Brexit: Withdrawal Agreement and Political Declaration

Lord Hain Excerpts

Wednesday 9th January 2019 Lords Chamber

[Lord Hain (Lab)]

My Lords, what a fascinating speech to follow.

Speaking in support of my noble friend’s Motion, I refer to the paper by the European Research Group and Global Britain, entitled Fact—NOT Friction, which insists that all the warnings about a no-deal Brexit are mere myths. It claims that the European Union has promised us tariff-free trade, so we can have our cake and eat it, citing in support the President of the European Council, Donald Tusk. Although he did in indeed propose, on 7 March 2018, that the parties should,

“aim for a trade agreement covering all sectors and with zero tariffs on goods”,

any reading of his speech shows that that was a clear reference to the long-term aspiration of a UK-EU free trading agreement under WTO rules, which will, of course, take years to negotiate. It would follow a deal taking effect after 29 March, not no deal. Tusk also made clear that such an agreement,

“will not make trade between the UK and the EU frictionless or smoother. It will make it more complicated and costly than today, for all of us. This is the essence of Brexit”.

Whatever the fantasies of the ERG-type Brexiteers, therefore, once we leave the EU without a deal, WTO non-discrimination rules mean that the EU will be obliged to treat the UK as it treats other non-EU WTO members—not, as has been implied, like the remaining 27 EU countries—unless and until a free trade agreement is in place.

As a European Union member, the UK gains from around 70 additional free trade agreements with non-EU countries such as Japan and Canada which, in a no-deal Brexit, would also be lost. The Department for International Trade has made no real progress in persuading each of these countries to agree a rollover of the UK’s current deals as part of the EU. To encourage potential foreign inward investment, a prior UK-EU agreement will need to be in place, so that third countries will know what, if any, EU market access they can achieve from the UK as a platform into the European Union. The Comprehensive Economic and Trade Agreement between the EU and Canada, despite being the European Union’s deepest free trade agreement yet, covering most goods, has little to offer on services, which make up 80% of the UK economy and 45% of our exports. This agreement took over seven years to negotiate and is still not fully in force.

The EU, with which we have a trade surplus in services, would have no obvious incentive to grant significant openings on services to the UK in a free trade agreement, not least because, under WTO rules, the EU would then be obliged to make similar offers to other countries with which it already has bilateral free trade agreements. For example, CETA explicitly states that Canada will benefit from any new services concessions by the EU to other third countries. This is therefore a major disincentive for the EU to make such deals. Even under a deal along the lines of CETA, to minimise the friction of trading with the EU single market, the UK would need to maintain European regulations in all the relevant sectors, as, for example, do EEA members Norway and Iceland. We would need to replace over 30 EU regulatory bodies and arrange legally workable memorandums of understanding between them and their EU counterparts. This is a process which, again, would take years and be very expensive.

In the event of no deal, the European Commission’s own package of 14 contingency measures, which are allowed by the WTO, specifically warns of delays to the transport of goods—hence the most reverend Primate the Archbishop of Canterbury’s warnings—because of the need for checks on all UK livestock exports and the application of customs duties and taxes on goods moving between the UK and EU.

These minimalist EU measures were taken, as the Commission explained, to maintain the integrity of the single market and customs union—relating to, for example, financial services, aviation and haulage. These and other sectors such as pharmaceuticals, food and drink, data flows and the car industry, to name but a few, would still face significant disruption and legal uncertainty. All this would have severe implications for competitiveness, for our GDP, and for trade and foreign investment in the UK, especially for advanced manufacturing operating just-in-time systems.

These Brexiteers claim that the UK already trades with non-EU members on WTO terms alone. On the contrary, because of its membership of the EU, the United Kingdom benefits from numerous side agreements with countries such as the US and China that go well beyond WTO provisions. In fact, no EU member trades on WTO terms only; all have at least one bilateral or regional trade agreement with other countries, especially their nearest neighbours.

If we leave the EU with no deal on 29 March, therefore, only WTO terms will apply, including a hard Irish border with its political danger and economic damage. The UK will also lose the leverage of the EU bloc—the richest and biggest in the world—and will be weaker, not stronger, in future trade negotiations. A diminished UK will face the unenviable choice of Donald Trump’s “America First” United States or the repressive and expansionist dictatorship of China.

The consequences for citizens, consumers and businesses will be nothing short of catastrophic. In some leave-voting areas, lives will be blighted for generations. The no-deal Brexiteers should come clean and stop peddling myths that all will be fine. It will not. As the noble Lord, Lord Patten of Barnes, told the BBC on Monday, their agenda is “snake oil”. No deal must be blocked at all costs and I believe that a people’s vote should be supported to save the country from the ERG-aligned Brexiteers, who have no viable plan of their own, yet still insist on charging on recklessly.