Trade Bill

Lord Grantchester Excerpts

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

Moved by

[Lord Grantchester]

34: After Clause 5, insert the following new Clause—
“Division of agricultural tariff rate quotas
It shall be the objective of an appropriate authority to take all the necessary steps to ensure that after exit day the division of agricultural tariff rate quotas with the European Union remains at the same level as prior to exit day.”

[Lord Grantchester (Lab)]

My Lords, I declare my interests as stated in the register. Tariff-rate quotas have been set for mostly agricultural products, to allow some countries preferential access to the EU single market below the tariff rate set for those products. The UK does not have its own national tariffs but merely shares in the amounts set for all member states across the EU. This is most important to the agricultural sector and industry, as it sets out the quantity that comes into the EU at preferred competitive rates, bearing in mind that products still have to be compliant with the relevant EU standards.

On exit, these TRQs at EU level will need to be split between the remaining states and the UK. The proposal agreed between the EU and UK is that the product quota should be split according to the relevant usage or consumption of the product in the UK and EU. The difficulty arises on the specific quantities, as there is a lack of data to inform the division. Although there is detailed information on the point of arrival of products into the EU, there is not the same detail regarding where the product may be consumed. The EU and UK, in bilateral discussions, have agreed to adjust the schedules without triggering renegotiations under Article XXVIII of GATT. This was submitted in October 2017. However, it was almost immediately challenged by the large exporting countries, such as the US, Brazil, Australia and New Zealand.

I cannot overstress how critical this issue is to British agriculture and the nation’s consumers. It is revealing that so many glib answers are often proposed in the current impasse over Brexit. From a lack of information and knowledge, poor judgments are made, leading to a lack of appreciation of the consequences. I am sure I do not need to explain to the Minister the delicate balances in the market, where price volatility results from small changes in supply, quite irrespective of the huge discrepancies in tariffs under preferential treatment and other third countries that have allowed managed change to take place.

To give one example, Britain’s sheep exports, with large implications for the Welsh economy, comprise more than one-third of production, with almost all of it destined for Europe. This trade is virtually one-way, with minimal imports from the EU. Without agreement, and a smooth transition, tariffs to the EU would render this trade immediately uneconomic. The seriousness of the issue was underlined by a joint letter from the British Retail Consortium, signed by the chief executives of all the major supermarkets—Sainsbury’s, Asda, M&S and Waitrose, among others—only two days ago. The BRC stated that it wanted to maintain the same tariff-rate quotas. The wording of the amendment signifies that it is a probing amendment to ask the Government to provide some certainty in their answers to the challenges, and their approach to the future.

Amendment 54, in the name of the noble Lord, Lord Purvis, calls for a report to Parliament, and I look forward to the noble Lord’s remarks. The concern is that access to the home market—and, hence, the vibrancy and well-being of agriculture and the rural economy—will be sacrificed as a pawn in negotiations in rolling over trade deals to be ratified by third countries in the future, especially in relation to the interests of other industries. The Committee has already debated the fear that standards would also be under jeopardy. It is imperative that the UK Government continue to maintain the present TRQs. I beg to move.

[Lord Purvis of Tweed]

My Lords, Amendment 54 is in my name. As the noble Lord, Lord Grantchester, pointed out, the division of the tariff-rate quotas is of great importance to parts of the UK economy, especially the rural economy, but it is also important to our trading partners. Some likely trading partners when it comes to agriculture have already stated their concern about the agreement the UK and EU have reached.

I admit that this amendment was prepared with the expectation that there would be more than a month between the Act coming into force and exit day. That was a naive hope. I thought that the Government might have been able to have this legislation on the statute book long before, but with the delays that have occurred I admit that one month would be tight between the Act receiving Royal Assent and potential exit day. Nevertheless, the core element of the amendment, which seeks to get clarity on the UK’s position, is important. Clarity is sought in two areas: first, what our current position is regarding discussions with third countries about the division of the tariff-rate quotas; and, secondly, how the Government would consider the impact of these decisions on our economy.

As the noble Lord, Lord Grantchester, indicated, agreement was reached between the UK and the EU in 2017. He was right that that provoked immediate objections. The countries considered that the changes proposed by the EU and the UK for the division of the tariff-rate quotas amounted to more than simple rectification of the schedules. The European Parliament said in a report to its own committee that the changes had,

“involved less flexibility and market access for their exporters”.

Its stated objections to the EU-UK quota subdivision, saying that,

“other concessions should compensate for the loss of market access”.

These are the questions that the European Parliament is asking the Commission about what concessions there are likely to be. The questions the European Parliament is asking the Commission are ones that this Parliament should be asking our Government.

The expectation might be that we will want to trade on certified WTO schedules. As the Minister said previously, it is not necessary for us to trade under these, but they are desirable because they mean that the negotiations, on which concessions could be provided, are not ongoing, and that concessions have either been provided and then accepted and settled, or that there are ongoing negotiations in which we have to monitor what concessions are being offered to secure the prize of certification. My amendment asks for a report from the Government to be clear about what that position is.

As with the debate we had on the previous group, I was able to secure information about what had happened at the WTO market access committee in October, and the position of the other countries and of the EU. I was able to see the text of a Council regulation, EC32/2000—the proposal to modify the implementation of the tariff-rate quotas bound in the GATT. The discussions that took place between the Council and the European Parliament have been reported on. On 14 November the Parliament decided to enter into inter-institutional negotiations based on the Council’s report on its proposal. In none of that has it even been suggested that there could be a role for our Parliament in discussing with the Government the potential impacts of the concessions offered to secure approval for our TRQ division. The provisional agreement reached with the Council at the Parliament on 10 December to discuss what the European Union’s position would be is in stark contrast to this place, where there have been no equivalent proceedings with the British Government.

If we are not going to be involved as the European Parliament is on the European side, at the very least we need a report on what the likely impact will be after the Bill becomes an Act, if it does so. On that basis, I hope the Government will accept that we need much more information not only about the current standpoint but, similar to what the European Commission has provided to the European Parliament, on what the likely impact will be.

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[Baroness Fairhead]

I will try. First, the UK is already a member of the WTO; it was a founder member and it is a member. When its schedules have been lodged, they become the schedules, and even if they are not certified, we can continue to operate on that schedule. I committed to respond to the noble Lord, Lord Purvis, following a conversation we had following some press reports about certification and whether one country could operate; I have the draft of the letter and am about to sign it, and again, I will put a copy of that in the Library. It is clear that a country can operate on an uncertified schedule; indeed, the EU 28 are currently operating on a schedule which is not an EU 28 schedule. All that is set out in detail in this letter, which I hope will provide satisfaction.

Having now laid before your Lordships the steps the Government have taken at the WTO, I turn again to Amendments 34 and 54. We have made our proposed apportionment of WTO TRQs on the basis of the best data available to us regarding recent patterns of trade in the relevant products, so that any apportionment does not distort existing trade patterns. However, we have always said that, should trading partners have alternative data, we would be prepared to examine that in order not to distort trade flows in these commodities. If allowed, Amendment 34 would prevent us doing this, and, in doing so, would undermine one of the UK’s obligations to our WTO partners at the moment when we are re-establishing and reasserting ourselves as an independent member of the WTO.

Amendment 54 requests a report detailing our progress on GATT Article XXVIII negotiations. I trust that the Government’s frequent updates on our WTO transition reassure this House that the Government are committed to keeping Parliament informed at every stage of this process. We will continue to update Parliament as we progress and complete our Article XXVIII process.

The report in Amendment 54 also requests an assessment of whether the objections raised by other countries that gave rise to our Article XXVIII negotiations affect the UK’s ability to trade on our goods schedule after we leave the EU. I hope that I addressed that in my previous answer to the noble Baroness, Lady Kramer. We will be able to use and base our trade policy upon our goods and services schedules even if they remain uncertified at the point they become operational—whether that be after the conclusion of the implementation period or in a no-deal scenario in April 2019. We are also able to negotiate, sign, ratify and bring into force trade agreements with uncertified WTO schedules. This situation is not without precedent. Indeed, the EU has done precisely this for years while signing several trade agreements, including with Canada and Japan.

Given the broader work already in train, the impact these amendments may have on that and the Statements that the Government have made and will continue to make throughout our trade policy transitions, I ask that these amendments be withdrawn.

[Lord Grantchester]

My Lords, I thank the Minister for her answers and explanations. Once again, I am grateful to the Committee for allowing me to come forward with this probing amendment to understand better the processes and procedures that the Government are currently undertaking. They will be of great importance to large sections of our economy. They were put forward in the context of continuity—very much, as the noble Baroness said, of rolling forward existing trade flows. Hence, I was very happy to take questioning and probing from the noble Baronesses, Lady Byford and Lady McIntosh, on the amendment’s meaning. The answer is that I wanted to get the subject matter down for debate and to understand it better—and, indeed, to underline the difficulties of the word “improvement”, which the noble Baroness, Lady Byford, used for how we might want to change things and go forward. Obviously, improvement means different things to different stakeholders in the process.

I am very grateful to my noble friend Lord Whitty for explaining the background so comprehensively. What is really referred to is market access. Does improvement mean better market access, and for whom? How does this affect other stakeholders and the balance of interests between the countryside, the food chain and consumer interest and consumer prices? I was not really coming from the angle of an importer or an exporter, but I wanted to have the issue debated. The Minister has provided a lot of background interest and information that will certainly take a lot of reading and reflection.

Finally, the process outcome still seems far from clear. We will be talking about the apportionment that can result from it and how this may still give rise to anxieties and the balancing of those interests. Having made those remarks, I am very grateful to the noble Lords and noble Baronesses who have taken part in this little debate. I beg leave to withdraw my amendment.

Amendment 34 withdrawn.

Moved by

[Lord Grantchester]

35: After Clause 5, insert the following new Clause—
“Internal energy market
It shall be the objective of an appropriate authority to take all necessary steps to implement an international trade agreement which enables the United Kingdom to fully participate after exit day in the European Internal Energy Market.”

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[Lord Grantchester]

My Lords, Amendment 35 seeks to set the objective that the UK should fully participate in the European internal market after exit from the EU. This wording may also need to be examined. However, it is once again merely a probing amendment to enable the Government to provide more clarity on their intentions in the Bill and in future scenarios. Full participation may be said to imply continued membership in the internal energy market. While the Government have now been clear that leaving the EU will also include leaving Euratom, they took some time to explain what the close relationship with Euratom would mean. We now know that it means full duplication of regulations and regimes. However, what is the situation regarding the internal energy market, and—turning to Amendment 36—how does this outcome bear on the internal all-Ireland energy market?

Once again, an industry is calling out for clarity over trading arrangements as the UK leaves the EU. In the event of no deal, the outcomes become even more precarious and pose risks to the functioning of the UK energy market. Energy and climate should be among the first topics covered in negotiations to preserve security of supply and aid completion of the modernisation of the UK’s energy system, which requires tens of billions of pounds in investment in a smart power grid, low-carbon transport and heating to underpin the competitiveness of all UK business. Electricity and gas cross-border trading is an increasingly important part of efficient markets. Net imports of electricity accounted for 4% of the UK’s power supply in 2017 and 47% of gas arrives via pipelines from Europe. Increased interconnection and a proposed doubling of these connectors with neighbouring markets are planned—for example, from Peterhead—and will help balance the security of power supplies.

I am grateful to my noble friend Lord McNicol for tabling his Amendment 36, to which I am also speaking in this group. It draws attention to the challenges posed by the integration of the island of Ireland’s single electricity market. Also included in this group is Amendment 46, which proposes that there should be no hard border between Northern Ireland and the Irish Republic. Will the UK continue to participate through membership of the internal market to avoid disruption across both Ireland and the UK and maintain a low-cost, efficient power supply through integrated systems under common international environment laws? Losing access could lead to higher bills for consumers and potential disruptive effects, and raise critical issues regarding the EU emissions trading scheme. It is important that the Government provide clarity. I beg to move.

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[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.

Amendment 35 withdrawn.