Trade Bill

Lord Bates Excerpts

Report: 1st sitting: House of Lords
Wednesday 6th March 2019 Lords Chamber

[Lord Bilimoria (CB)]

I emphasise how important this issue is. From my experience, the UK has arguably the finest legal services in the world. As the founding chair of the UK India Business Council, I am aware that foreign lawyers are not allowed to practise in India. That makes it very difficult for our lawyers to provide advice not just to British companies in India but to Indian companies, and that is a huge loss for India and our British legal services. The ability of our lawyers to practise abroad is crucial. The EU is another area where we have taken mutual recognition for granted. All sorts of situations could arise in a no-deal scenario—situations involving not just advice to companies but disputes. What about consumer rights, for example? British consumers will no longer be able to sue in relation to a European product here in the UK. It will have to be done in the country of origin in the EU and, if our lawyers cannot help out, that will be to the detriment of our consumers. Therefore, this is a very important point that cannot be taken for granted and should be included.

[The Minister of State, Department for International Development (Lord Bates) (Con)]

My Lords, I thank my noble friend Lady McIntosh for presenting this amendment and for giving us the opportunity to put on the record further remarks on where we are with regard to legal services. As she reminded us, legal services contribute around £25 billion to the UK economy, with a trade surplus of around £4 billion. They directly employ well over 300,000 people in the UK, two-thirds of whom are outside London. The UK is a world leader in the provision of legal services, as the noble Lord, Lord Bilimoria, also pointed out, and English law has a reputation for excellence across the world. We are determined to continue to build on this success.

We acknowledge that leaving the single market might have implications for market access and that some UK and EU service suppliers will not enjoy the same rights as they do today. That point was made by my noble friend Lady McIntosh when referring to Implications for Business and Trade of a No Deal Exit on 29 March 2019, published by the Government on 26 February—specifically paragraph 40, which sets out a case study on legal services. In a sense, that underscores that the Government see this as a key priority in the future economic framework negotiations.

That is why, in the political declaration on the future relationship between the EU and the UK, there will be comprehensive arrangements on the trade in services, covering a wide range of sectors, including legal services. The political declaration includes a commitment to conclude arrangements for services and investment that go well beyond WTO commitments and build on recent EU free trade agreements, as well as a commitment to make appropriate arrangements for professional qualifications.

The Government want to secure positive outcomes for the professional business services sector, including legal services. However, as my noble friend will be aware, our future trade relationship with the EU is subject to negotiation with the EU. A trade deal must be negotiated before its terms can be set out in law. I am aware that this is perhaps a probing amendment that seeks to get some points on the record, but clearly the Government’s view is that what my noble friend proposes is not the correct vehicle.

I am aware that in previous debates on this Bill and on some no-deal secondary legislation my noble friend has raised concerns about the impact of a no-deal outcome for lawyers. We do not want a no-deal scenario but, as a responsible Government, we have to prepare for it.

The no-deal SI relating to the practising rights of European lawyers in England and Wales and Northern Ireland, which this House debated in January, and was made on 13 February, provides transitional arrangements for EU-EFTA lawyers. The purpose of this no-deal SI is to clarify the position of EU qualified lawyers who are practising in England, Wales and Northern Ireland immediately before exit day, so that they can be secure in the knowledge of what their position will be in the event that we exit without a withdrawal agreement.

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[Lord Stevenson of Balmacara]

I rise briefly to support the amendment in the name of the noble Lord, Lord Lansley, which I have signed up to. The meeting that he referred to was extremely helpful in drawing out some of the confusion that emerged during our first debate in Committee. The issues of how countries get on to the lists, how the lists get managed and shaped, and how the changes might come forward were all explored carefully; we now have a much better understanding. In these lists, there are bound to be curious decisions which do not seem to match up to one’s perspectives. I was in Tanzania on holiday recently and it certainly did not come across as one of the least-developed countries, although clearly there are issues around how it will progress and develop its own trading arrangements.

The point behind the amendment is to get on record some further points that have emerged. The noble Lord was kind enough to suggest that we might have further questions, but his all-encompassing knowledge and brilliant, incisive questions are quite enough for me.

[Lord Bates]

I thank the noble Lords, Lord Lansley and Lord Stevenson, for moving the amendment standing in their names and giving us another opportunity to discuss this important area. We are moving to a stage where we can consider how having an independent trade policy could provide opportunities, particularly to the least developed countries in the world.

I also thank the noble Lords, Lord Lansley and Lord Stevenson, as well as the noble Lord, Lord Fox, and the noble Baroness, Lady Neville-Rolfe, for the debate we had in Committee and for then participating in what I was glad to hear reported as a helpful meeting. I join noble Lords in saying that I found it an incredibly helpful meeting, which improved my own understanding not only of the barriers and hurdles but of the opportunities that are there.

I should perhaps deal directly with my noble friend Lord Lansley’s questions, rather than outlining issues that have been previously discussed in Committee and on which the House is already aware of our position. The noble Lord asked whether it is the Government’s intention to identify a sub-category of vulnerable countries. The answer is yes: we will be replicating the GSP+ tier of economically vulnerable countries.

The noble Lord asked whether these trade preferences would undermine human and labour rights. The UK has a longstanding commitment to universal human rights, and this will be reflected in our trade preferences schemes. As part of transitioning the EU preferences scheme, we will be maintaining a similar approach to human rights commitments.

On the question of who will investigate accusations of subsidies, dumping, surges of imports et cetera, the Trade Remedies Authority will be able to investigate cases against any country, including preference-receiving countries. In doing so, it will consider allegations of dumping, subsidies and unforeseen surges in imports which cause injury to UK industry. Where the TRA determines that a trade remedy measure should be applied, it can make a recommendation to the Secretary of State, who can accept or reject that recommendation. Such measures usually take the form of an additional amount of import duty above the most favoured nation rate.

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[Lord Stevenson of Balmacara]

I have a private joke with the former Minister, the noble Baroness, Lady Neville-Rolfe, that there is a small and declining number of people in this House with an interest in intellectual property, and that we used to gather to discuss arcane issues using incomprehensible language to our hearts’ content. The noble Lord, Lord Clement-Jones, is clearly a member of that group, and there are one or two others. The noble Baroness, Lady McIntosh, who is unfortunately not in her place, has joined the group recently. I say that because the discussion of the WTO tariff rate is coming down to that rather narrow group of people who have a deep knowledge of and fascination for the issues and are interested in exploring them, but are frustrated by the fact that the Taxation (Cross-border Trade) Bill, on which we should have had the chance to discuss the points so ably made by the noble Lord, Lord Lansley, was held back from us by procedural rules and went through without much debate. We are therefore having to invent a way of getting into that discussion.

The noble Lord, Lord Lansley, has done a great service to the House by going through some of the very intricate and complicated issues around setting tariffs and rates and how you play the game against the very complicated rules of the WTO. He does it, however, from a position of knowledge and experience that, I am afraid, will be frustrated again tonight, because there is not the will in the House to go through it in detail. Indeed, I tabled an amendment a week or two ago—when I thought there would be more time to discuss these things—on the prospect of the GSP tariff rates, setting and mechanisms. He is right that there are broader issues around those that we should discuss. However, this is not the time—and we do not have the time—to go into the detail, so I will not press my Amendment 14, which comes later, because the noble Lord, Lord Lansley, has raised the same points in a broader context. I hope that the Minister will respond briefly to the points raised, so that some of the issues that need to be on the record are on the record, but perhaps we should save some of the more detailed issues for another day.

[Lord Bates]

I thank my noble friend for moving the amendment. The noble Lord is right: my noble friend has raised, effectively, three issues that need to be examined. One is the level of tariffs. In that regard I will probably disappoint my noble friend by referring back to my noble friend Lady Fairhead’s response from the Ministers’ Bench to the invitation of the noble Lord, Lord Kerr, to set out a timetable for when those tariffs might become known. She made her points and they stand on the record; I probably do not need to repeat them. I also draw to the attention of the House The Implications for Business and Trade of a No Deal Exit on 29 March 2019, which was published on 26 February. On this occasion I draw my noble friend Lord Lansley’s attention to the section on tariffs, beginning at paragraph 31 and continuing into paragraph 32, which explores some aspects of the setting of tariffs.

Those are two aspects on the level of tariffs, but I now turn to some of the specifics to which my noble friend referred. He asked about the status of the common external tariff applied by the WTO. The noble Lord is correct that we have notified our bound tariff schedule to the WTO. Our bound schedule represents the upper limits of what tariffs the UK could apply on imports. If, for example, our bound schedule says 10% for product X, we could choose to apply 9%. The Government have yet to announce their applied tariffs for a no-deal scenario, but the noble Lord, Lord Lansley, is correct to say that on leaving the EU we will be free to set out tariffs within the parameters of the bound schedule that we lodged last year.

The EU’s common external tariff—as referred to by the noble Lord, Lord Lansley—is the EU’s version of its applied tariff schedule. These are the tariffs that will apply to UK exports to the EU in a no-deal scenario. My noble friend also referenced the Taxation (Cross-border Trade) Act, which states that the first time a tariff is set, and whenever an import duty rate increases, the made affirmative procedure will apply; otherwise the negative procedure will apply.

These amendments would make the made affirmative procedure apply in different circumstances. In the case of Amendment 10, that would be any time the rate of import duty diverged from the bound commitment made by the UK to the WTO; in the case of Amendment 14 the made affirmative procedure would apply in all circumstances. However, under both amendments it is currently stipulated that the setting of the tariff would remain a matter for the other place. The Act ensures that the scrutiny procedures applied to the exercise of each power are appropriate and proportionate, taking into account the extremely detailed nature of the tariff and the frequency with which it may be changed. The tariff is long and complex; it currently contains 17,000 types of goods and is more than 1,000 pages long. The EU tariff is subject to regular, almost daily, amendment, so the current balance of the chosen procedure reflects that understanding.

Once again, I express the Government’s appreciation to my noble friend Lord Lansley for moving this amendment, giving us the opportunity to expand on our positions and put those additional remarks on the record. I hope that is helpful and reassuring to him, and that he feels able to withdraw his amendment at this stage.

[Lord Lansley]

I am grateful to my noble friend, and to the noble Lord, Lord Stevenson of Balmacara. This debate has been very helpful, and the takeaway from this—one I am grateful to my noble friend for confirming—is that the bound schedule has already been notified to the WTO. People need to be very clear about the fact that if we leave without a deal and the Government come forward and say, “These are the tariffs that we intend to apply”, they are not varying the WTO bound rate but saying that, on a most favoured nation basis, they will apply these rates. That provides a basis for negotiations on preferential schemes that could emerge over time. I read the document about the implications of no deal for tariffs, and it is correct: the Government must balance the desirability of supporting liberalised trade, with benefits for consumers through price and choice, with protection for producers in this country. That will be a delicate balance to strike. If people are aware that we can behave in this way with an applied rate that varies from the bound rate, it removes the argument that by applying a lower rate in the short run we have prejudiced our ability to conduct trade negotiations with other countries in the future—we have not done that. If we get rid of that argument, it helps to shift the balance in many cases in favour of lower rates in the short run, rather than higher rates. I am most grateful to my noble friend for his response. On that basis, I beg leave to withdraw the amendment.

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[Lord Bates]

My Lords, I am conscious of the time, but I also want to ensure that noble Lords have an opportunity to reflect on the serious issues raised by the noble Lord, Lord Lea. We may deal with them briefly this evening but we did not deal briefly with them when they came up in Committee. There was quite some debate on them on 4 February, and for those noble Lords who are interested, they can read it in glorious technicolour between columns 1360 and 1370 in the Official Report of those proceedings. Perhaps if the noble Lord, Lord Lea, will permit me to summarise what the key arguments were at that point, I will try to answer two of the points that he raised.

EFTA membership would not be acceptable because it would mean accepting the free movement of people between its four existing members. To gain access to the 29 existing free trade agreements negotiated by EFTA, the UK would have to negotiate its way into each and every one of them with the relevant third countries. There is no guarantee that that would be successful: EFTA’s trade agreements were not negotiated with the size and type of Britain’s economy in mind. Were the UK to join EFTA, it would constitute 71% of the enlarged area.

If we rejoined the European Economic Area to stay in the single market, we would not have control over our borders. It would mean having to accept all four freedoms of the single market, including free movement of people across the 30 EEA states. On laws, it would mean having to implement new EU legislation covering the majority of the sectors of our economy. In contrast, we are making an up-front sovereign choice to commit to ongoing harmonisation with EU rules on goods, covering only those necessary to provide frictionless trade in the context of our agreement.

The noble Lord, Lord Lea, said that if we crash out, we need to keep the right to rejoin EFTA. If we leave the European Union without a deal, we fall out of the EEA and EFTA. We would be able to apply to rejoin, but this is contrary to government policy for the reasons that I have explained. He asked what the impact on the EEA Agreement would be if we extended Article 50. If we were to extend Article 50, the UK would, of course, stay within the EEA under the EU pillar until we left the EU. With regard to citizens’ rights agreements made with the EEA and EFTA states, these would enter into force only when we leave the EU or at the end of an implementation period.

I hope that, with that brief summary, the noble Lord—whose contributions I always enjoy and listen to attentively—will not feel that I have not responded to him, but in the context of the wider consideration of this issue in the debate, the Government’s position remains as it was in Committee. I therefore ask him to consider withdrawing his amendment at this stage.

[Lord Lea of Crondall]

My Lords, I thank the Minister for that reply. In fact, he did not answer all the questions on 4 February. I could draw attention to some of them, but I will not. This could have been an opportunity today. Free movement of persons is, of course, an issue of which we have experience within the European Union. We would be cutting off our nose to spite our face on areas of the economy, such as the whole entertainment, theatre and ballet industry, as the noble Baroness, Lady Bull, referred to on one occasion. There are many, many others, so these sweeping statements about control of our borders are really over the top and not a sensible way to address this issue.

I am not going to say more at this stage. Suffice it to say that the initiative is now with the House of Commons. I have some confidence that in the next few days and weeks this will become, as my noble friend Lord Monks said, a strong policy in the Commons. I rest on the fact that it is still the policy of the House of Lords, as has been said by my noble friends. On that basis on this occasion, I will not seek to test the opinion of the House.

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[Baroness Falkner of Margravine]

The noble Baroness has just told your Lordships that the House was trying to protect manufacturing through being in “the” customs union. So we have on one side “the” customs union, which is the EU customs union, and on the other side we have a bespoke customs union. That in itself illustrates the problem with those who want to reverse where we are today.

I urge the House to look at the common commercial policy carefully, not only in the light of Articles 206 and 207 of the TFU, and to look at the jurisprudence. The jurisprudence on the part of the CJEU expounds the EU’s common commercial policy into foreign direct investment rules way beyond common commercial policy and into the EU’s external action policy. Some of us may have no problem with that, but the jurisprudence will continue while we are outside the room and not at the table. The jurisprudence will reflect the EU’s priorities, not ours. It would leave us in a vulnerable position going forward whether we were in “a” customs union or the bespoke customs union, which would potentially give us bargaining rights and some say in jurisprudence. Certainly that customs union would give us no rights at all.

I am not used to evoking Mr Blair in support of any cause—I suppose it will have the same impact here as it does elsewhere in the country—but even he has gone public to say that the worst of all worlds would be for us to stay in the customs union. If noble Lords want to support trade in goods they need to move either towards the withdrawal agreement and the FTA that is likely to come with it, or to move to simply remain in the EU. This amendment is an ambush to try to achieve that latter aim. I am pro that latter aim—I am pro remaining in the EU—but I can see, with 20-something days to go, that either we have to agree with the withdrawal agreement, as I voted the last time, or we have to go the other way, as I said in my previous speech, and ask the Prime Minister reconsider our position. A customs union is not going to do that and, on that basis, I will be voting with the Government.

[Lord Bates]

My Lords, at this hour, and given the debate, there will probably not be many Members of your Lordships’ House who are carefully weighing the arguments on either side, wanting to know what the Minister is going to say from the Dispatch Box that could just persuade them another way. We have been around this course many times and the arguments have not changed. The House knows the Government’s position on this: they have set it out many times. The people of the United Kingdom voted to leave the European Union and to take back control of their laws, borders and money, and have an independent trade policy. If we had a customs union, we would not get that. That is the central point against the amendment. On the other hand, we have a withdrawal agreement that allows us to have many of the benefits of our membership of the European Union without being members of it, and honours the referendum result.

I shall come to two points. The noble Lord, Lord Stevenson, when moving the amendment—which is worthy of further examination as to what it is seeking the Government to do—said that he wanted to give the other House an opportunity to think again on this issue. The noble Lord, Lord Kerr, in a brilliant, brief contribution—perhaps because we had heard his eloquence on this point in Committee—reminded the House that it voted in favour of his amendment. What they did not mention was that when it went to the other House, giving it an opportunity to think again, it rejected not only your Lordships’ amendment but the concept of a customs union put forward by Stephen Hammond when the Bill was at this stage in the other place. If the purpose is to give that House another opportunity to think again, perhaps it could shout down the Corridor, “We have already said it; did you not hear us the first time?”

Some noble Lords have pointed out that the uncertainty is damaging for business. I accept that. Uncertainty is always damaging for business. What business needs is certainty. However, right at the 11th hour, when we are within sight of and have an agreement, with an exit day that meets the criteria, the amendment proposes to require Her Majesty’s Government to reopen the whole negotiation process that has taken place over the past two years. Somehow that is supposed to help business. Not many businesses would sign up to that level of reopening negotiations and uncertainty. The presentation of the amendment presupposes that the outcome and benefits of a customs union are known. No—they would have to be negotiated. That would be the case unless, as the noble Baroness, Lady Falkner, rightly said, it actually related not to “a” but “the” customs union. In that case, the noble Lords’ option would be there immediately. That is the position of those who want to stay in the European Union, and we understand it.

The amendment therefore plunges us further back into uncertainty and more years of negotiation. The House has already given its view, not once but twice, on this issue. The other place does not need the chance to think again and I therefore urge noble Lords to vote against the amendment if it is pushed to a Division. Most importantly, I urge all Members in the other place not to listen to the amendment but to look at the withdrawal agreement before them next week and make sure that they vote for it, so that we leave the European Union on 29 March, as the British people wanted, but with a deal.

[Lord Stevenson of Balmacara]

Follow that wonderful peroration! The Minister has been practising, I am sure. I congratulate him on his brilliance in getting out of the Tugendhat trap. He obviously thought that he would be judged on whether he met the very high standards required of an answer in this place before going down to an ignominious defeat—as I hope will be the case. He did it by setting his own bar and then deciding whether he had passed it by inventing, as often happens in these debates, the things that I did not say and then arguing against them effectively. He ended up by appealing to the green Benches down the Corridor, where I think he will probably find a slightly better response than he will get today.

I am sorry that the Minister has to defend the indefensible. As he said, all the arguments have been exhausted. In response to two of the charges, yes, the other place has considered this matter before, but somebody once said, “When the facts change, I change my opinion. What do you do, sir?” On the question of uncertainty, surely it is better to have a certain target, even if it takes time, than the continuing uncertainty of whether there will be a target, and that is what this amendment tries to do.

Customs unions are not very widely found in the world. They are a very special thing, particularly when they involve equality of partners trading with each other. The majority of customs unions in the world involve single dominant economies forcing terms on others. This customs union is a particularly good example of the way in which mature democracies coming together can create good for all and we should be very chary of moving out of it.

The Minister challenged the wording of the amendment but it is incredibly inclusive and was drafted to make sure that it stood the test of time. It simply states:

“It shall be the objective of Her Majesty’s Government to take all necessary steps to implement an international trade agreement which enables the United Kingdom to participate after exit day in a customs union”.


It does not imply staying in the EU. I think that we have had the debate. I wish to test the opinion of the House.

Trade Bill

Lord Bates Excerpts

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

That is what Amendment 46 is designed to secure, in line with both the UK’s responsibility as a guarantor of the Good Friday agreement, and as a nation—so far, at least—respected for upholding its international and bilateral obligations. I hope the Government will accept Amendment 46; otherwise, we will need to vote on it on Report, especially after the dangerous torpedo the House of Commons launched last night at the Irish border backstop, the Irish Government and the Good Friday agreement.

[The Minister of State, Department for International Development (Lord Bates) (Con)]

My Lords, I need to manage noble Lords’ expectations as to what I am going to be able to say. The noble Lord, Lord Hain, has given a polemic based on his deeply held views on the situation in Northern Ireland, born of great experience and service. I do not think I will be able to persuade him on this issue and Amendment 46, so he will doubtless come back to it on Report. I will, however, put some important points on the record regarding where, as of today, Her Majesty’s Government stand on these crucial issues.

The noble Lord, Lord Grantchester, talked about the internal energy market. Again, I have to be careful: I am not able to give him an answer at this stage, beyond that set out in the political declaration. I know he has read that carefully, along with the explanatory note; section XI deals with energy co-operation.

Let me first put some comments on the record about the nature of the internal energy market, and then I will turn to the single energy market and north-south co-operation, addressed by the noble Lord, Lord Purvis. The Government continue to support the development of energy interconnectors—which bring benefits to countries at both ends of the cables, including improved security of supply and the lowering of prices for businesses and consumers—and support efforts to decarbonise. That is why we set out in the political declaration that both the UK and the EU should co-operate to support the delivery of cost-efficient, clean and secure supplies of energy and gas, and to ensure as far as possible that efficient trading over our interconnectors continues. Our aim is to secure the best possible future arrangements for trade in energy, and which achieve the objectives set out in the declaration, to which I referred.

On the effect of the shared wholesale market, the all-Ireland single electricity market provides significant benefits to consumers and the economy in both Northern Ireland and Ireland, as the noble Lords, Lord Purvis and Lord Hain, alluded to. It is also an example of north-south co-operation on the island of Ireland. The Government are firmly committed to facilitating the continuation of a single electricity market in any EU exit scenario. The agreement reached on the single electricity market annexe, as part of the Northern Ireland and Ireland Protocol to the withdrawal agreement, should ensure that the SEM is maintained. We also expect to reach an agreement with the EU on a future economic partnership that will maintain the SEM without engaging the backstop. As set out in a technical note on electricity trading, published in October 2018, which the noble Lord, Lord Purvis, referred to, we will take all possible measures to maintain the SEM in the event that we are unable to reach an agreement. Even in this scenario, which I stress—

[Lord Purvis of Tweed]

Perhaps I might add some clarification. The Minister has just said that not all of the Northern Ireland protocol is now up for renegotiation—as the Commons have voted for—only part of it. He said that the energy component of it is going to carry on. So which parts of the backstop are being renegotiated and which parts are not?

[Lord Bates]

I have been on the Front Bench long enough to see a curveball lumbering down the crease. If the noble Lord will forgive me for not taking a swing at it, at such a delicate time, I do that in all seriousness because I want to get the wording precisely right in relation to this. The noble Lord has heard the remarks that I made in relation to the annexe to the Northern Ireland protocol, and that is the position. If we have more to say, I will certainly say that ahead of Report, but even in the worst scenario—

[Lord Purvis of Tweed]

I did not intend to bowl a curveball or even a googly—or anything. It was a genuine point. The Government’s position now is that they are seeking to renegotiate the whole protocol, commonly known as the backstop. If that is not the case, Parliament needs to know, because we understand that the Government are now seeking a renegotiation of part of the agreement. We know that the European Commission has said that this is not up for renegotiation. If the Government are telling the Committee that only part of it is being renegotiated, that is really significant, because at the moment we understand that the whole element is being renegotiated.

[Lord Bates]

I am happy to put some additional comments on the record for the noble Lord, in that spirit. Last night, the majority of MPs said that they would support a deal with changes to the backstop, combined with measures to address concerns over Parliament’s role in the negotiation of the future partnership relationship, and commitments on workers’ rights. We will now take this mandate forward and seek to obtain legally binding changes to the withdrawal agreement that deal with concerns on the backstop while guaranteeing no return to a hard border between Northern Ireland and Ireland. We are keen to work with the Government of Ireland to ensure that the SEM will continue in any scenario, and welcomed their statement in December that they were engaging intensively with the EU to ensure that the single electricity market would continue. I hope that this provides some reassurance.

On the point made by the noble Lord, Lord Hain, we have been consistent in our commitment to avoiding a hard border between Northern Ireland and Ireland, upholding the Good Friday agreement and maintaining the conditions for north-south co-operation. We are delivering on those commitments. We negotiated a withdrawal agreement that delivered on those commitments in good faith; we have worked hard to build support for it in Parliament over many months. It was clear to the Prime Minister, having met parliamentarians from all parties, that a change to the backstop would be necessary to get the agreement through. The Prime Minister was clear that there are a number of ways to do that and that she will work with colleagues from all parties, and with the EU, to secure changes that command the support of Parliament. Although the Government will seek to secure legal changes to the backstop, their commitment to avoiding a hard border and maintaining the necessary conditions for north-south co-operation remains undiminished.

In a paper published earlier this month, the Government set out their commitments to Northern Ireland, including: a legal guarantee that the backstop could not be used to alter the scope of north/south co-operation; a role for a restored Northern Ireland Executive in UK-EU discussions, through the Joint Ministerial Committee, on matters concerning Northern Ireland; a commitment to seek the agreement of a restored Northern Ireland Assembly before new areas of EU law could be added to the protocol; and a legal guarantee that Northern Ireland businesses will continue to enjoy unfettered access to the entire UK market.

Let me be clear: the Government are committed to ensuring that any arrangements to avoid a hard border on the island of Ireland respect the devolution settlement in Northern Ireland. The UK recognises our unique relationship with Ireland. The UK-Ireland relationship should continue to operate through the well-established three-stranded approach set out in the Good Friday agreement. At this stage, I am unable to add to the remarks I have already put on the record, but I thank noble Lords for the opportunity to make them. I know that we will come back to this issue on Report, but in the meantime I hope that the noble Lord will feel able to withdraw his amendment.

[Lord Grantchester]

I am grateful to all noble Lords who have contributed to the debate. As the Minister said, this issue relates not only to the energy market but to crucial aspects of the UK border on the island of Ireland, as spoken to by my noble friend Lord Hain, whom I thank for his remarks.

Returning to the amendments on energy, I am sure that co-operation between industries from member states will continue on a practical basis, but against the challenges of modernisation with low-carbon energy, a clear commitment from the Government could settle the issue. Interconnectors are not the only relevant things here, as the internal energy market provides challenges to the Government on other aspects, such as continued participation in the EU emissions trading system. I note that the Minister was most careful with his words, which the Committee will study with interest. I beg leave to withdraw the amendment.

Trade Bill

Lord Bates Excerpts

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

[Lord Purvis of Tweed (LD)]

My Lords, I seek some clarifications when the Minister responds, broadly in response to the constructive contribution from the noble Lord, Lord Lansley. With the withdrawal Bill, there was much debate in Committee and this House regarding how existing EU law will be migrated into UK law. There were 12 competences the UK Government believed were reserved and would therefore be fully within the competence of the UK Government, but that the devolved Administrations believed were either devolved or had a direct impact on devolved powers.

State aid was one of those areas where there was no agreement. That means that if there continues to be no agreement, then the amendment in the name of the noble Lord, Lord Stevenson, is absolutely critical. It means that for regulations brought for the continuity agreements, there needs to be far more enhanced consultation with Administrations that believe this is touching on their direct competences. If there has been agreement, then perhaps the amendment is less necessary for the continuity agreements; but as we come to further amendments, this sets the tone for what will be necessary for future agreements. When the Minister responds to this group, I hope he will be able to provide clarification on where the discussions are, regarding whether there is agreement on where state aid lies within this area of competences.

[The Minister of State, Department for International Development (Lord Bates) (Con)]

My Lords, I join others in thanking the noble Lord, Lord Stevenson, for moving this amendment. In response to my noble friends Lord Trenchard and Lord Lansley, I think that the noble Lord intended this as a probing amendment, as he said, to give the Government the opportunity to put some issues on the record. It has been very timely, not least because under the EU withdrawal Act, mentioned by the noble Lord, Lord Purvis, on Monday we laid the regulations on state aid before the House. That 77-page document will now make its way through the rigorous scrutiny of the Joint Committee on Statutory Instruments and then the Secondary Legislation Scrutiny Committee. Then, of course, it will be subject—because it is by the affirmative procedure—to scrutiny later in this House. For that reason some of the specific issues referred to by my noble friend Lord Lansley and the noble Lords, Lord Purvis and Lord Lea, might be usefully dealt with in that area.

Clause 2 is not about making changes to existing agreements, and the regulations cannot be used for future free trade agreements, as my noble friend Lord Lansley rightly identified. In answer to the noble Lord, Lord Stevenson, we also need to recall that the Competition and Markets Authority has been given this responsibility domestically, across the UK jurisdiction. When it comes to free trade agreements and the EU, the Trade Remedies Authority would undertake that responsibility.

To provide further reassurance that we do not expect to need to use these powers to set up a domestic state aid regime, I can inform the Committee that we have laid the instrument I referred to. This instrument, the State Aid (EU Exit) Regulations 2019, will be made under the European Union (Withdrawal) Act 2018 and establish a domestic state aid regime that will work for the whole of the UK at the point that this is required. No doubt Noble Lords will be offered an opportunity to scrutinise this in detail.

Subsection (2) of the proposed new clause requires the Government to consult relevant stakeholders prior to laying implementing regulations under Clause 2 which make provision on state aid. We have been clear that proportional consultation is of the utmost importance to us. We have engaged with a large number of stakeholders through our programme of trade continuity. The Government will always consult stakeholders as appropriate, so to set out specific provisions concerning consultation on state aid is not needed at this stage. The Bill already requires the Government to lay reports before Parliament in which we will provide detail of any real-world changes to free trade agreements. These will be laid before the agreement is ratified or regulations are laid under the Clause 2 power in relation to that agreement, whichever comes first.

Any significant differences in agreements that are relevant to state aid would be identified in these reports and Parliament would then be in a position to take an informed decision in relation to the making of the regulations or the conduct of the ratification process. I say again that we do not expect to need to make regulations under this power in order to implement state aid commitments in existing free trade agreements.

I turn to some of the specific points that were raised. My noble friend Lady McIntosh raised the horserace betting levy and the tripartite agreement. This is something we will come to in Amendment 48 in a later group, so perhaps I can leave it to the lead Minister, my noble friend Lady Fairhead, to respond, but the relevant provisions of the horserace betting levy were notified to the Commission and approved by the Commission under state aid rules. I confirm that the TRA—the Trade Remedies Authority—will not be responsible for state aid prioritisations in FTAs. It will be a matter for individual free trade agreements to establish a dispute mechanism.

[Lord Stevenson of Balmacara]

I was going to ask the Minister about the TRA—I am glad that he tried to clarify what he had said, because he did raise a doubt about what was arranged. Have I got it right? I would be grateful if he could confirm that we are proceeding on a continuity basis and using the withdrawal Act to ensure that, under the statutory instrument he mentioned, the existing set of rules that currently apply, because of EU directives and regulation, will be applied under UK law after exit day. Therefore, that process does not require any further discussion or debate, because of the reasons he has given, and he is not saying that in future trade agreements there will be a specific role for state aid rulings by the TRA—that will remain with the CMA—but there will be an opportunity to discuss that broadly when we get to the point at which we are, post continuity, talking about the real world and what is actually going to happen in trade. Is that right?

[Lord Bates]

That is correct. I am grateful to the noble Lord for setting that out. My noble friend Lord Trenchard mentioned the Government’s commitment to the state aid system. That point is contained in Command Paper 9593, The Future Relationship between the United Kingdom and the European Union, which says in section 1.6.1:

“The UK has long been a proponent of a rigorous state aid system—this is good for taxpayers and consumers, and ensures an efficient allocation of resources”.


Moreover, the political declaration which accompanies the withdrawal agreement points out in section XIV, paragraph 79:

“The future relationship must ensure open and fair competition. Provisions to ensure this should cover state aid, competition, social and employment standards”.


That will all be fleshed out as the future economic agreement is worked on. Again, I thank the noble Lord for the opportunity to clarify some points on the record.

[Lord Purvis of Tweed]

Will the Minister clarify that since the Sewel convention continues to apply, the UK would not legislate ordinarily on devolved matters if the Government have brought forward this regulation? Last year, during the withdrawal Bill process, the devolved Administrations believed that this touched on their competences with state aid. Has there been agreement with the devolved Administrations that this is a fully reserved issue?

[Lord Bates]

Perhaps I could write to the noble Lord on that to make sure that I get that absolutely correct. I will write to him. Does the noble Lord want to come back on that?

[Lord Purvis of Tweed]

I wonder if the Minister is able to write before we get to the next grouping because this is going to be relevant. Whenever the Minister can provide clarification, it will be welcome to the Committee.

[Lord Bates]

I have a sneaking feeling that some clarification may be coming via my noble friend Lord Younger by the time we reach the next grouping. I am sure the noble Lord will have an opportunity to respond to that. Failing that, I will be very happy to write before Report. I thank the noble Lord and ask him to consider withdrawing his amendment at this stage.

--- Later in debate ---

[Lord Liddle (Lab)]

My Lords, I will briefly express my support for the amendment. It is very important in the present political situation that we in the House of Lords demonstrate that, on a cross-party basis, there is some way forward out of the impasse we are in. For that reason alone, I support it.

The amendment obviously is not a complete solution to the Irish border problem. We would also have to have some arrangement of regulatory alignment. That, of course, is why the withdrawal agreement contains about 60 pages’ worth of EU rules that will apply in Northern Ireland but not in Great Britain, and why there would have to be some regulatory checks between Great Britain and Northern Ireland to make sure that rules on technical standards, health and safety, sanitation and that kind of thing would be adhered to. For there to be no border on the island of Ireland, that issue would have to be addressed, as well as the customs union. But the customs union is a large part, once you have made that step—and I do not think it is too far a step—of going on to deal with the regulatory questions.

On Labour’s position, it depends who you listen to. I am a great supporter of Keir Starmer, who talks about it in a very practical and common-sense way. But the truth is that sometimes people talk about a customs union as though it would be a relationship of equality between the United Kingdom and the EU 27 —which would, in effect, be trying to give the United Kingdom a veto over the Union’s autonomous trade policy. That will not work. It is not a runner. We could, as a big economy, negotiate very strong consultative arrangements, but I do not think that we would be granted a veto under any circumstances. Since we are in a position where we have to clarify these things in the next week—that is why have spoken frankly about this—it is important to acknowledge that that aspect is a non-starter.

So let us agree this amendment, refine it if we can on Report, and show that there is a spirit of co-operation in this House, which unfortunately there is not elsewhere.

[Lord Bates]

My Lords, this has been a fascinating debate. The noble Lord, Lord Stevenson, was very brief and succinct in introducing it. I will try to be pretty much the same in winding up. With the right reverend Prelate’s presence here and his questioning of a customs union, this is one of those debates where, after the past two years, I am not expecting to create many converts. Positions have been stated with great eloquence by my noble friends Lord Patten and Lord Lansley, and the noble Lords, Lord Kerr and Lord Hannay, but they are not ones that have differed, because of the veracity of the arguments and beliefs that they hold.

The noble Lord, Lord Liddle, came up with a great line which I scribbled down. I hope I have got it correct, because of course I do not have Hansard. He said that “on Labour’s position”—which of course my noble friend Lord Ridley asked about—“I suppose it depends who you are talking to”. I think I am right; I do not want to quote him incorrectly. It was an interesting point, because it would be fair to say that the Opposition’s position has differed between a customs union, a permanent customs union and a comprehensive customs union. It has oscillated between the crucial words “a” and “the”.

The noble Lord, Lord Purvis, applied a great deal of forensic scrutiny to this. His conclusion, and that of his party, is that they would be in favour of staying in the customs union, which makes it interesting that he has put his name to this amendment, which talks about “a” customs union. I cannot believe that there is now confusion even in the Liberal Democrats about what might be meant by this.

--- Later in debate ---

[Lord Purvis of Tweed]

The Government’s position, already stated, is that they intend the future customs arrangement to be based on those aspects of the Northern Ireland protocol which require agricultural and goods regulatory alignment with the European Union.

[Lord Bates]

We have been very clear about this; we want a deep and special facilitated trading arrangement with the European Union which allows all the benefits of free trade while allowing us to take advantage of the new opportunities which are emerging. According to the EU’s figures, 90% of growth over the next 10 to 15 years will be outside the EU—in India, China and the United States. That is what we need to tap into. That is what we need to be focusing on. We need to have the freedom to negotiate those independent trade agreements. If you go for a customs union, you are going to surrender that opportunity, and we are not prepared to do that. You would also surrender the right to shape the rules that you are going to have to implement.

[Lord Kerr of Kinlochard]

A brilliant description of the disadvantages of being stuck in a backstop.

[Lord Bates]

That is the reason why we want to avoid the backstop.

[Lord Liddle]

Surely the best alternative way of benefiting from the growth outside the mature economies of western Europe—remember, this is catch-up growth; it is not a criticism of the European Union—is to be participants in the EU and its extensive trade deals with the emerging economies of the world. Why would we have a stronger negotiating position as 60 or 70 million than as an economy of 350 million or 400 million?

[Lord Bates]

Because 17.4 million people decided that they wanted to leave, and that is what the Government are committed to doing. I want to be careful not to be flippant about the subject we are dealing with; it is very serious, and the positions have been well argued. Nor do I want to be disrespectful to people for whom I have huge admiration, such as my noble friends Lord Patten and Lord Lansley, and the noble Lords, Lord Hannay and Lord Kerr, whose expertise I respect. But the position of Her Majesty’s Government is very clear. We have a deal. We should take advantage of that deal. A customs union would have all the disadvantages with few of the benefits. That is the reason we do not accept the amendment.

[Lord Purvis of Tweed]

Before the Minister sits down, I wonder whether he could advance this clarity. The noble Baroness, Lady Neville-Rolfe, states that we have now agreed with Israel to roll over our existing trading relationship with Israel. Israel does not have a free trade agreement with the European Union, or with us now. It has an association agreement, which has been in force since 2000. That is part of the pan-Euro-Mediterranean cumulation on rules of origin. This means that if we are replicating our existing relationship with Israel, we are replicating the rules of origin relationship that Israel has with the European Union. It also has common rules of origin procedures with Turkey, so if the Government’s position is that we are simply rolling over all of our current trading relationships through an association agreement with Israel, it means that we are now going to be bound by common rules of origin procedures with the western Balkans, the Faroe Islands and Turkey in the pan-Euro arrangement.

I am not sure why the Faroe Islands is part of that, but the reality is—and this is the point I was trying to make in my contribution—that we have to be open. If you want complete independence of trading relationships in the way the world trades now, that is impossible, so the Government have to have some limitations on it. If it is replicating the Israeli agreement, it is replicating exactly the same rules of origin alignment that we currently have with Turkey, and Turkey is part of a customs union with the European Union. That is quite simple, too.

[Lord Bates]

The Committee will come to rules of origin shortly, but on that point, that is the reason why, in the agreement that we are proposing—the deal that is on the table—we propose that to ensure that trading goods between the UK and the EU remains frictionless in the UK, there will be no routing requirements for rules of origin on trading goods between the UK and the EU. What we are talking about with Israel is consistent with that.

[Lord Stevenson of Balmacara]

My Lords, it is impossible to summarise what has been a very wide-ranging discussion. It certainly ended up in a rather more heated and fetid atmosphere than I expected when we set off. I have to say to the Minister, for whom I have the greatest respect, that it is fine to listen to what he is saying about what we ought to be doing and how we should do it, but he should point behind him when he is talking, because we do not get the arguments in the same way.

We started off with a description of hell, and what it might be to be listening to the same debates and discussions. I think we have justified the argument that we have moved on. The interesting thing that I took from this debate was how positions are being nuanced and changed as we move forward. There is an attempt from all sides to try to find common ground, and I wish that had reached all of our speakers. We are in a place that might be redolent of hell, with the colours that surround us and the flames leaping around, but I actually quite enjoyed being here. I am bound to go to hell anyway because of my previous life, so if this is what it is like, I quite like the prospect. But not yet—not yet. I call on the aid of the right reverent Prelate at this moment.

So what have we got out of this? We have got a sense around the Committee that there is something here that needs to be pushed to the next stage, and the Government should take away from this that this is a matter that will not go away, irrespective of what happens next week. By the time we get to Report, I am sure this will still be bumping around. I hope that by that stage we will have picked up on some of the points made by the noble Lord, Lord Lansley. We are getting hung up on what we mean by “customs union”, when we should be thinking behind the name—thinking about the process. It may be that we are likely to be close to, if not necessarily aligned with, EU current practice—and we ought to be, because, as my noble friend Lord Liddle said, size matters in these negotiations. Size matters, and always will, in any trading arrangement.

We are not really talking about tariffs. Tariffs are probably the 20th-century problem. The 21st-century problem is the regulatory barriers, and working on services to try to ensure that there is proper and fair trading, and that the issues at the heart of negotiations are rights and responsibilities, and the opportunities for providing benefits all round—a sort of development agenda meets trade, and coming together for the benefit of both.

The short, sharp intervention by the noble Viscount, Lord Ridley, was the most difficult to answer. I hope that, if he has the time, he will come back for the next group, when we will talk about some of these issues in more detail, and I will be able to give him a response. However, the truth is that I am quite happy with where the EU has got to with some of these trade deals. They are very good, and they would not be achieved by any smaller country on its own. We must not lose them, whatever arrangement we finally come to.

Trade Bill

Lord Bates Excerpts

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

[The Minister of State, Department for International Development (Lord Bates) (Con)]

My Lords, it is welcome to move from the group of amendments that caused maximum divergence to the group of amendments after dinner where there is maximum convergence. I think we all side with the way that the noble Lord, Lord Stevenson, led this debate by pointing to the immense benefits in achieving sustainable development goal 1, the eradication of extreme poverty by 2030. We are not going to do that by aid—aid is around £1.5 billion a year. It requires significant trade flows and therefore this is crucial.

I will make some very brief general remarks. Around £20 billion of goods a year are shipped to the UK from developing countries, accounting for around one-third of our clothing, one quarter of our coffee and other everyday goods such as cocoa, bananas and roses. This trade also creates jobs, helping people to work their way out of poverty. Consequently, I am pleased to confirm to the Committee that this has already been legislated for in the Taxation (Cross-border Trade) Act. My noble friend Lord Lansley might still have been on vacation when on 4 September I took that Bill through this House. Although the debate on it was brief, it was very good. I shall come back to that point later.

The trade White Paper confirmed the Government’s intention to provide, as a minimum, the same level of import duty reductions to all current beneficiaries of the EU’s GSP scheme as we leave the EU. I am also pleased to assure the Committee that Section 10 of the Taxation (Cross-border Trade) Act enshrines in UK law the obligation to provide duty-free and quota-free trade access for least developed countries. The Government will lay secondary legislation to set out these details of the scheme before we leave the EU if needed by March 2019, or at the end of the implementation period. In the future, we will look to improve the UK’s trade preference scheme by making it even more generous, simpler to attain and capable of working better for the poorest people around the world. Alongside this, our aid spending will continue to provide support and expert advice to help break down barriers to trade and to promote investment so that developing countries can take better advantage of these arrangements.

As the noble Lord, Lord Stevenson, mentioned, I also have the privilege of being the Minister with responsibility for economic development in the Department for International Development. It may be of interest to my noble friends Lord Lansley and Lady Neville-Rolfe and the noble Lord, Lord Fox, that in that context I am undertaking a review of how we might approach the opportunities to look at more beneficial trade and tariff-reduction packages and economic partnership agreements in future as we leave the EU. I would be delighted to take this conversation into the Department for International Development, for those who are interested, to meet officials so that we can delve more into some of the great expertise and ideas that we have heard today.

[Lord Purvis of Tweed (LD)]

The Minister’s commitment is very welcome. We know that we can take him at his word on that because he is very open and a very responsive Minister who is respected across the House. I will follow up a point made by the noble Lord, Lord Lansley. With regard to the 49 countries under the EU Everything But Arms policy and, according to the OBR, the 27 other low-income countries that the EU has defined, if on exit we are going to replicate the EU system we would also have to replicate the rules of origin system that comes with GSP+. GSP+ has distinct EU rules of origin requirements for those countries that are part of it. Is the Government’s intention to replicate the rules of origin criteria that the EU currently operates for them?

[Lord Bates]

I am grateful for the noble Lord’s question. His precise point is that we are aiming to replicate what currently exists, so we would take across the current applicable rules of origin into what we would be laying in secondary legislation before we leave the European Union. Once we have left—without a deal or, we hope, after an implementation period—we could devise our own scheme during that implementation period and be aware of the EU’s thinking. I know from serving on the Foreign Affairs Council that it has done some tremendous development work, particular with the post-Cotonou negotiations, as to how we fit. The current plan is that what is presently the case will initially also be the case for these countries.

[Baroness Neville-Rolfe]

Before my noble friend sits down, could he give me some reassurance about the wealthier countries on the list? Have they actually come off the list or is it our plan to make sure that the benefit of tariff-free trade is given to those who are worse off?

[Lord Bates]

Yes, and my noble friend Lord Lansley touched on this point. He talked about the treatment of different countries. We work from a World Bank list and an OECD DAC list of the least developed countries. As countries graduate—which is a normal procedure—they need to move to other agreements as well.

[Lord Stevenson of Balmacara]

My Lords, I am grateful to the Minister for his full response. We would welcome the opportunity to meet up with him.

We are converging on this point, though the noble Baroness, Lady Neville-Rolfe, is coming from a slightly different direction. She is hoping to see some quite quick change towards—I cannot think of the right word—a family relationship, involving Commonwealth and other markers which are not a feature of the other lists we have been talking about. It might make sense to try to work out where this is going.

We are among friends, so I can confess that I tried to do exactly what the noble Lord, Lord Lansley, did, which was to go back to the Taxation (Cross-border Trade) Act 2018 and try to work out where we were. I gave up, but he did not. I could not make out the list markers. The confusion comes because we are working from two different directions, as the Minister said. One is from a World Bank list of economic measures and the other is from a trading and development list which gives a different feel. Clearly, you get a different group of countries if you look at different indicators—not just poverty but the potential to export, the development status of their industrial arrangements and their other markets. We would have to think hard about all these. This does not vitiate the main point that it may not be necessary to put an amendment into this Bill, but it would be quite useful to have something where we, on all sides of the House, roughly understand the basis on which the Government are progressing. The Minister did say rather remarkably—but I hope it is true—that, whatever the timing, even if it were 29 March, they would be ready to make sure and clarify full details of what would be available to all the countries in scope on the GSP and on the Taxation (Cross-border Trade) Act approach. If that is true, he is obviously ready for the meeting and we are too. I beg leave to withdraw the amendment.