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

Debate between Lord Kerr of Kinlochard and Baroness Donaghy

Wednesday 1st May 2019 Lords Chamber

[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.