comes to trading policy, and if it were a means of bypassing Parliament, that would be very regrettable. The single aviation market and the open skies agreement between the EU and the US are very good examples of where proper scrutiny rather than simply an executive-to-executive arrangement is required.

However, we are where we are. This agreement was perhaps started in a very false political context and through a rather unseemly political process to try to get agreements in place before what would have been Brexit day. I hope that this slight window of opportunity allows us to take some deep breaths. What had seemed to be rollover agreements could well now be seen in their proper context of an ongoing permanent trading relationship with those countries, should we leave the European Union. However, as with the earlier rather tortuous Private Notice Question about ferry contracts, it begs the question of what will happen in six months’ time if we are in the same situation as we were before 29 March. The clock is ticking towards another situation—there are about six months to go—and there seems little clarity about our preparedness for it.

I turn to the agreement itself. The noble Lord, Lord Whitty, and the noble Earl talked about the scale of our trading relationship with Switzerland, which is very large. I noted a comment online from a professor at Geneva University which summed up that this is not simply about the UK’s trading relationship with Switzerland; it is also about the UK, Swiss and EU relationship. Going forward we simply cannot separate out those three, as I think is recognised by both Houses. The professor said of the Swiss relationship with the European Union:

“It’s like the moon around the Earth: The force of attraction of the European Union is such that you can’t have all the autonomy that you want”.


Therefore, even in the context of Brexit, we will still have a bilateral relationship which, in many respects, will be dominated by the relationship with the European Union. Brexit will not mean that we are immune from the laws of trading gravity.

The Government’s report on the agreement clearly shows that some of the most crucial elements of the trading relationship, such as customs facilitation and security, or animal and plant health requirements, will still depend on the positon that the EU takes and then the position that we take in our relationship with the EU. Many noble Lords have been aware of this. Some countries were simply not in a position to sign a rollover agreement before Brexit because, justifiably, they were waiting to see what the future relationship would be. Therefore, it is little surprise that, of the 140 agreements with the EU, only eight have been able to be rolled over in this agreement. Even within some of those eight, as the noble Lord, Lord Whitty, said, some key components have had to be disapplied as we wait to see what our future relationship and agreement with the EU is. By definition, in a no-deal scenario much of our relationship would be at risk in six months’ time.

With regard to the agreement itself, I have a number of questions arising from the very thorough contribution of the noble Lord, Lord Whitty. As he indicated, only three of the 20 sectors of the EU-Swiss mutual recognition agreement are covered by this treaty. Of those, as the agreement states, we are waiting on the recognition of equivalence of rules between Switzerland and the EU. When do the Government estimate that we will reach a position of clarity on that? Elsewhere, it is indicated that the Government are looking for “simplified arrangements”. What is being considered as far as mutual recognition agreements and simplified arrangements are concerned, and when are they likely to be brought forward?

On agricultural products and those significant areas that have been disapplied, including sanitary and phytosanitary measures for plant health, animal feed, seeds and the trade in animal products, the Government indicated in their report that there were,

“requirements for equivalence or harmonisation with EU law and systems”.

What is the Government’s intention with regard to those in a no-deal scenario, when there would be no move towards agreement on equivalence or harmonisation? What is the Government’s intention with regard to how those harmonisation elements would be brought about?

European Union (Withdrawal) Bill

Debate between Earl of Kinnoull and Lord Purvis of Tweed

Committee: 9th sitting (Hansard - continued): House of Lords
Wednesday 21st March 2018 Lords Chamber

[Lord Purvis of Tweed (LD)]

My Lords, I know the Committee wants to move on but I will make just a couple of brief points—in support of the Government moving on this issue; on the contributions made by the noble and learned Lord, Lord Mackay of Clashfern, and my noble and learned friend Lord Wallace of Tankerness; and on the anxiety that perhaps yet again we will be making constitutional measures on a temporary basis late in the day as a result of decisions by two Executives. While we have to take the Government at their word that these will be temporary measures, many procedures in this House and many elements of our constitution started off as temporary measures but have become almost permanent features of our constitution. In the absence of some changes which will provide a sunset element, we may well be in a similar situation.

Two years ago I brought a Bill to this House for a British constitutional convention, as a result of the Scottish referendum, to try to proactively discuss some of these issues. But, as the noble Lord, Lord Lang of Monkton, said, we are where we are now with this Bill so we have to address what may be constructive ways forward. I think the contributions made so far are good suggestions for what is a very complex situation because we are extracting ourselves from a single market at the same time as seeking to create one with the powers that will be coming back from the European Union. By definition, many of those powers are designed to be cross-border.

Many elements of European legislation are as a result of international agreements that the EU itself has made to implement global agreements, such as on climate change or safety in aviation. These are complex. Interestingly, as the Government’s own framework paper shows, most of that legislation has come into place since devolution. The evolution of the markets within the European Union does not entirely predate 1999. Whether on animal welfare, safety or aviation, many have developed not only since we established devolution in the UK but since the single market has developed. These are going to be very important for our future trading relationships, not only between us and the EU but in our arrangements with third countries.

Most of those areas concern non-tariff barriers, regulations and legislation in domestic law. These are going to be relevant for every single trade agreement that the UK will negotiate and will be at the heart of our relationship with the European Union. Although I have a degree of sympathy with the Government on a temporary basis, we will have to come back not only to the legislation for the implementation period but to that for the new relationship with the European Union. That adds even more weight to the fact that the discussions taking place now will have to be time-limited.

We are also discussing blind how we would expect a framework or a common market to operate within the UK. In many respects, you would argue that we do not have that at the moment. If you drive from where I live in the Borders to London and if you are selling cigarettes or bringing animals, you will be operating under three different road traffic systems. If it was cigarettes, you might have a different packaging system in Scotland. Certainly in Scotland, not only the language of road signs but road traffic speeds are legislated for differently. We operate within many barriers. The question is how damaging those barriers would be to the functioning of the United Kingdom.

That leads on to my second point. This is not simply going to be a relationship based in law; it is also about how the different component parts of the United Kingdom will operate. Since 1999, as noble Lords have said, there have been major changes to that legislation—changes that previous UK Governments said should not be made because they would be counter to the effective operation of the United Kingdom—and Governments have changed their position, usually as a result of consensus and cross-party negotiations.

Where I did slightly disagree with the comments of the noble Lord, Lord Lang, is that there have been now more than 150 LCMs in the Scottish context, and in many respects devolution has been working extremely well when you take away the rhetoric of the wider nationalistic argument. But it does show that there needs to be a degree of flexibility within this set of arrangements. That flexibility will have to come not just with a government-to-government relationship but also with the other elements that are necessary to determine how effectively a common market operates. Who provides the statistics? What is the dispute resolution mechanism? Who provides the data? We saw this in all the discussions that the noble Lord, Lord Dunlop, had during negotiations on the fiscal framework between the UK Government and the Scottish Government. In the end, many of the discussions were not about the legislative element but about the non-legislative element, such as who provided the information, whether there was an independent source of data on fiscal revenue and who did the forecasting going into the future. These are all going to be very important.

Noble Lords perhaps thought I was making a glib comment in the previous discussion when I intervened on the Minister and spoke about managed divergence, but that is part of the parlance in our discussions with the European Union. We have that within the UK, and the question is how divergent we can be in the UK for that common market to operate effectively. Part of this discussion will have to be about the existing offices that consider the markets within the UK—our office for energy, our office for communications, the Competition and Markets Authority—which are now going to have to be covered.

That leads me to my final point, which in a way is to address the point made by the noble Lord, Lord Forsyth. The choices that we have made about our relationships within the UK—whether nations were consulted and whether or not consent was provided—have been addressed by our European colleagues in different ways. The noble Lord referred to consent in the German federal structure, under which the Bundesrat provides, under the constitution, a decisive opinion when the federal Government bring forward measures that would impact the interests of the Land parliaments. This House is not a federal House; the House of Commons is not a federal Chamber. We will have to have some forms of institutions which bring this together.

In the first instance, however, I strongly support this legislation and the temporary measures being time limited. We will need a schedule of the specific areas which are, in effect, reservations, because we will have to make sure that those areas are resolved before we go over to the next stage. We will be in a kingdom of divergence and will need new institutions. It is not just about frameworks, but a new relationship across them. As many noble Lords have said, including the noble and learned Lord, Lord Hope, in his Second Reading speech, all of this will have to be underpinned by trust. It is the non-legislative relationships which in many respects will be more important than the legislative relationships in this Bill, in the next Bill, in the final agreement Bill and in all the different measures that come subsequent to it.

[The Earl of Kinnoull (CB)]

My Lords, I will speak very briefly indeed, in strong support of the government amendments, to make one observation and one point.

My observation follows on from something that the noble Lord, Lord Dunlop, said in his speech concerning the memorandum of understanding. The current memorandum of understanding, which is dated October 2013, is only a draft—it was never finally signed off. Since that date, of course, we have had the Scottish referendum and very serious Bills in this House that have given more and more powers to the devolved Administrations. I have said before in this House, as others have, that it is frankly not fit for the purpose of acting as the constitutional glue that the structure it controls should be. A well-functioning memorandum of understanding would breed a healthy atmosphere and the ability for the differing nations of the United Kingdom to talk together. Instead of the C words that we have been discussing today, “consult” and “consent”, there may even emerge—from my experience of international companies, where quite often you have the French arguing with the Germans or whatever—a third C word, “consensus”, which would be enormously helpful in this situation. My observation is that this situation is much to be regretted, and I hope the Government are going to put a lot of weight behind getting it resolved and getting a proper memorandum of understanding structure sorted out so that we are not in the position that we are in today where we have a fractious and pretty horrible discussion going on about these issues.