Trade (Australia and New Zealand) Bill

Lord Kerr of Kinlochard Excerpts

Committee stage
Monday 23rd January 2023 Lords Chamber

[Lord Johnson of Lainston (Con)]

I thank the noble Lord for his comments. This is one reason why we are pressing ahead with the Bill: it is part of the process that will lead to the agreement coming into force. I will cover this later in Committee, I am sure, but there are other legislative acts that need to be brought into force, to enable the entire agreement to function, at which point we will have the entry into force of the FTA—a moment we are all, frankly, much looking forward to.

[Lord Kerr of Kinlochard (CB)]

Before the noble Lord sits down, can I ask him about his reassurance to the noble Lord, Lord Lennie, on Amendment 1? He said we need not worry about Clause 1(2) because Clause 1(1) can be used only in cases arising from these two trade agreements. I think I follow the Minister’s argument—until I turn to Clause 2. Clause 2 seems extremely permissive and says one can make provision, general or specific, or

“make provision for different purposes or areas”.

Can the Minister expand on his assurance to the noble Lord, Lord Lennie, and assure me that the Bill as a whole, not just Clause 1(2), cannot be used for purposes other than to deal with cases arising as a result of the two free trade agreements?

[Lord Johnson of Lainston (Con)]

I thank the noble Lord for that intervention. I think I have made my position clear that any concomitant actions following on from this Bill will relate specifically to the matters necessary for bringing it into force. Pursuant powers—this is an important commitment—are very much linked to what we would describe as minor and specific issues. They could relate to changes in government departments’ names, such as the Department for Culture, Media and Sport adding “Digital” to its name. The effective implementation of that in the agreements is relevant in these texts, so it would be confined to errors such as that. I know that we will discuss the concept the noble Lord raised regarding Scotland later in Committee, so I will be delighted to go into more detail on that then.

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[Lord Lansley (Con)]

My noble friend simply makes the point that the Government should implement the legislation that exists. We have no need to change the legislation to ban the import of hormone-fed beef or the use of hormone growth promoters on beef imported into this country, since the legislation already exists. The point is its implementation—and messing about with this Bill does not change that at all.

I have one final point. As I turn to the CPTPP and sheep farmers, I should say that my sister-in-law is a sheep farmer in north Wales. She may take a view about the New Zealand agreement, principally because of lamb imports, but she has never mentioned it to me. She probably thinks that it is a pretty remote risk compared with the many risks that she has to put up with on a daily basis.

I am UK chair of the UK-Japan 21st Century Group; my noble friend Lord Howell, who is sitting on the Front Bench, was one of my predecessors. My Japanese friends tell me that we are making good progress on our potential accession to the CPTPP. There are clearly issues. In this context, if one were critical of the Government, it would be on the risks associated with the precedent of tariff liberalisation—to the extent that it was offered in these agreements—being used by other counterparties as a basis for their negotiations, not least through the CPTPP. They may seek that in the schedules that they are looking for from us before we are allowed to accede to the CPTPP. Notwithstanding that reservation, in the view of my Japanese friends, other aspects of the negotiations stand a fair chance of being completed in the first half of this year.

On the basis of what the Government have already said about impact assessment and reporting in the future, I think the amendments in this group in particular are not required.

[Lord Kerr of Kinlochard (CB)]

My Lords, I rather agree with the noble Lord, Lord Lansley. There are two points to bear in mind, particularly about the agricultural concern. First, Australia is a very long way away; and, secondly, the big market for Australia and New Zealand is due north of them in East Asia, not over here.

I do not see even the hill farmers in Britain suffering seriously. I do not think that this will be a major target market for Australia and New Zealand. Let us remember the scale. This is a very marginal agreement. It is not a bad deal, but it is certainly not a big deal. It will not change much in our economy; even on the Government’s own estimates of the increase in GDP that might result as a consequence of these two agreements, it is really marginal.

So I am very doubtful about calling for a raft of impact assessments; it seems to me that that is not really necessary. The one amendment that might be necessary is Amendment 18, in the name of the noble Lord, Lord Purvis of Tweed, which takes us back to procurement standards. I can see a case for that, but not for looking sectorally across the agreements and calling for impact assessments in every case.

It would be reassuring if the Government could say something about the non-precedential nature, in their view, of the agricultural agreements with Australia and New Zealand. We read that the Canadians and the Mexicans are pricking up their ears and asking for the same terms that we have given to Australia and New Zealand. Those countries are much closer, and a major target market for both is Europe. If one were to look beyond them to, say, Brazil, Uruguay or Argentina, then I would say that the hill farmers in Britain would have a real reason to be concerned, if the Government were to follow the precedent of their deal with Australia and New Zealand, which is going to come in slowly, over time, and will be pretty marginal in its economic effects. If that were to be applied to trade with Canada, Mexico, Brazil, Uruguay and Argentina, there would be very serious effects on UK agriculture.

What we most need from the Government is not an impact assessment of the effect of the deals that they have done but an undertaking that, since very different considerations would apply, they would do very different deals with other future partners.

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[Lord Lennie (Lab)]

My Lords, I will speak to Amendment 10 and Amendments 20 to 35 in this group, which are consequential to it.

As the UK Government have prerogative powers to negotiate international agreements, Parliament has limited scope to make substantial changes to such an agreement, not least as it has already been formally signed, and opportunities to block ratification are therefore limited. As a result, it is of concern to see the Government waiting so late in the day before tabling the agreement to meet the statutory 21-day scrutiny period. It was not tabled until 15 June, which limited the time available for Members to scrutinise the Bill and for the International Trade Committee to publish its report. The Secretary of State for International Trade also failed to attend a meeting of the International Trade Committee to answer questions on the agreement on 29 June, despite a commitment to do so. This made it impossible for the committee to take account of her evidence on the new agreed date, 6 July, and still publish the report before the end of the scrutiny period.

Furthermore, it is shameful that Ministers have taken such a long time to conclude negotiations and long ago signed the trade deals but have not appeared before Parliament to give a full account. Ministers have been granted significant powers in the trade negotiations. The Labour Party will continue to push for more and wider scrutiny, so that parliamentarians and wider groups can properly impact on the process.

To help achieve this, our Amendment 10 and those that are consequential to it would bring in the super-affirmative procedure where an instrument is, or, as the case may be, regulations are, subject to the super-affirmative procedure. Under the super-affirmative procedure, a Minister presents a proposal for a statutory instrument and an explanatory statement. Committees in the House of Commons and House of Lords consider the proposal and can make recommendations. The Minister can then formally present or lay a draft of the statutory instrument under the affirmative procedure. We consider this necessary due to the limited other opportunities for scrutiny that come from legislation stemming out of negotiations, not least with the Procurement Bill changes that will limit this further and the Government’s steps to avoid scrutiny.

Our other amendments would implement some of these steps individually, such as requiring draft regulations to be laid in advance, but without the requirement for committee consideration that the super-affirmative procedure would bring. Amendments 34 and 35 would sunset the ability to make regulations, either two years after the Bill passes or on the UK’s accession to the CPTPP—which the Government said would happen last year.

[Lord Kerr of Kinlochard (CB)]

My Lords, I have considerable sympathy with those who argue that the regulatory procedure is insufficient for looking at these regulations for all the familiar arguments, which I need not go into.

Our role in the House of Lords in relation to the negative procedure is nugatory. I do not think that that is quite right. The matters we are discussing are quite important, so I support Amendment 20. Part of my concern is that I am worried about Clause 2 itself. I have mentioned this before. I would be very grateful if the Minister would construe what Clause 2(1)(a) means. It says that:

“Regulations under section 1 may … make provision for different purposes or areas”.


What does “different” mean? Looking at it, I see that regulations under Section 1 must be provisions to implement the procurement chapters of these two agreements. So what are the “different purposes” mentioned in Clause 2(1)(a)? This is rather permissive drafting. I want to know what “different” means. Could “different” mean going beyond the scope of the procurement chapters in the free trade agreements with Australia and New Zealand? If it does mean that, we are giving the Government a pretty wide power in Clause 2. If it does not mean that, why is it necessary to have the language at all?

[Lord Johnson of Lainston (Con)]

My Lords, I thank all noble Lords for their comments. I am delighted to respond to the thoughtful contributions we have heard—from the noble Lords, Lord Lennie and Lord Kerr, and my noble friend Lady McIntosh—on the issue of scrutiny and how regulations made under the Bill will be made.

Before I focus on the amendments themselves, I would like to draw attention to the beautifully short report published by the Delegated Powers and Regulatory Reform Committee on this Bill, on 11 January. Unlike my previous response, as has been alluded to, it was extremely short. The committee found that there was nothing to note on this Bill’s use of delegated powers. The Government are of course extremely satisfied that the committee is content with the use of the negative procedure in the Bill.

I reiterate that the Bill is required to implement two free trade agreements that Parliament has already scrutinised. The scrutiny process under the Constitutional Reform and Governance Act was completed for the Australia FTA in July 2022 and for New Zealand in December 2022. We engaged extensively with Parliament throughout the negotiation process. For these deals, this included eight public progress reports during talks, including extensive information published at agreement in principle, and 12 sessions with the International Agreements Committee and the Commons International Trade Committee, both in public and in private with Ministers and/or officials, before and after signature. There were nine ministerial Statements—three oral and six written—and eight MP briefings, plus one on the Trade (Australia and New Zealand) Bill.

A programme of statutory instruments has been put in place to implement the agreements to ensure that the UK is not in breach on its entry into force in the following areas: rules of origin and tariffs, intellectual property, government procurement, immigration rules changes, and, for the New Zealand FTA only, technical barriers to trade.

The Government have long acknowledged that, due to their length, complexity and importance, FTAs warrant a bespoke framework of scrutiny, and our full range of commitments is contained within the exchange of letters conducted last year between my predecessor, my noble friend Lord Grimstone, and the International Agreements Committee.

I turn to the specific issues raised by these amendments. It is the Government’s view that the amendments would require disproportionate scrutiny of the regulations to implement what Parliament has already had the opportunity to scrutinise, including through noble Lords’ scrutiny of this Bill. As it may be of interest to noble Lords, I can commit to sharing the draft procurement SIs ahead of Report. They will be in a draft version subject to change, due to consultations, as noble Lords can imagine, legal checks and recognising that the Bill is still undergoing scrutiny by your Lordships’ House. I hope that the noble Lord, Lord Purvis, is satisfied by that.

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[Lord Johnson of Lainston (Con)]

I thank my noble friend for those comments, and I will be happy to respond to both questions in writing. She raises the very important point that, to have security and trust in these free trade agreements, we need to know that they are properly policed and monitored. I am completely with her on this, and I hope the reassurances I have already given will be seen as significant and can be passed on to my noble friend in the detail that she requires.

If I may come to a conclusion, I thank noble Lords again for their contributions, but I hope I have demonstrated that these amendments are not necessary, and I hope that I have provided further reassurance to noble Lords today. I therefore ask that the amendments not be pressed.

[Lord Kerr of Kinlochard (CB)]

I still have not heard what “different” means in Clause 2(1)(a). I do not need to know now, but if I do not hear by Report, I shall be tempted to join the noble Baroness, Lady McIntosh, in arguing that Clause 2 should not stand part of the Bill.

[Lord Johnson of Lainston (Con)]

I appreciate the comment made by the noble Lord. I am told that it refers to Clause 1(1)(b), which says,

“otherwise for the purposes of dealing with matters arising out of, or related to, those Chapters.”

I am happy to have a more detailed conversation with the noble Lord about the specifics of the Bill at a later stage. As the noble Baroness mentioned, I have offered to all Members of this House to have one-to-one or group discussions about the agreement, and I have kept my diary open, but the meeting that I was so looking forward to last week was cancelled due to no one attending. I hope the next meeting that I arrange will have a few more people coming, since I look forward to the debate and am happy to be specific about the details.

Trade (Australia and New Zealand) Bill

Lord Kerr of Kinlochard Excerpts

2nd reading
Monday 9th January 2023 Lords Chamber

[Lord Kerr of Kinlochard (CB)]

My Lords, I have made a new year’s resolution to try to be more congenial, so I need to start by saying that I warmly welcome the last three substantive points made by the noble Lord, Lord Frost. It has been a very long time since I have been able to say that I entirely agree with the noble Lord, Lord Frost. It is also a great pleasure to see the Minister back on the Front Bench, and I greatly appreciated the balanced and understated analysis he put forward. The noble Baroness, Lady Liddell, spoke of hyperbole. I heard no hyperbole; I heard no geese misclassified as swans. I believe that we will all benefit from such a calm, rational analysis. I think it would be as well that the Minister does not pay any early visits to the hill farmers of Scotland, Wales or Northern Ireland.

I have only two points to make on the substance of the Bill and two points on the agreement. On the Bill, I do not understand its rationale—I am like the noble Baroness, Lady Liddell. It is bizarre. The Procurement Bill—which has gone through this House and will have its Second Reading, I think, today in the other place—overtakes this: it confers on the Government powers to implement procurement provisions in trade agreements. So why do we need a separate and specific Bill, primary legislation, in respect of Australia and New Zealand? I really do not understand. It is not as if the Australian and New Zealand agreements were massive agreements urgently requiring to come into effect, or agreements with momentous procurement provisions. I am not against the Bill, but I did not hear from the Minister any convincing rationale for it. It may be helpful if he could go on record to explain why we are doing what we are doing.

I am a little more concerned about the substance of what the Bill says. It is a skeleton. That came as a surprise because the Explanatory Memorandum on the agreement with Australia told us that primary legislation on procurement would be required. The Bill, however, makes none of the apparently necessary changes to the current statute book and does not tell us what they are. Instead, it asks us at Clause 1 to delegate regulation-making power to an “appropriate authority”—not just power to make the changes required by the Australia and New Zealand agreement but power to make any changes that the appropriate authority deems appropriate. Clause 2 suggests that such appropriateness can be construed liberally. That all seems a little permissive to me. The wording of Clause 1 and, possibly, Clause 2 may need some careful consideration in Committee.

I also note that the regulations making the changes that the appropriate body thinks appropriate would be subject only to the negative procedure. I wonder whether choosing that, rather than the affirmative, procedure is necessary or appropriate. That, too, is a point the House may want to think about in Committee.

My third, more general point is that the Minister might find the House more relaxed about implementing legislation if the Government felt able to be more open—perhaps as open as the Australians and New Zealanders—about the process of negotiating trade agreements. As our EU Committee pointed out in 2019, the Constitutional Reform and Governance Act 2010, CRaG, which defines our role now, is

“poorly designed to facilitate parliamentary scrutiny”

of trade agreements. That did not matter much in 2010 because the EU was then our trade negotiator and the European Parliament was required by treaty to approve the mandate for trade negotiation, to be fully informed at all stages of the negotiation and to approve its eventual outcome. Because the European Parliament was fully in the picture, so were we. However, we now have none of its three means of scrutinising and controlling the process of treaty negotiation. Therefore, we can be taken by surprise, as the Scottish, Welsh and Northern Ireland hill farmers were, by the agricultural elements in the deals with Australia and New Zealand. Those concerns were not entirely justified—again, I am with the noble Lord, Lord Frost, on this—but greater openness would reduce the risk of such surprises and I hope that the Minister will look again at the International Agreements Committee’s proposals on how to mitigate the defects in CRaG and restore effective scrutiny of trade agreements. “Taking back control” did not have to mean slamming down the shutters.

My second-to-last point illustrates why I am one of those who strongly believe that we need a government strategic document setting out the trade policy strategy. Let me try to do that, this time, by giving examples of strategic issues which I am sure the Government and department are greatly concerned about, but about which we have been kept a little in the dark. First, and most urgently, I ask the Minister: where do we, and should we, stand in the debate touched off by the Washington agreement to invest nearly $750 billion in green energy under the Inflation Reduction Act? Over in Brussels, our EU friends still seem to be on their plan A, which is to seek to ensure that more non-US firms benefit from this enormous US investment. That is a rather unlikely outcome, particularly given the change in the composition of the House of Representatives. But if, as I expect, the European Union falls back on its plan B, which is to enact similar national preference provisions on energy investment, I would have thought that this would be rather detrimental to our interests. So, where do we stand in this debate, and what are we trying to do about it?

A second and equally strategic issue which could be addressed in a government trade strategy document is the trade policy consequence of our hardening attitude to China, given the increased belligerence towards Taiwan and our increased concern about supply chain resilience. I do not know what the agreement between the Foreign Office and the Department for International Trade is on the attitude we should take. I hope that there is an agreement, and I cannot see any reason why public debate should not be enhanced by the position being made known.

Thirdly, to what extent should our approach in trade relations with friendly third countries such as India take account of their compliance or non-compliance with our and our friends’ sanctions on Russia over the invasion of Ukraine? I do not think trade can be regarded just as a watertight compartment. As we try to negotiate a trade agreement with India, we need to know the Government’s view on how watertight that compartment is.

Fourthly, how does trade policy interact with environmental policy? To me, the surprise in the agreement with Australia was not the agricultural provisions—we clearly decided to give the Australians what they wanted, perhaps for good reason—but the weakness of the environmental provisions. We knew that the Australian Government were determined to protect their coal industry. We remember Alok Sharma’s tears at the COP in Glasgow; the Australians drove him into that corner. However, we knew that the then Australian Government were behind in the polls and likely to lose the imminent election, and that the incoming Government would take a much more constructive line on global warming. Since we were giving the Australians what they wanted on agriculture, why were we not trying to extract a price on environmental policy commitments? In addition, why the rush? Why were we not waiting for a Government whose views on global warming, like those of the New Zealand Government, were closer to ours—a Government like the one we have in Australia now? I do not know the answer to that question. Maybe Mr Lynton Crosby is part of the answer; I do not know. I think it would be easier for the Government to maintain a credible position in public debate if they set out the principles they see as governing the interaction between trade policy and environmental policy.

I have a final example of the sort of issue which should be covered in a trade strategy. By the way, I think that the trade strategy should be submitted for debate in Parliament on a regular basis. It should be renewed year on year and provide the basis for this kind of debate, but on a wider stage than just that of Australia and New Zealand. The elephant in the room for trade policy is how we can reduce the non-tariff barriers to trade with our biggest and closest market. If you look at the queue on the Dover road, you must think that this is a strategic issue with direct daily consequences to the detriment of British business.

One of my more poignant memories of 2019 is of the then Prime Minister proudly announcing that his trade and co-operation agreement contained not a single non-tariff barrier. I cannot remember any trade agreement that set up a non-tariff barrier. The purpose of trade agreements tends to be to take barriers down; on the other hand, leaving a customs union, a single market and an area of free trade and free movement is bound to erect barriers—it certainly did, and the treaty did nothing to mitigate them. However, there will be a review in a couple of years’ time and, in my view, mitigations are possible if trust can be restored.

So it is not too late—or, indeed, too early—to start thinking about a plan. I hope that the Government are thinking one up. I do not know whether this has been entrusted to the Department for International Trade; I fear that the matter may be being handled by the Foreign Office, which, in my view, would be unwise. The Government would do well to produce some inkling of what they think is the best way to reduce the barriers that have now made the channel so wide.

With that, I had better stop. If I do not, the House may think that I have forgotten my resolution to be congenial.

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

Lord Kerr of Kinlochard Excerpts

Wednesday 1st May 2019 Lords Chamber

We are going to be in that position, and we need the parliamentary mechanisms of scrutiny to ensure we get the best deal that we possibly can.

[Lord Kerr of Kinlochard (CB)]

My Lords, I congratulate the noble Lord, Lord Whitty, on his authoritative introduction to his Motion. I am not competent to comment on the detail, but I agree very much with the general points on which he ended, about how we should be scrutinising trade agreements. I should like to strongly support that.

When Speaker Pelosi was in London and issued her warning about the effect on the American body politic if we were to mess up the Irish frontier, and the effect on the possibility of getting Congress to agree to any trade agreement with the UK, she was not threatening us. She was telling us a plain fact: that is the case. The power of the US Congress in matters of trade does not mean that it negotiates the agreement, but it strengthens the hand of US negotiators no end. They are able to say, “You have a point and I understand your point, but I have to tell you that I could never get that through on the Hill”. Probably, they are sometimes telling the truth, and sometimes they are not. It would strengthen the Government’s hand in trade negotiations if there was a kind of powerful joint committee of the two Houses, as the noble Lord, Lord Whitty, recommends. I must say that I very much agree with him.

I shall make two other points. One follows on precisely from where the noble Lord, Lord Purvis of Tweed, ended and is a point of detail. The second is a sad, bittersweet point.

The last document in the edition of the treaty that we have been shown is the Joint Declaration Concerning a Trilateral Approach to Rules of Origin. In this joint declaration, the British and the Swiss agree that the preferred outcome on cumulation would be a trilateral approach with the European Union. That is clearly the case; I understand that. The excellent report from the EU Select Committee says that, after three years, the cumulation arrangements set out in the treaty will be up for review. To quote the report:

“DIT officials did not foresee difficulties in securing basic cooperation arrangements with the EU in a ‘no deal’ scenario”.


The committee then comments,

“this does not seem unrealistic, as the rules on cumulation also benefit European suppliers”.

Everything there is true, except the word “unrealistic”. The European Union has told us what would happen in the event of no deal. In that event, there will be no deals on anything until we have addressed the questions of finance, citizens’ rights and the Irish frontier. It has been quite open on that. If we were to be landed with a Prime Minister who was happy with no deal, or perhaps even a Prime Minister who thought that we should not pay what we owe, there is no possibility of European business and industry overruling their Governments and ensuring that their interest in trilateral cumulation wins. Politics will win.

Think of the history of the City of London’s rather clever ideas on mutual recognition and dynamic equivalence in financial services. These were very impressive, with complex architecture being worked out in and with the Bank of England. These ideas are dead. The political declaration attached to the withdrawal treaty makes it clear that they are all dead; there will not be mutual recognition or dynamic equivalence. That is in a situation in which the European Union expects a deal. In the event of no deal, I am afraid it is unrealistic to think that trilateral cumulation on rules of origin would happen. Therefore, although this is an extremely helpful report, and I agree with nearly everything in it, I disagree with two letters: the “un” in “unrealistic”.

My third point is the bittersweet point. On this date 15 years ago, 10 countries joined the European Union: Poland, Hungary, the Czech Republic, Slovenia, Slovakia, the three Baltic states, Cyprus and Malta. Many joined feeling very grateful to the United Kingdom, going back to the inspiration of Mrs Thatcher’s Bruges speech—the bit that none of us remembers, about how the great cities of central and eastern Europe should also be brought into the comity and community of the European Union. That was inspirational to many behind the Iron Curtain at the time. John Major’s Edinburgh European Council text, which produced the Copenhagen criteria, which produced the drive, strongly supported and led by the United Kingdom with the Danes and the Dutch to bring in the countries of eastern Europe as soon as possible, is remembered in eastern Europe. Tony Blair’s generosity, with the pre-accession aid being unrebated by our choice, is remembered in eastern Europe. We might have forgotten all that; they do not forget it and they wish we still felt now as we did then. So do I.

[Baroness Donaghy (Lab)]

My Lords, I agree with my noble friend Lord Whitty. This is not so much an umbrella agreement as a safety vehicle—an ambulance, if you like—designed to ensure that at least eight existing trade-related treaties between the UK through the EU and Switzerland can continue. Any matter that does not require EU consent, approval or agreement in future is simply rolled over. Where EU authority would still apply, those matters are disapplied from this agreement, with a promise of future discussions.

As many noble Lords will know, my trade is as a negotiator. I would have loved to have been a fly on the wall with these particular sets of negotiations. I do not know whether there is an off-the-shelf negotiating skills kit in existence, but the basics should include: agree where you can agree; identify where third-party agreement is required and the timetable for achieving it; set out a plan for future consultations on the remaining issues, no matter how vague; and then sell the deal to one’s constituents.

Plans for future consultations will be a priority, in the form of enhanced mutual recognition agreements, as set out in this deal, memorandums of understanding or exploratory discussions, with the aim of modernising and developing existing provisions. That is the sweetener. This trade agreement breaks no new ground, so I would like to ask the Minister whether this is a holding operation just to keep the show on the road, or whether there are elements that take it above an administrative exercise.

I appreciate that, until we achieve a deal or no deal—if we can call that an achievement—there will be areas that require EU involvement, so I accept that little progress can be made at the moment. Equally—I agree with the noble Lord, Lord Robathan, who is not in his place—this exercise shows considerable good will between the parties, which it is important to build on, especially with the intention to modernise or develop provisions. However, it does not give much confidence when the parliamentary report states that, in respect of the EU, cumulative provisions will be revised three years from the point of the UK’s exit from the EU—and subsequently DIT officials say that this was a mistake. The review period apparently will start when the trade agreement takes effect.

My noble friend Lord Whitty has already said how important trade is with Switzerland, so I will not deal with that, but although important areas of trade are covered, large proportions depend on any future arrangements with the EU. There is a memorandum of understanding to continue discussions on the disapplied customs security agreement, chapters on the agricultural agreement and an enhanced mutual recognition agreement between the EU and Switzerland covering the recognition of manufacturing goods. As the noble Lord, Lord Purvis, said, only three of the 20 have so far been agreed. Of the other 17, the major one outstanding would be on machinery. So it would be useful if the Minister could update us on any progress in the negotiations in those 17 outstanding areas.

Trade Bill

Lord Kerr of Kinlochard Excerpts

Report: 2nd sitting (Hansard): House of Lords
Wednesday 13th March 2019 Lords Chamber

I ask noble Lords to note that this amendment does not prescribe any particular new border arrangements. That is a very important point: it does not place the Government in a straitjacket. All it requires is the very outcome that we all—leave or remain, government or opposition, London or Dublin—are supposed to be signed up to: namely, the invisible open border on the island of Ireland that we currently have. Without that, we all know what will happen, because we are already starting to see it happen: the reverse of the painstakingly constructed hard-won process of peace, stability and trust on the island of Ireland. We know where that ends: putting back up barriers of all kinds, which will spark division and potential conflict for generations to come. I hope that your Lordships’ House will accept this amendment. I beg to move.

[Lord Kerr of Kinlochard (CB)]

My name is on the amendment but I have very little to add to the authoritative introduction from the noble Lord, Lord Hain. I agree with him that we should be pressing at an open door here. At the start of Report, the Minister, in responding to me on what the tariff regime would be in the event of no deal, indicated that we would be told in due course. Such is her power that I understand that the schedules were published this morning—conveniently for our debate. I am sure that that was the only reason for their publication and I am sure that we owe it entirely to the Minister, because the timing is so apt.

I myself have seen nothing from the Government but, according to the press, it is made clear in today’s announcement that temporarily at the outset—I do not know how long that means—if a tariff regime is required on 30 March because we leave with no deal, it will not be applied at the inner Irish border. There will be no tariffs and no customs checks, and imports will be exempt from quotas, although, for imports from the EU other than across the Irish border, tariffs will be charged—10% on motor cars and quite a high tariff on agricultural products of various kinds. I am not quite sure how long such an arrangement can last. It will be a breach of WTO rules, but I guess that the WTO will live with that for a bit. Although I have never wanted a BMW, if I did want to buy one, it would be 10% cheaper if I imported it via Dublin and Belfast, which would be slightly odd. I cannot see that lasting on a permanent basis.

However, my point is that the Government are quite right to exempt the inner Irish border—it really matters. It therefore seems obvious that it should be easy for the Minister to accept Amendment 22, moved by the noble Lord, Lord Hain. The Government have already accepted it in another context, as he explained, and today’s announcements show that they would intend to apply it to the inner Irish border anyway.

The other night, in his reply to a question from the noble Lord, Lord Campbell of Pittenweem, the noble and learned Lord, Lord Keen of Elie, said:

“The whole point of the present withdrawal agreement and the Northern Ireland protocol is to ensure that we adhere not only to the terms but to the spirit of the Belfast agreement”.—[Official Report, 12/3/19; col. 978.]


I applaud that. The withdrawal agreement is dead, but we must uphold the spirit and letter of the Belfast agreement, whatever the future regime, and this amendment would permit us to do that. Since it seems to be in line with the Government’s actions and words—in today’s tariff announcements and last night’s speech by the noble and learned Lord, Lord Keen—I very much hope that the Minister will be able to accept the amendment.

[Lord Eames (CB)]

My Lords, speaking from a Northern Irish position, I urge the House as strongly as I can to support this amendment in the name of the noble Lord, Lord Hain.

As the debate over the entire Brexit situation has come and gone in the past few weeks, there has been growing concern across the business community in Northern Ireland about the hidden implications of what we are debating. They will affect every strand of the Northern Ireland business community, which is finding itself thrust on to the knife edge of Brexit.

The whole border question has obvious but also hidden implications. The noble Lord, Lord Hain, rightly referred to the Belfast agreement. While it is all too easy to raise the worry about an increase in violence and the breakdown of relationships—and to overplay that card—it is equally dangerous not to mention it. The subtlety of that situation is such that, with the words of this amendment, we are not only strengthening the spirit of the Belfast agreement but recognising that it is an integral part of the whole vista of trade.

Across the border counties, the links between the Republic of Ireland and the Province of Northern Ireland, there are numerous small businesses which are absolutely identifiable as Irish, in a sense. They are small and may not employ many people, but they are the absolute breath of the local community. Those businesses—as well as the major BMWs of this world, if the noble Lord, Lord Kerr, will forgive me—are not only the heartbeat of our community but are indicative of why Northern Ireland will probably be the greatest sufferer if what we fear in the light of yesterday’s events down the Corridor comes to pass.

So I urge noble Lords to take seriously the thinking behind this amendment. The noble Lord, Lord Hain, is ideally placed to speak about the situation from his years of experience in dealing with us in Northern Ireland and seeing something of what makes that community tick. While I am introducing an element that is not about detailed trade negotiations or principles, I believe that it is a genuine, real reason why this amendment must be passed.

--- Later in debate ---

[Lord Brown of Eaton-under-Heywood (CB)]

I am grateful to the noble Lord for giving way, not least because I confess that I am almost certainly behind the curve here and may well be about to ask a very inept question. But this amendment is directed solely to an international trade agreement between the UK and the European Union. In the event of a no-deal exit, I am unclear whether any future trade agreements that are going to be reached will be with the European Union as opposed to, for example, individual EU countries such as Germany and France. If that were to be the position—I may well be barking up a most irrelevant tree—and there were a future agreement with Germany, as I understand it, the proposed clause would not bite. Is that right?

[Lord Kerr of Kinlochard]

It could be that the Germans are planning to leave the European Union, but while they remain their external trade will be conducted by the European Union.

[Lord Hain]

I was going to make exactly the point that the noble Lord, Lord Kerr, has just made with far more authority. The European Union negotiates as a bloc and the Brexiteers want to break free of that, for their own reasons.

--- Later in debate ---

[Lord Stevenson of Balmacara]

My Lords, when I first joined your Lordships’ House, I was given tutelage in the ways and proceedings of this House. Indeed, I had a watcher who held hands with me, as it were, right through my opening period. One of the first things he said to me was, “When you get a new Bill, look at the commencement clauses, because they tell you how serious the Government are about their intentions”. Hidden in the interstices of the commencement clauses there is often a very good clue about how things happen. Some of the powers in a Bill come into effect immediately the Bill receives Royal Assent. Quite a few do not, and for them usually various elements come forward under regulatory procedures which are sometimes difficult to guess but which are very important to follow through to their logical conclusion. Nine years ago that was seared on my brain as an important thing, and I have never had the opportunity to do anything about it until today. I am therefore delighted to bring forward my first amendment on a commencement clause—and what an amendment it is.

As we speak, Divisions are happening in another place that will bear to some extent on the future of this Bill in its entirety, because consideration is being given to the question of whether there will be no deal. We have anticipated some of the thinking on that by wondering whether it would be sensible to give regard to the question of whether this Bill in its entirety had a commencement at all in relation to whether the other place had actually resolved that measures that would be affected by the legislation contained in this Bill had been given satisfactory agreement by the House of Commons.

There are two parts to this. Either a withdrawal agreement and framework for the future relationship with the EU must have been approved by a resolution of the House of Commons in a move by a Minister under Section 13(1)(b) of the European Union (Withdrawal) Act 2018, or the House of Commons must have passed a Motion that it approves of the United Kingdom leaving the European Union without a withdrawal agreement or a framework for a future relationship. These are quite tight and narrow constraints on the ability of this Bill to come into force. They are important because, in a sense, they tie the whole of the debates about our future relationship and trade in the widest context to the question of what exactly the Government intend for the future of the country in relation to the withdrawal Act.

The whole process can take effect only on the formal passing of a Motion or Motions by the House of Commons. This may not be the night on which such a Motion takes place. I understand that the amendments selected for discussion today do not fulfil the criterion set out in the withdrawal Act as being binding on the Government, although they will give us a clear view about where things will go. But we have been saying this for ages. Indeed, my credibility is shredded by the number of projections I have given to my family about what I thought was happening, all of which have turned out to be wrong. I am not proposing to go further tonight than simply saying that activity is happening that may have a bearing the future of this amendment. With that, I recommend to your Lordships’ House that we seriously consider this amendment. If necessary, I would like to test the opinion of the House.

[Lord Kerr of Kinlochard]

My name is on this amendment, which seems to be an extremely sensible one. I support what has just been said. I had no mentor when I came into this House, and I had no one to hold my hand, so, as will be obvious to all, I am lost, particularly on the details of commencement. But it seems to me that one of the virtues of this amendment is that it would rule out proceeding in the event of an accidental no deal. An accidental no deal is still a real possibility. But any form of no deal would be an act of self-harm, which I hope will be rejected very strongly in a very few minutes.

I was very sorry to see that some members of the Government were proposing to vote for self-harm, which is very odd. The doctrine of Cabinet responsibility seems to have fallen by the wayside on an issue as important as this, where it is impossible to have a government line which all the Cabinet would stick to. It seems to me that, since Sir Robert Walpole’s time, the defining characteristic of British Cabinet government is Cabinet responsibility shared by a group of friends who can command a majority in the House of Commons. It seems that both of these conditions are not met. I am not sure how relevant that point is to the amendment in my name and that of the noble Lord, Lord Stevenson of Balmacara, so I will say merely that I support it.

[Lord Purvis of Tweed]

My Lords, as we move towards the final stages of Report, it is right that we reflect briefly on why we have this Bill. Primarily it is here in case there is a no-deal Brexit. It includes many of the provisions that the Government told us would have to be in place before exit day for preparedness in case there was a no-deal exit. That was the intention in January 2018, when the Commons first debated this Bill, and we received it in September.

It was still the Government’s intention then that there would be plenty of time to put this legislation on to the statute book in order for there to be a framework for the slew of continuity agreements that we would all be considering. So far we have three, representing 0.3% of UK exports, and we will be debating them later today. If we are going in the direction of putting this Bill on the statute book in order to facilitate a no-deal Brexit, it is right that it is an intentional decision by the House of Commons that that is indeed the path that we should go down.

If the noble Lord, Lord Stevenson, presses this amendment, we will support it, because it is unconscionable, to use the Attorney-General’s word, that we will somehow at this stage find ourselves inadvertently in a no-deal scenario. However, we will have to reflect to some extent on what the House of Commons decides. The noble Lord, Lord Kerr, is absolutely right: not only has Cabinet collective responsibility now been ditched but there is not even any kind of collective responsibility within the Treasury. Today, the Chancellor talked about the shock to the economy and the deeply damaging elements of a no-deal Brexit. His deputy disagrees with him and will be in a different Division Lobby in the other place this evening.

Therefore, whatever the House of Commons decides, it is right that we provide a degree of certainty in this legislation, so that we cannot accidentally go down the path of a no-deal Brexit. If this Bill is to be enforced to provide that framework, it will have to be on the basis of a majority in another place specifically asking for it, and that is why this amendment is justified. As I said, if the noble Lord presses it, we will happily support it.

Trade Bill

Lord Kerr of Kinlochard Excerpts

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

[Baroness Fairhead]

My Lords, with the indulgence of the House I should like to welcome the start of Report. A number of points were made on the preceding Motion, but I believe that they will be picked up in our discussions on further amendments over the course of the day.

I have listened carefully to the thoughtful contributions that this House has made on the Bill so far—not just in our debates, but in meetings I have had with a great number of noble Lords over the past few weeks. I look forward to continuing to benefit from the experience, expertise and knowledge of your Lordships, and the continuation of the constructive dialogue we have had so far.

[Lord Kerr of Kinlochard (CB)]

I would like to ask one question of the Minister. I welcome the White Paper; it is full of commitments to transparency. What will be the tariff regime of the United Kingdom for imports on 30 March if we have left the European Union on 29 March with no deal? We know what the European Union’s tariff will be against us—it is the one we are currently applying—and we know that two months ago the European Union sent out instructions to the member states on how to apply the common external tariff against United Kingdom goods in the event of a no-deal Brexit. As far as I know, however, we know nothing apart from rumour about the regime that British importers will pay. Could the Minister enlighten us?

[Baroness Fairhead]

As the noble Lord will be aware, the Government’s aim is to achieve a deal. As this House will also be aware, we seek to achieve some important agreements on or before 12 March. We are therefore not planning for no deal, which is not our preferred option. If and when that occurs, that would be the appropriate time to publish those schedules, but as I have said before on the Floor of this House our objective is to achieve an agreement, at which point we will move into the implementation period.

[Lord Kerr of Kinlochard]

I understand that that is the Government’s aim, but it is also the case that the Government have deliberately kept no deal on the table. British importers, businesses and farmers do not know what no deal means for them. Is that fair?

[Baroness Fairhead]

I understand the point that the noble Lord is making. As we have always said, we will seek to balance the protection of our consumers and downstream users from the possible price impact of no deal. The tariff regime will be subject to the approval of the House, and secondary legislation to give effect to the tariff will be laid in line with the Taxation (Cross-border Trade) Act 2018. The Government aim to secure a deal, so we hope that that announcement will not be required.

--- Later in debate ---

[Lord Kerr of Kinlochard]

My Lords, my perspective is that of a former negotiator. I do not think that a serious parliamentary procedure of the kind set out in the amendment for the approval of a mandate and the approval of the outcome of a negotiation damages one’s negotiating stance or limits one’s flexibility. I do not believe that at all. Having negotiated against Americans, I know that it greatly strengthens their hand to be able to say, “Here is the proof that I cannot give you what you want, because Congress would turn it down”. At the end of the day, when Congress turns one down—and it does—that is a very serious and effective deterrent to those disagreeing with the Americans in a negotiation. Speaking against unilateral disarmament in 1957, Aneurin Bevan talked of the dangers of sending the Foreign Secretary naked into the conference room. If we do not accept the amendment in the name of the noble Lord, Lord Stevenson of Balmacara, we will weaken the hand of British negotiators in the future.

[Lord Tugendhat (Con)]

My Lords, I will intervene very briefly. The proposers of this amendment put forward their arguments so admirably that there is little more to say, particularly the noble Lord, Lord Hannay, who compared the role envisaged for this Parliament with the roles of other parliaments. As we all know, one of the key arguments in the referendum campaign was about taking back control. Here is an absolute instance of where Parliament ought to take on greater powers if it is to take back control over an important area of British policy. The other thing is that a great deal has been made by the Government, the Secretary of State for International Trade and the Prime Minister about the centrality of being able to do trade deals. The argument is put forward that one of the great reasons for being outside the EU is that it gives us the ability to do trade deals. They are going to be a central part of government activity once we have left the European Union. For those two reasons, it seems to me that the Minister will have to put forward some very strong arguments indeed if she is to convince me and perhaps some others that it is right for the Government to ignore the principle inherent in this amendment.

--- Later in debate ---

[Lord Purvis of Tweed]

My Lords, there is no doubt that we on these Benches support the free economic movement of goods and people, which benefits all parts of the British economy and of our United Kingdom. The news today from the motor manufacturing industry is no surprise to those who have been following the assets leaving the United Kingdom and seen the people leaving the United Kingdom. There is a growing and depressing trend of businesses making a choice to move away, or at least to move some elements away, from the United Kingdom.

One of the principal reasons for that is the uncertainty about our trading relationship with our biggest market. The amendment, to which I have put my name, is better than the Government’s current position, or any position they are likely to take. That is why I support it. It is becoming a cliché that business needs certainty, but for many businesses it is now too late. The least this House can do, through the Bill, is to offer a higher level of certainty to businesses that there is some support for the UK remaining a member of a customs union.

I shall give one small example, of the many that could be offered, of why it is important to avoid the kind of disruption that leaving a customs union would bring about. This was highlighted in the Government’s recently published paper, Implications for Business and Trade of a No Deal Exit on 29 March 2019, and it illustrates what leaving a customs union would mean. There is a requirement for all businesses trading with the European Union to have an economic operator registration and identification number, in order to,

“complete the necessary customs documentation for goods they are importing”.

It is not simply desirable; it is necessary. As the Government themselves say,

“an EORI number registration is one of the most basic and straightforward parts of the process most businesses would need to undertake to prepare for no deal”.

Businesses will need that number on exit day. The government document goes on:

“As of February 2019 there had only been around 40,000 registrations for an EORI number, against an estimate of around 240,000 EU-only trading businesses”.


So we are one-sixth ready to leave.

The document highlights the fact that on an issue for which government communications have been strong, and the information to businesses about the fact that they needed to prepare has been clear, they have not done so—for a number of reasons. This illustrates the complexities required of the business community if we are outside a customs arrangement that would amount to a union. That is one reason, among many others, why we support the amendment.

We on these Benches reserve our right to campaign strongly for the UK to retain membership of the single market, as well as the customs union, of the European Union, and to say that if there is to be a withdrawal agreement it should be ratified by the people in a referendum. I hope that those on the Labour Benches are also moving faster in that direction. That debate is for another time. The debate on the movement of people is for the next day on Report, but for the moment we can give a signal to businesses across the country that the House of Lords, at least, is focused on providing a degree of certainty, even if the Government are not.

[Lord Kerr of Kinlochard]

My Lords, for this House it is déjà vu all over again. We voted for a customs union in the withdrawal Bill on 18 April, by an enormous majority of 223. The amendment then was in my name, and I made a speech of coruscating brilliance taking up several columns of Hansard, advancing five very strong arguments for the customs union. I refer the House to my speech on that occasion.

[Lord Wigley (PC)]

My Lords, I shall try to be as brief as the noble Lord, Lord Kerr. I too tabled an amendment early in the Committee stage—the predecessor to the amendment that he so ably moved at that time. My feeling is that we have lost an opportunity to find a satisfactory compromise in the negotiations. The red lines laid down by the Prime Minister have stopped the possibility of getting a deal, including a customs union and possibly a single market—that would have avoided the difficulties with Northern Ireland and safeguarded the position of Gibraltar. More than anything, it would have looked after the manufacturing industries for which we in Wales worked so hard, with different parties in government, to secure over the past 30 years. I think that it was 52 Japanese companies that came to Wales, to sell to the European Union: they came for that reason. We now see the danger of Japanese companies and others being lost. Let us also look at the situation of the agricultural industry, and the need to ensure that we have that export market. For all those reasons, I hope that the amendment will be carried—by the same majority as last time.

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[Baroness Falkner of Margravine (LD)]

My Lords, I would like clarification from those who tabled this amendment: they refer to “a” customs union but other speakers have used the expression “the” customs union, as the noble Baroness, Lady Altmann, has. For the purposes of what I am going to say. I will assume that they mean remaining in the EU’s customs union and common commercial policy.

If that is the case, I understand the motivation for seeking a halfway house between leaving and remaining, which is what this implies. However, being in a customs union and being entirely subject to the EU’s common commercial policy, which is the overarching umbrella under which the customs union sits, is the worst of all options. That is why Switzerland and Norway—two countries with different arrangements in the EU—have chosen not to be part of the customs union. So while the idea may be attractive to protect trade in goods—and I admit that is important—given that we have an economy where trade in goods is a relatively small part of our exports, the sting of the common commercial policy, although it is encroaching into services, is primarily about trade in goods, not trade in services.

Being under the umbrella of the CCP without membership of the EU will mean that we will not be present in the European Council, which has the ultimate say over trade deals; we will not be present in the European Parliament or in regional parliaments. Noble Lords may remember the Canada-CETA story and the Parliament of Wallonia. We would not even have the status of the Parliament of Wallonia in future trade deals were we stay in the customs union. We would be a rule taker without a seat at any table. It would also render the previous amendment, which the House overwhelmingly passed, entirely redundant.

Turkey feels so disadvantaged by its current arrangement in the customs union—which, incidentally, was only agreed as a stepping stone towards full membership—that it is seeking to change those terms. However, I suspect that by now it is not seeking to change the terms because it accepts that it is not going into membership of the European Union.

The CCP is designed to serve the interests of member states—and so it should—but it is not designed to serve the interests of the fifth biggest economy in the world. Even those who feel that the United Kingdom will be much diminished if it leaves the EU must surely recognise that we are a more significant economic power than Turkey. So when the EU rightly seeks to advance its own interests, who will speak for UK interests? When the EU moves to use trade remedy laws—we have had a great deal of discussion during the passage of this Bill about trade remedies—to protect its own industries, and when that does not cohere with the United Kingdom’s interests, while we remain a member we can say something about it; we can indicate our preferences. If we are out of the EU but within the customs union, we would have no say over our interests being disadvantaged in the interests of any of the 27 member states which would be at the table.

[Lord Kerr of Kinlochard]

The situation the noble Baroness is describing will obtain if the Prime Minister’s deal goes through and we go into an interim transition period. It is certainly the situation that would obtain if we go into the backstop. We would be a rule taker. We would have no say in the making of the tariffs but we would have to apply them. We would not be consulted; we would be notified.

The amendment refers to “a” customs union. We have never attempted to work out what kind of customs union the EU would be prepared to agree with us. We have never done that because the Prime Minister’s rash red line ruled it out. We are now going into the worst possible case, if the deal goes through, of being absolutely a rule taker and absolutely not in the European Council, as correctly described by the noble Baroness. However, that is not what the amendment is asking for. It is asking for the negotiation of a real customs union between the United Kingdom and the European Union.

[Baroness Falkner of Margravine]

The noble Lord has expressed sentiments that I have heard many times over the past three years from Mr Corbyn. In our various EU Select Committee meetings with the EU’s chief negotiator Mr Barnier, some of us raised the issue of whether there would be a possibility of negotiating a different sui generis, unique, bespoke customs union. We have been told in terms that that is not possible. I fear that concealing one’s intentions behind “a” customs union in the hope that if all else fails the EU will come around to providing us with a customs union presents the EU with a situation where it would have to consider how it could give each country it does any negotiation with in the future a bespoke customs union.

Anyone who knows anything about EU law—I accept that the noble Lord does, but I do too—will tell you that it will not uniformly make such an enormous exception in a law that has been there from the 1950s to accommodate the United Kingdom, particularly not at this late stage.

Trade Bill

Lord Kerr of Kinlochard Excerpts

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

[Lord Kerr of Kinlochard (CB)]

My Lords, I can be very brief in supporting this amendment, which has my name on it. Saying that is a very ominous start; it usually means the exact opposite, like the phrase “with the greatest respect”. But I can indeed be very brief because, on 18 April, I proposed and the House approved, by a majority of 123, a very similar amendment on the European Union (Withdrawal) Bill. With the greatest respect, I have to say to the Government that we would not be in the present predicament if they had listened to what the House said on 18 April.

The economic case for a customs union if we leave the European Union is pretty well understood now. Business is explaining ever more volubly how damaging supply chain disruption would be. With the greatest respect for No. 10, I do not believe that the red line against a customs union would have been drawn in the 2016 party conference speech had there been any consultation with business, Parliament or the Cabinet beforehand. The political case for a customs union has become even more familiar as we think about the concept of a customs frontier across the island of Ireland and a backstop with a frontier down the Irish Sea. With great respect, I have to say that it was unfortunate that the 2016 announcement of the red line on a customs union, interpreted in Dublin as a declaration of intent to abrogate the Belfast treaty, was made without any advance consultation with or notification to the other parties to the treaty, and with no consultation with this Parliament or with the Northern Ireland Assembly, which at the time still existed.

Taken together, the economic and political case for a customs union, if we leave the European Union, looks pretty overwhelming—but I see no reason to labour the point now. I recognise that the Minister cannot accept the amendment, and we all know that much may have changed before the House considers this Bill again on Report. I simply urge the Minister, with the greatest respect, to ensure that her colleagues remember how this House voted on 18 April.

[Lord Patten of Barnes]

I am happy to support this amendment—although I realise that happiness is a relative concept. We find ourselves going round and round these arguments, again and again, banging our heads against the same walls of confusion and obfuscation, and barely managing to avoid Brexit derangement syndrome as we make this tiresome journey. As the noble Lord, Lord Kerr, said, we have of course been here before—several times. The most notable is the debate we had, as he said, in April last year, when all of us were younger. Indeed, one or two of my noble friends are no longer here—permanently—since that debate. On that occasion, we won the amendment to the withdrawal Bill by 123—not 230, the sort of figure that we are used to these days, but by a pretty comfortable margin. As the noble Lord said just now, if our advice on that occasion had been taken, we would not be in the shambles that we are in today. One reason for discussing this issue again is that it is quite possible that a customs union, among other things, will be part of a way out of the shambles that we are currently in.

In an article in the Times a couple of days ago, the admirable commentator Rachel Sylvester reminded us that Einstein defined insanity as continuing to make the same decision on the assumption that it will get the result you want and therefore continuing to be disappointed. I suppose that, by that definition, one of the steps you take towards insanity is that you start quoting your own speeches, and most of us have made these arguments again and again.

I want to make four very brief points in the hope that we do not have to spend the rest of our lives talking about customs unions. My first point is this. The argument that we have to do this because of the referendum result—that this is a red line that cannot be painted any other colour—is an assertion. As the noble Lord, Lord Kerr, said, it was an assertion made in a party conference speech, where it is not always the case that objective truth or consensus is looked for. The party conference speech then became an item of sacerdotal interest. It was put into the manifesto before the 2017 election—in which our party did not do conspicuously well. We are told that we have to implement a proposal to get rid of any customs union because of that party manifesto.

I had a great deal of pleasure rereading that manifesto. Right at the beginning is the sentence:

“People are rightly sceptical of politicians who claim to have easy answers to deeply complex problems”.


I would certainly settle for that. There were one or two notable items in the manifesto, and my noble friend Lord Lansley and I have written more manifestos than most people have had hot dinners. I seem to remember that pledges were made that were dropped even before the election, including a very good proposal, which I supported, about funding healthcare for the elderly—a subject in which I am sure I will soon be much more interested than I am now. The idea that this is a tablet of stone, engraved with the absolute commitment, whatever happens, to deny the country a way out using a customs union, is ridiculous and risible.

My second point is about the belief that, somehow, we can manage everything as we go forward without any deal, and certainly without being part of a customs union. It is part of the Catch-22 situation that we find ourselves in now. If you say that there are problems in leaving the EU and the customs union without a deal, you are told that there are no problems. If you do not say that there are problems, you are told that there are no problems. It is rather difficult for us to find a way through this Catch-22 situation. The notion that we can manage in the future simply on WTO terms is, of course, ridiculous. No developed country in the world manages solely on WTO terms. We talk about Europe’s agreements with America being on WTO terms; they are not. There are 100 sectoral agreements with the United States, which go well beyond WTO terms. The truth is that, in addition to the WTO terms, other things are necessary to secure the best possible advantages for your exports and for your industry. That is why, since the WTO was established, 243 different trade agreements—substantial ones—have been made by countries to secure their economic interests. Crashing out and pretending that we can manage simply on WTO terms is, again, a ridiculous proposition.

The third thing one should recognise is the difficulty of putting together a trade policy at the speed that we are trying to now. That became apparent in a debate we had earlier this afternoon. I say without, I hope, being remotely patronising to the Minister that she has the impossible job of marking Dr Fox’s homework. On the basis of what we know so far, the House would not have given him a pass: he would not even have got into the margin of error.

The issue is so difficult. From the European point of view, it involves a great deal of transparency. If the noble Lord, Lord Mandelson, was in his place, he would be able to confirm that. I used to do the political side of trade agreements. We would go back, again and again, to the European Parliament and to parliamentary committees to be quizzed about what exactly we were negotiating. Quite rightly, one of the most pressing invigilators every time was the British Minister: we were pressed on the details of the negotiations as we went along.

When we were told by Dr Fox, in between flights, that there would be 40 trade agreements ready for lift-off within seconds of leaving the European Union at the end of March this year, some of us were a little cautious in taking his word for gospel truth because we had seen what had happened with his previous prediction that negotiating with the European Union was going to be incredibly straightforward. Now, however, we know what the score is. It is not 40, not 39, not 29 and not 19 and a half—we have hardly made any agreements.

If we crash out of the European Union on 29 March, it will be extremely painful for British business and industry. There are all sorts of issues. The Minister said quite properly that these are very big agreements. She said that the Canada agreement is 1,600 pages long and the South Korea agreement is 1,400 pages long. As we have said before, you cannot simply go through them Snopaking “European Union” and inserting “United Kingdom”. All sorts of really complicated issues have to be dealt with and that will take a very long time.

If we look beyond just rolling over those trade agreements, what else are we talking about? We are talking about capturing a huge share of the big markets: China, India and the United States. At the moment, China is not the easiest place to do business. The indebtedness is now 300% of GPD, which may look even more difficult in the future, and there are, alas, increasing security and political issues that we have to cope with. Then there is India. If he was in his place, the noble Lord, Lord Bilimoria, would tell us, as he has done with great authority in the past, that what the Indians are interested in is visas, not concessional trade deals with the UK. Then we have the United States. If my noble friend Lord Deben was in his place he would give us a speech on American chickens that would make any sentient human being become vegan. He has done it two or three times, and it is a very moving piece of rhetoric, as one would expect from my noble friend. The idea that we can build a tower on the sand of President Trump’s meretricious and mercantilist policies is an absurdity. An independent trade policy was why we said we had to reject a customs union, so where is it? It remains an aspiration of our ubiquitous International Trade Secretary and one which, alas, we are not going to see consummated in the foreseeable future.

My final point is on Northern Ireland, which we have talked about again and again. Both previous speakers pointed out that the problems of the Northern Ireland border would not exist if we were in a customs union. In the referendum campaign, the Prime Minister, to her credit, made absolutely clear what she thought of the Northern Ireland border issue and how important it was for the future and integrity of the Good Friday agreement. She was right. The other day, my noble and learned friend Lord McKay explained with spectacular clarity why there would have to be a hard border between the Republic of Ireland and Northern Ireland. Guess what: if you have one set of trade and customs arrangements in one country and a different set in the country next door, you have a hard border. It is the case everywhere. Search parties have been sent out to find an example of where it is not true and to find a technological solution—and answer came there none.

--- Later in debate ---

[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.

Trade Bill

Lord Kerr of Kinlochard Excerpts

Committee: 1st sitting (Hansarad): House of Lords
Monday 21st January 2019 Lords Chamber

[Lord Strathclyde (Con)]

My Lords, am I alone in finding this a most extraordinary debate? It is deeply disappointing given the eminence from which it comes. The noble Baroness, as Leader of the Opposition, is a leading light of the usual channels. She could have raised any of these issues—perhaps she did—during the course of discussion through the usual channels.

The great principle which underlies the work we do on legislation in this House is that we believe and understand that the Queen’s business should be carried. That means we scrutinise and revise legislation. The amendment—the Motion—says that there should be a full stop. We will do all the work in Committee, we have agreed the business on Second Reading but after Committee, a full stop. There is a theme here: a couple of weeks ago, we had the noble Lord, Lord Foulkes, saying that we should all go on holiday. Now, the noble Baroness is asking us to stop work after Committee.

There is another practical aspect to this. For many years, I was a member of the usual channels. We did not always get it right, but we worked in the interests of the whole House—every aspect of us—to try to find the right time and the right stages to do various bits of business. This Motion drives a coach and horses through all that. For the noble Lord, who was formerly my noble friend, to pray in aid the kind of behaviour that we have seen in the House of Commons and say that what they are doing there, we should do here, is completely ridiculous and absurd. The noble Lord said that we should take over the running of all this. In this House, the Government have no majority. It proceeds only because we have the agreement of the whole House. We trust and ask the usual channels to do this.

Perhaps the second most disappointing thing which the noble Baroness said is that she will ask the opinion of the House and have a Division. If the business of the House will always be decided by a Division, then God help us. I really hope that she will consider, however important the great issues are, that they can be dealt with in the Bill by amendment in the usual way; they should not be decided like this.

[Lord Kerr of Kinlochard (CB)]

My Lords, it was good to hear from the noble Lord, Lord Strathclyde, and to be reminded of the days when everything worked swimmingly. I do not know if he was here on Second Reading, when the Government were perfectly honest and straightforward in admitting that there was a big lacuna in the Bill. They accepted that there was and said it would be filled in at a later stage. We were talking of a two-Bill scenario at that stage; we were also thinking of an implementation period.

I agree with the noble Lord, Lord Hannay: we are now in a completely different scenario. The modesty of the Leader of the Opposition’s proposal is admirable. She is not saying that we should not proceed with the Committee stage, and she is right. We should not down tools. We should go on doing our job trying to improve this Bill. However, the lacuna is still there. We do not know what the machinery will be for legislative scrutiny of future trade negotiations.

--- Later in debate ---

[Baroness Fairhead]

I simply say to the noble Lord that we are trying to ensure as much continuity as we possibly can. I hope that I did not say that these agreements would be easy; I said that some technical issues would need to be resolved. That is why the Government have committed to lay before the House detailed reports that talk about the changes and the impact of those changes. Both Houses of Parliament will have the ability to review them and they will be subject to the affirmative procedure. I do not stand before the Committee saying that this is all easy. It is complicated, but the Government have committed to laying these reports, with all the detail, before both Houses so that they have a chance to review the agreements.

[Lord Kerr of Kinlochard]

I have a degree of sympathy with the amendment proposed by the noble Lord, Lord Purvis of Tweed. I am grateful to the Minister for the meeting she had with me last week. I was encouraged by what she said then and by what she has said here today about an answer being given to the Constitution Committee—I think she said tomorrow. That seems to be good news.

The point made by the noble Lord, Lord Purvis of Tweed, relates to an aspect of a wider question; it is an important aspect, but the wider question will have to be addressed before we reach Report. It is an important element in the amendment to the Motion which was carried by the House. I look forward to hearing what has been said to the Constitution Committee; I imagine that it is fairly general and that, on points like the one we are discussing now, we would be looking for something more particular from the Government before Report.

Trade Bill

Lord Kerr of Kinlochard Excerpts

Monday 21st January 2019 Lords Chamber

[Baroness Young of Old Scone (Lab)]

My Lords, I support the sentiments behind most of the amendments in the group, although perhaps not the exact wording. My focus is on environmental standards, their vital nature and why they are at risk under the current government proposals.

When we discussed Amendment 4, I made the point that it is much easier to be ambitious about standards if you are part of a pack, part of a group—which we were, we were one of the 28. When we are working on our own in a more isolated position negotiating bilateral agreements, even if they are allegedly rollover bilateral agreements, it is less easy to be robust and ambitious.

Environmental standards are vital in transitioning continuity agreements, but the other point, which has already been made, is that whatever we do in the continuity agreements is a harbinger, a signal, of how we want to handle negotiations on new deals, including deals with countries such as the USA and Brazil, where we know that big environmental issues will arise, particularly in agricultural trade deals. Agricultural standards impact not only on food standards and safety and animal welfare but on the environment. We do not want the chlorinated chicken debate replicated in individual trade deals for the future.

We need the Government to use the Bill to guarantee that all free trade agreements ensure, for example, that food imports meet the UK’s environmental, food safety and animal welfare regulatory standards. That should be the case in all negotiating mandates as well as in the subsequent agreements that flow from them. Import into the UK outside a free trade agreement is much trickier, but it is still vital that the Government set out very soon that they propose to use current World Trade Organization rules to maintain standards.

I will speak briefly to Amendment 15, the non-regression proposal from the noble Baroness, Lady Jones. International trade agreements have the potential to undermine or weaken essential standards, as we know from the TTIP negotiations, which have already been mentioned. Non-regression commitments are common in existing trade agreements, and a meaningful commitment to non-regression provides a useful safety net. All international trade agreements implemented pursuant to the Trade Bill should incorporate that principle. Indeed, we need to go further. We need to widen their scope and strengthen their enforceability if they are to help deliver the Government’s promises to improve the state of the environment.

The Minister will say that we should be reassured that the Bill is only about continuity—I am rapidly coming to hate the word “continuity”—and that we are carrying across, not renegotiating conditions, but nothing in the Bill assures that. The Government have said tonight that only changes essential to ensuring continuity will be considered, but we know that when this was debated in the other place, the question was raised as to whether other Governments will want to agree deals with us without substantive changes. Indeed, Michel Barnier said a year ago that,

“partners around the world may have their own views”.

The message to the Government there is that it takes two to tango and although we do not want to renegotiate any conditions, there may be strong pressures to do so in the rollover process. Government needs to give a signal that we are absolutely clear about not negotiating any weakened standards.

The test of the Government’s mettle in all this will be how quickly we can get as many agreements as possible under our belt, both rollover and new, to demonstrate that they understand what Brexit is all about and are making real progress in trade. Although I hesitate to ascribe to the Government any dirty tactics, the reality is that, when push comes to shove, environmental standards will get the boot. We have had umpteen assurances from the Government that they are highly committed to maintaining all sorts of standards, including on the environment. The Command Paper, Preparing for our Future UK Trade Policy, said:

“The Government is fully committed to ensuring the maintenance of high standards of consumer, worker and environmental protection in trade agreements”.


Michael Gove, the Secretary of State, said:

“Let me try and state in letters that are as big or as bold or as clear as possible: we won’t be signing trade deals that mean British producers are undercut on animal welfare or environmental standards”.


The Prime Minister has made that point; indeed, today’s Statement reinforced how important environmental standards are and that they would not be compromised by the Brexit process. If we have all these assurances from government, I invite the Minister to say, “Since that’s what we really want to happen, we are going to enshrine it in this Bill”.

[Lord Kerr of Kinlochard (CB)]

Like the noble Baroness, Lady Young, I welcome the sentiment behind the amendments—in fact, I welcome their substance, but with one exception. I am uneasy about Amendment 25. I may have misunderstood it, but it seems to fall into a slightly different category—Amendment 15 is perhaps partly in that category, too.

I apologise for picking up one of the amendments in the name of the noble Baroness, Lady Jones, because she shames us all with her enthusiasm and hard work, but Amendment 25 seems slightly different because it would lay down a requirement on the Government to require something from the other participating Government in the agreement. Paragraph (b) requires that goods should,

“have been produced to standards that are comparable in effectiveness to those of the United Kingdom in protecting food safety, the environment and animal welfare”.

On the environment, India will be burning more coal next year than this year, and more the year after than next year. In China, coal will remain a very large part of the power mix. Would the amendment debar the Government from doing trade agreements with India or China in respect of goods produced using power? It would seem quite a wide provision to require the Government to require something from the other Government. I may have misunderstood it. I also recognise that it would only enable the Government to do these things; it would not require them to do them, yet I am not sure that the distinction indicates a real difference. If it was on the statute book, the Government might feel obliged.

Amendment 15 raises the question of non-regression. As I read it, and I may be wrong about this, too, it would place an obligation on the Government to require that the agreement incorporated the principle and that the principle applied to both sides—not just to us but to the other side. I may have misread that, but, if so, my point about China and India perhaps applies to it, too.

Trade Bill

Lord Kerr of Kinlochard Excerpts

2nd reading (Hansard): House of Lords
Tuesday 11th September 2018 Lords Chamber

[Lord Kerr of Kinlochard (CB)]

My Lords, it is a pleasure to follow the noble Lord, Lord Astor, who spoke so warmly of my old service, and to take part in this debate, introduced so clearly and convincingly by the Minister.

There is absolutely no doubt that, if we leave the European Union in March next year—something about which I am becoming increasingly doubtful—we need to have a Bill of this kind on the statute book. As the noble Baroness, Lady Henig, reminded us, there is a lot to be done on the detail in this Bill: the balance it strikes between the Executive and the legislature; future roles of and relationships between industrial, social, environmental, consumer and trade policies, and how transparent it should all be. In Part 2 of the Bill, I hope we shall look at the devolution aspects in relation to the Trade Remedies Authority. The noble Lord, Lord Browne of Ladyton, drew our attention to this. A threat that is seen as not particularly substantive UK-wide, could be seen as significant in a devolved part of the country.

I think we shall spend quite a long time in Committee. For reasons that escape me at the moment, we are about to be sent away on holiday. It is clear from this debate that we should take advantage of our last chance before the October European Council—which was meant to be decisive—to tell the Government what we think about deal, no deal, what it might take to get a deal and what no deal would mean for our country. I shall try to go into that territory too. I shall cover almost exactly the same themes as were addressed by the noble Lord, Lord Hamilton, in his typically splendid, rambunctious speech, although I may address them in slightly different terms. There is nothing between me and the noble Lord but a fundamental disagreement.

On no deal, I am not always sure that those of us who claim that it would be perfectly fine if we were to trade with the world and have the EU trade with us on WTO terms, understand what WTO terms would mean. I exempt the noble Lord, Lord Hamilton, from this criticism. The WTO’s guiding principle—the most favoured nation principle—means that, in the absence of any agreed bilateral or multilateral free trade agreement covering substantially all trade, WTO members must offer the same terms to all fellow members. Without an EU-UK free trade agreement covering substantially all trade, the EU could not offer us terms better than it was ready to offer everyone. This is what WTO terms means. It means tariffs, queues at Calais, UK supply chain disruption and queues at Dover because the trucks have to go in both directions. I am talking only of the effect of the EU being on WTO terms in relation to us, whatever we do.

What would we do? Take the United States. In the absence of a UK-US free trade agreement covering substantially all trade—and the President is not exactly rooting for trade liberalisation—any specific concessions that Dr Fox were to offer the Americans in order to try to open up their market, he would have to offer to all third countries. This would seem to be some way down the road, if ever. These are the WTO rules. Concessions outside FTAs, covering substantially all trade, have to be erga omnes. I have not heard Mr Gove explaining this recently to UK farmers.

Going to WTO rules would mean a major economic shock. Some would say that it might be salutary. Professor Minford is all for it. Perhaps the noble Lord, Lord Hamilton, is too—I do not know. Gardeners in the Cotswolds would come much cheaper if the car factories in Swindon and Oxford were to close. The Bullingdon boys would be just fine. They could carry on giggling about two-thirds of diddly squat. The country would not be fine. WTO rules, in the absence of a free trade agreement with the EU, would hit our producers and exporters. We would have left the world’s largest single market and seen it obliged, by WTO rules, to act against our exports. In the absence of the full rollover of and continuing participation in the EU’s 40-odd free trade agreements with third countries, or newer, successor free trade agreements with all 40, WTO rules would mean that we would have to allow wider market access. If we allowed it for a particular import from one country, we would have to allow it for that import from all. Professor Minford would love it. He wants the end of all tariffs, quotas and duties. UK farmers and manufacturers would not. Prices would undoubtedly fall, but so would employment, growth and revenue.

I might be accused of setting up a straw man. The 27 have said all along that they would like to have tariff-free trade with us. It has been in all their texts. I believe they mean it. They have said all along—or for more than a year— that they would be ready to offer us a Canada-type free trade agreement. I believe they mean that too. This assumes that there is a deal. If there is no deal, there is no free trade agreement. Why? Twenty-eight member state Prime Ministers, including our own, have defined the deal. They agree that it means a framework declaration about the future, although I fear this is increasingly likely to be alarmingly vague and aspirational. It also means a treaty covering citizens’ rights, the money we owe, a backstop solution to the Irish border problem and a transition period.

If Mr Rees-Mogg, Mr Johnson and their friends have their way; if we renege on the Prime Minister’s December commitment to pay the £39 billion we agreed we owed; and if we ignore Section 10 of the EU (Withdrawal) Act—recalled by the noble Lord, Lord Adonis—and renege on the Prime Minister’s commitment to find an acceptable backstop in Ireland, ensuring the Irish border stays open, there will be no treaty. The EU will see us in court. They will want their money back. There will be no UK-EU FTA, but tariffs at Calais. There will be no EU co-operation on rollover deals on the third-country free trade agreements and the division of quotas, and there will be no transition period, but a cliff edge in less than 200 days’ time. It is not a straw man. It is a clear and present danger because it is the consequence of what Mr Johnson is advocating, even if he does not understand that.

Actually, I think the money question is settled. I was alarmed by what the noble Lord, Lord Callanan, said at our Dispatch Box this afternoon, but I was fortunate enough to run it past the Chancellor of the Exchequer in a committee upstairs and was reassured by his reaction. He confirmed that, in the event of no deal, the United Kingdom would honour its legal obligations. I never thought that we would default. We never have.

The crux is the Irish border issue. Mr Johnson complains that it is the tail wagging the Brexit dog. Mr Rees-Mogg cheerfully talks about going back to the way the border was—or, rather, was not—controlled during the Troubles. Brexiteers dare to say that the Belfast agreement, the Good Friday agreement, has run its course. I find that shaming. It is certainly not the view of the other 27 Governments. I do not believe it is the view of our Government. It is an international agreement, so the others are entitled to have a view. In my view, that is not how anyone in this House sees it. It seems to me that we all stand by what the Prime Minister has been saying about the Good Friday agreement.

If there is no secure backstop, I do not believe that there will be a withdrawal treaty or a free trade agreement. My Brussels friends tell me that there has been no sign of the backstop deadlock breaking. Mrs May rejected the 27’s proposal. Her counterproposal, the Chequers idea of a customs partnership—with all imports at all UK ports to be examined, segregated and taxed differentially and then tracked to their ultimate UK or EU destination—looked pretty implausible from the start. The implausible became the impossible when the Government accepted the ERG amendments on the customs Bill, so purporting to require the other 27 to impose the same complex dual system on their ports, clogging them up and increasing their costs. Of course they will not, and the Government must have known that. Mr Barnier has certainly said it.

What is our next trick? I see only one workable solution. It would be warmly welcomed by UK industry, commerce and inward investors. The CBI and the TUC have both called for it. The Opposition parties all favour it, and this House voted for it in April by a majority of 123. The solution—or nine tenths of the solution—to the problem of the Irish border is for the UK to negotiate a customs union with the European Union. I very much hope that in addition to all the technical improvements that I am sure we will make to the Bill, we will add to it a provision requiring the Government to do just that. I hope that it will have the support of the noble Lord, Lord Tugendhat, as it did last time.

Without a credible Irish backstop—a commitment to a customs union would be the most credible—I do not believe that there will be a withdrawal treaty. Without a withdrawal treaty, there will not be a free trade agreement any time soon and we will be thrown back on WTO terms which, as I have tried to explain, will certainly mean an economic shock. Whether one sees that as a good or bad thing is a matter of judgment. I think it is a very bad thing. It is imminent, because no treaty means no transition period.

I cannot believe that our Government would be so irresponsible as to propose a no-deal Brexit, or this Parliament so irresponsible as to permit it. I do not see the charlatans being allowed to run the show. Rather, I foresee an Article 50 extension and an exercise in democracy to establish the will of the people—the informed will of the people—when the outcome of the present negotiation, at last defining the choice before them, is clear.

I must remind the noble Lord, Lord Hamilton, who is sadly not here, that the polls show that a majority across the country now believes that there should be such a poll. So, as in Whitehall in the distant past, I still stand with the noble Lord, Lord Butler. Meanwhile, of course, I do not oppose the Bill, although, like the noble Lord, Lord Taverne, I very much hope that events will render it otiose.

Trade and Customs Policy

Lord Kerr of Kinlochard Excerpts

Tuesday 5th December 2017 Lords Chamber

[Lord Kerr of Kinlochard (CB)]

As the legendary and topical Irishman said when asked for directions to Dublin, “If I wanted to get to Dublin, I wouldn’t be starting from here”. It seems to me that it might have been a good idea before the October Conservative Party conference speech to stop and consider the possible effects on the Good Friday agreement, and perhaps to consult our co-signatories to the 1998 agreement—the Irish Government—and the devolved Administrations before concluding that Brexit meant leaving the customs union and the single market. However, we are where we are. The easiest way to solve the present problem would of course be to reinterpret what Brexit means and to consider, as the costs of leaving become clearer, whether it might not be better to avoid the damage to our trade that will be done by leaving the customs union and the single market.

It was a pleasure to hear the Minister introduce this debate in such an elegant way. It is less of a pleasure to follow the noble Lord, Lord Whitty, because he made most of the points I wanted to make—and rather better than I would have.

The two White Papers we are debating today are rather contrasting. I do not mean to be rude to the Minister, but the Chancellor’s is a sort of technical explanation of a Bill, and I find it extremely useful. On reading Dr Fox’s, I was reminded of Dr Pangloss: there is a lot of aspiration and assertion, but not a lot of facts. So I thought I would suggest eight facts to keep in mind. It would have been 10, but the noble Lord, Lord Whitty, pinched a couple of them on the way.

Fact one is that it is worse than the noble Lord, Lord Whitty, said. It is not just a matter of time. Legally, one cannot negotiate a trade agreement under Article 50. It is not possible. Article 50 is about divorce, settling the debts and setting the dates. That is all. Yes, one is enjoined by the treaty to agree a framework for the future relationship, guidelines and ground rules. I have been arguing for over a year that we would do very well to submit our own draft framework. I do not understand why we insist that it is for the other side to put forward all the papers. We would have done ourselves some good if we had submitted a draft long ago. But the draft cannot amount to a free-trade agreement or an association agreement because they come under the different rules of Articles 216 and 218.

The Secretary Of State for Exiting the European Union was quoted in the FT yesterday as saying that if we leave the EU before we have a trade deal,

“trying to finalise an FTA under those circumstances would be very disadvantageous from a negotiating leverage point of view”.

That is if we have left before we do it. But that is what will happen. He is quite right. It is very disadvantageous from a negotiating point of view, but the inconvenient fact is that we cannot do trade under Article 54 or until we have left. That is a fact.

The second fact is that a free-trade agreement, as the noble Lord, Lord Whitty, said, will take several years —perhaps five—to negotiate and ratify. I imagine that it will be a mixed agreement, as he said, so ratification will add another couple of years. The Canadian deal took seven and it is still not in force. A deeper agreement than the Canadian one, extending to services, might take longer to negotiate and will certainly face greater ratification problems. It certainly cannot be done by 2021—the end of this standstill period—so another hiatus will be coming up. That is a fact.

The third fact is that the standstill agreement that is being talked about is one that the EU has been offering since April. It is in its April guidelines. It is in the Florence speech so it seems that the Prime Minister is now ready to accept it. It would only be a standstill. It comes in after we have left, so we would no longer have a vote in Council, judge or Commissioner and we would no longer have Members of the European Parliament, but we would agree to respect, in the Prime Minister’s words, all the rules and regulations of the EU during that period. We would be enjoying, if that is the word, a sort of colonial status. It might be politically a little ignominious but economically very convenient, except that it would lapse after two years and the second hiatus would then come in. The standstill agreement does not avoid the cliff edge; it merely postpones it. It gives businesses more time to do the packing as they prepare to leave, but it does not avoid the cliff edge. It would be wrong to call it a transition or an implementation period because, by the time it ends in 2021, we would have nothing agreed to transition to and nothing to implement. It cannot therefore provide the certainty that employers and investors now seek. That is a fact.

I will add another equally inconvenient fact. Many I meet in the business community say, “Ah well, the can will be kicked down the road. The usual solution to the problem is that you say now that it will take two years, but it will stretch for longer than that”. Under the treaty, it cannot do so. The Commission and Council lawyers looking at the divorce treaty already have grave difficulties in accepting that it can cover the colonial period when you have left but are still respecting the rules of the club. There is no colonial article in the treaty or any provision for this state. Moreover, it is odd to have a relationship with a third country that is not covered by any of the articles of the treaty; it will be a first. The European Parliament lawyers say that it is completely impossible, while the Commission and Council lawyers seem to have compromised on two years as a maximum that cannot be stretched. I am afraid it will probably remain the view that you cannot do as the French say and make the temporary the provisional and then the permanent. Legally, that will not happen, so the cliff edge will still beckon.

Dr Fox’s White Paper states that during the standstill period we will be able to negotiate new trade deals with third countries. That is right because the standstill period will begin only after we have left. In practice, our first concern will probably be to try to salvage a share of the third country access that we currently enjoy under agreements negotiated by the EU. The Minister referred to that in her introductory speech and she made it sound rather simple, as does page 28 of the White Paper. However, it would not be simple at all because it is not a matter of arithmetic, of dividing it up. Trade diplomacy is a form of mercantilist arm-wrestling. We have seen that already in the reactions of Australia and New Zealand to the division of quotas agreed between us and our European Union friends. They were instantly rejected by the Australians and the New Zealanders. It is not simply a question of dividing our share from their share; the third country will want to grow the cake.

Nor will it be easy to replace in these third countries the market share that we will be losing in the European Union. The reason for our large export trade with the European Union is principally because it is quite close. The member states are our neighbours. There is a pretty much infallible rule when talking about trade in goods that the trade halves as the distance doubles. It is really hard to see how we can replace in distant parts what we will be giving up close to home. That is not in Dr Fox’s White Paper but it is a fact.

How good a deal with the EU will we get eventually? To coin a phrase, the key is in regulatory alignment. Tariffs are not the problem these days when we talk about trading goods. The greatest obstacle is not tariffs but differential standards. In services, of course, the greatest obstacle is regulatory misalignment. It is not just in Ireland that the issue of regulatory alignment is important; it is the key to the whole negotiation. A month ago in London, the American Secretary of Commerce, Mr Ross, told the CBI and others that if we hope for greater access to the US market, we must break with EU regulations and standards and adopt American ones. Three weeks ago in Brussels Mr Barnier asked in public whether the UK’s aim was to limit or to maximise divergence from the EU regulatory model we have been working to build for 44 years. Nobody in Brussels knows the answer. I do not think anybody in London or the Cabinet knows the answer, because the issue has been ducked up to now. To hold the coalition that is the Cabinet together, it has been important not to ask the question but to pretend instead that one can have the cake and eat it. However, the crunch point is coming quite soon. The moment we start talking about trade, the EU will need and want to know where we are going. If the Cabinet decides that we will go with Dr Fox, insisting on adopting American standards or setting our own autonomous national standards and regulatory systems, I do not see how we can get anything better than the Canadian deal, which is very light on services and would therefore be very bad for us.

I have only two more facts to go. Fact seven is that the EU’s existing free trade agreements include most favoured nation clauses. That means that if a third country, as we would be, gets a better deal for any particular category of goods or services than the South Koreans, Singaporeans or Canadians got—or than the Japanese will get—the EU is obliged to upgrade the deal for the third country in question and is not entitled to claim any compensation in better terms for its exports to that third country. That could be a disincentive for the EU to offer us a much better deal than Canada. You will not find that in Dr Fox’s White Paper, but it is a fact. The most favoured nation clause, which we were extremely keen on while a member of the club—because we were trying to liberalise the EU’s external trade—will now be a weapon against us. We will find it very disadvantageous.

Fact eight is simply to cheer noble Lords up. We do not have to go there. A notification under Article 50 is not an irrevocable act. As more inconvenient facts emerge, and as the costs of leaving the EU become clearer, it is important that people understand that the people of this country have the right to say that we should take back the Prime Minister’s March letter. We are still free to choose not to move to colonial status in 2019, nor to stormier waters in 2021. We have not crossed the Rubicon. It is still up to us.