Trade Bill

Lord Liddle Excerpts

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

[Lord Liddle (Lab)]

Surely one of the main concerns of the manufacturing industry is what will happen to rules of origin in British trade agreements with countries such as South Korea, when the EU rule is that 55% of cars have to be manufactured domestically yet we manufacture only 40% of our content domestically. Surely this is highly relevant to Brexit and the economic damage that Brexit could cause to a sector of our economy on which 1 million jobs depend. Therefore, to say that the Bill has nothing to do with Brexit is very strange.

[Baroness Fairhead]

I did not say it was not happening because of Brexit. In fact, I was clear that the Bill is happening because of Brexit. But Brexit is not happening because of the Bill. It is a fine point but it is clear. There is the decision on Brexit and then this is about the four areas that I talked about. We will come on to rules of origin in the debate. It is a really complex and important area, and something that we are negotiating with both the EU and the third countries in the continuity agreements. I have little doubt that we will talk about this and I expect to cover it in my closing speech. If the noble Lord is happy with that, I will proceed.

Lastly, the Bill is not an attempt by the UK Executive to take power from Parliament, the devolved Administrations or anyone else—in fact, the opposite. On devolution, the Bill grants devolved Ministers the powers they need to implement existing trade agreements and procurement legislation, respecting their competence in these areas. It retains for the UK Government the powers they need—nothing more. We have also agreed changes to the Bill with the devolved Administrations, in the other place. We look forward to continued engagement with the devolved Administrations throughout the passage of the Bill and hope to work together to secure legislative consent Motions.

On wider public engagement, the Government have no desire to push through trade agreements without public support. Frankly, that is not in our interests. When Governments try to push through trade agreements, not only is it the wrong thing to do but it almost always backfires, as we saw with the Transatlantic Trade and Investment Partnership—TTIP. In any new free trade agreements, the Government will engage with the public right from the start. In June we published our engagement strategy for the pre-negotiation stage of future trade agreements. The comprehensive four-point plan includes open public consultations. We launched four online consultations on 20 July, open for 14 weeks. These ask for public feedback on potential free trade agreement negotiations with the United States, Australia and New Zealand. They also ask for views on the UK potentially seeking accession to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership —CPTPP.

We also set out detail on UK-wide outreach events; detail on thematic and sectoral groups of stakeholder experts; and information on our intention to convene a strategic trade advisory group, consisting of experts from across the country from academia, trade unions, consumer groups and businesses from different sectors and of different sizes. That is just for the pre-negotiation stage. There will be more targeted engagement as we move forward. As I said, the Bill is about existing trade agreements. These agreements are already in place. Maintaining their effects in UK law merely preserves the status quo and will not involve changes on the ground for businesses or consumers.

Finally, on the role of Parliament, as noble Lords will know, these trade agreements have already gone through the normal parliamentary scrutiny processes for EU legislation and have already been scrutinised by both Houses of Parliament. In any case, the power to implement continuity trade agreements under Clause 2(1) is exercisable only for three years from exit day—unless both Houses agree extensions. This is one of only seven delegated powers in the Bill and one of only two Henry VIII powers. The other Henry VIII power relates to HMRC data collection. This is also subject to the affirmative resolution procedure and is very narrowly defined, as requested by HMRC itself. All these delegated powers are necessary. It would be simply impossible to implement our continuity trade agreements or the GPA membership in the time available without them. We would also miss the opportunity to understand how best to help UK businesses by collecting export data. That is why the Government have requested them, and for that reason alone.

In conclusion, we are forging a new trade policy to make the most of the opportunities of Brexit but we need to get the practicalities right first. I look forward to hearing the views of all noble Lords today as we enter the detail of the Bill. I will listen carefully and seek to engage as fully as I possibly can, whether with groups, by party or with individuals, to ensure that proper scrutiny is given to the content and intent of the Bill. It is a necessary and pragmatic Bill. It is one that respects Parliament, respects the devolution settlement and puts in place a firm foundation for our future trade policy for the years to come. It is with that in mind that I commend this Bill to the House. I beg to move.

--- Later in debate ---

[Lord Liddle]

My Lords, speaking as one of what the noble Lord, Lord Hamilton, so kindly described as the unreconciled, I do not like this Bill. It is an unnecessary Bill in pursuit of a foolhardy objective of having an independent trade policy, which is not actually required by EU withdrawal. Far from being technical and pragmatic, as the noble Baroness, Lady Fairhead, said in her introduction, it is actually a matter of ideological choice. It is a very bad choice to pursue this independent trade policy because the most obvious way of cutting the Gordian knot of frictionless borders and the Northern Ireland problem is for us to stay members of the customs union. I hope that, in Committee, the House will return to the question of the customs union and the European Economic Area. I was interested in what the noble Lord, Lord Cooper, said about public opinion and the public’s expectations of what Brexit would mean. The pursuit of an independent trade policy comes very low in the public’s priorities. Safeguarding our trade through membership of the customs union and single market is much higher.

This is a very misguided Bill, and I do not believe that the Government have presented any kind of evidence for the benefits of the UK having an independent trade policy. Could the Minister tell the House what research work the Department for International Trade has done on this question? If it has done research papers, why have they not been published? What are the gains that we believe we would achieve as a result of being able to conduct our own trade agreements as opposed to retaining the benefits of the single market which we are clearly on the point of losing?

The case for this independent trade policy is weak, and I have heard two arguments that for me completely destroyed the case. The first was a lecture by Sir Martin Donnelly, who was Liam Fox’s Permanent Secretary, in which he demolished the Government’s arguments for the policy, point by point. He ended up with the wonderful line that it was like forgoing a three-course dinner for a packet of crisps. That is what I believe it to be. The second was in this House when, on 18 April this year, we heard the most wonderful speech from the noble Lord, Lord Patten of Barnes. He took the Government apart on this question. I recommend that every Member of this House should read it. On all these Brexit questions, the Government have always completely failed to provide any rebuttal of serious intellectual arguments made against these ideological policies.

The Government have an aspiration for an independent trade policy but, beyond that, they are very confused. There is tremendous tension on the question of what we are trying to do. Are we prepared to sacrifice standards in order to get trade agreements with countries such as the United States? Michael Gove says we are not. So what sort of trade agreement are we going to be able to negotiate with the United States? In the Brussels negotiations on the withdrawal agreement, the Government are hanging out against the protection of geographical indications—the Scotch whisky-type thing—precisely because they know that that kind of protection is the sort of thing that the US trade negotiators would be going for straightaway, as soon as we tried to negotiate an agreement with them. I have a local worry about this. Cumberland sausage is about to suffer; it is going to be sacrificed on the ideology of this Government’s commitment to an independent trade policy. What a disgrace.

Another serious point is the one about rules of origin, which I raised with the noble Baroness, Lady Fairhead, in her clear introductory speech. I have not heard any satisfactory answer from a Minister on how this problem is going to be dealt with in the rollover of existing EU trade agreements. The very serious problem that gets in the way is this business of trying to pretend we are still in the EU when we are not, yet being able to negotiate our own deals because we are not in it. Yet, in order to have the rules of origin provision, we have to pretend that we still are. This is the total confusion of the Government’s approach to these negotiations.

The noble Lord, Lord Lilley, made a good attempt to justify the independent trade policy, but I rather agree with the noble Lord, Lord Horam, that the key question is competitiveness rather than trade deals. You have to ask yourself the question: if the EU is such an obstacle in its trade agreements to British success in export markets, why are the French and Germans beating us around the world hands down? It is not because of the EU but because we have fundamental problems of competitiveness that we have to address. On the argument about Switzerland, as I understand it, the Swiss have been unable to get any services provisions in their negotiations with China, and the argument that small countries are able to negotiate big deals is simply wrong about the modern world. When President Juncker of the Commission went to see Donald Trump, he managed to get him to back off from imposing industrial tariffs on the European Union. Why? Because the European Union is a very big market, and Trump thought that it was much better politics to have a go at China.

What we have here is basically an ideological obsession, which I am afraid is delusional, and I wish that the Government would abandon it so that we could have a soft Brexit around which a national consensus could be established.

--- Later in debate ---

[Baroness Fairhead]

My Lords, I am grateful for the insightful contributions from across the whole House to this evening’s excellent and wide-ranging debate. We are fortunate to have heard so many well-articulated, informed and expert contributions from noble Lords with considerable interest in and experience of trade issues, including my noble friends Lord Lilley, Lord Tugendhat, Lord Cavendish of Furness, Lord Trenchard, Lord Lansley, Lord Horam and Lady Neville-Rolfe. I loved the point that customers need to want to buy what we make or buy our services.

The debate was also well informed by our trade envoys, my noble friends Lord Risby and Lord Astor of Hever. We are well served by trade envoys across this House. The noble Viscount, Lord Waverley, focused in particular on services, and the noble Lord, Lord Kerr of Kinlochard, has extensive knowledge of this area. This considerable experience will be invaluable in helping us to put in place an effective independent trade policy after we leave the EU. I also thank the noble Lords, Lord Stevenson of Balmacara and Lord Purvis of Tweed, for the very active engagement that we had before this debate.

I confess that I join the horde of instant admirers of my noble friend Lady Meyer, and I am delighted to welcome her. She made an exceptional and utterly compelling maiden speech, and I have no doubt that this House will benefit greatly from her unique experience, her vibrancy and her tireless work against injustice. I am grateful for her recognition of the importance of the Bill and for supporting its speedy passage—and I loved her assertion that she is a true Brit and a true European.

I am pleased to have heard support for the Bill from a number of other noble Lords, including the noble Baroness, Lady Falkner of Margravine, and the noble Lord, Lord Butler of Brockwell. I am grateful also to my noble friends Lady Hooper, Lord Astor of Hever, Lord Cavendish of Furness, Lord Lansley, Lord Elton and Lord True for their support.

A number of issues have been raised in this thoughtful debate and I will try to cover as many as I can. I may not be able to respond to each point, but of course my door is open.

I am aware that many noble Lords hold strong views about the wider Brexit issues. As I mentioned in my opening remarks, that is not for this Bill, so I will try to focus primarily on your Lordships’ questions that have direct application to the Bill, and I will put them in the following blocks: continuity; the GPA; readiness for no deal; standards, including on medicines; devolution; the TRA; the World Trade Organization; and the Northern Ireland border situation.

The Bill is about providing continuity. That is our overriding objective and clear ambition, and I welcome the support expressed by many noble Lords for the importance of maintaining the effects of the agreements which we currently benefit from as a member of the EU. Almost no one who contributed to the International Trade Committee’s inquiry into continuity suggested that that objective was wrong. I also welcome the suggestion from my noble friend Lady McIntosh of Pickering about the practices in Denmark. I promise to pick those up with her at an early stage.

As well as having the legal power to provide for the continuity of existing agreements, we must also agree to do so with our trading partners. This point was raised by several noble Lords, including the noble Lords, Lord Grantchester, Lord Browne of Ladyton and Lord Fox, as well as my noble friend Lord Tugendhat. The Government’s aim is supported by our partner countries, whose own businesses and people will benefit from keeping the arrangements in place. We have had positive discussions with our trading partners about how best to continue these agreements. That is why we agreed that our continuity programme is a technical exercise, not an opportunity to renegotiate terms.

Of course, it is not surprising that some can see ways in which the agreements might be improved when we are no longer a member of the EU. But our partner countries agree with us that it makes practical sense, in the first place, to provide continuity. The negotiations are in different phases, but I can reassure the noble Lord, Lord Fox, and the noble Lord, Lord Browne of Ladyton, who raised concerns. One example is Canada, which has agreed that our bilateral trade and investment relationship will continue to go from strength to strength, has welcomed the approach to provide continuity during the implementation period and envisages a swift transition to a new bilateral arrangement once the implementation period has passed.

We are confident of securing continuity during the implementation period, under the terms of the draft withdrawal agreement. However, we of course continue to prepare across government—this is a cross-government initiative, with the FCO, DIT and DfID all working on these agreements—for a range of possible scenarios to maintain continuity, including one in which we do not reach an agreement with the EU on withdrawal.

Many noble Lords, including the noble Baroness, Lady Kramer, the noble Lord, Lord Liddle, and my noble friend Lady McIntosh of Pickering, raised the important area of rules of origin. In the debate today we have heard many detailed points. Rules of origin are a vital and very complex part of most trade agreements. Noble Lords raised detailed, technical questions that are difficult to cover fully in this debate.

We are, however, confident that we will be able to put in place provisions relating to rules of origin in our continuity agreements. They will seek to achieve maximum continuity for exporters in the UK and in our partner countries, who will continue to benefit from preferential trading terms. During the implementation period we will operate as if we were in the EU. The rules of origin in each agreement are a matter for agreement between the parties, including the EU and third countries. A number of noble Lords talked about diagonal accumulation, whereby we act as if we were part of the EU.

On a point raised by the noble Baroness, Lady Kramer, on rules of origin—

[Lord Liddle]

Is diagonal accumulation envisaged as applying during the implementation period, or as continuing after the implementation period? And what is the basis for the Minister’s confidence that our trading partners will agree to it?

[Baroness Fairhead]

Clearly, this is subject to negotiation. During the implementation period we will act as if we were in the EU and be treated as such. Diagonal accumulation is about agreeing with a third country that it will accept the UK beyond the implementation period. That was the point about rules of origin raised by the noble Baroness, Lady Kramer. I am happy to reassure noble Lords that it is common in trade agreements for the signatory countries to agree to allow accumulation of content with other countries. The approval of those other countries is not required, so the EU does not have a veto over what we can agree with our partner countries.

The subject of geographical indications, GIs, was raised by the noble Lord, Lord Browne of Ladyton, and the noble Lord, Lord Liddle. I can again reassure the House that the UK will be establishing its own geographical indications scheme after exit, through the European Union (Withdrawal) Act 2018. This will be in line with, and indeed above, the requirements of the WTO agreement on trade-related aspects of intellectual property. I appreciate how important Scotch whisky and GIs are to Scotland. The new framework will provide a clear and simple set of rules and continuous protection for geographical indications in the UK.

[Lord Liddle]

My Lords—

[Noble Lords]

Order. Not again.

[Lord Liddle]

These are very, very important and key—

[Baroness Fairhead]

We are working with the devolved Administrations and stakeholders to ensure that this future scheme takes account of the interests of all producers from the regions of the UK. Finally, in relation to the rest of the world, we are ensuring that the continuity agreements that we transition will fully protect UK GIs.

I turn now to the points made by noble Lords about scrutiny of the use of the GPA. The noble Lords, Lord Hain and Lord Grantchester, said that there is no ability to scrutinise the GPA. I disagree, but let me clarify that. The power in Clause 1 enables changes to be made to domestic procurement regulations in order to reflect the UK’s independent membership rather than membership through the EU, but in order to exercise this power, our accession will first have to be accepted by Parliament through the CRaG procedure. That is why the power is subject to the negative procedure—because Parliament will have had the opportunity to scrutinise the GPA before the powers in Clause 1 are exercised. The schedules to that have already been shared with the ITC and we would expect CRaG by the end of 2018 or early 2019. In order for the UK to accede quickly to the GPA after ratification, this Bill is necessary to avoid any loss of legally guaranteed market access for UK businesses.

My noble friends Lord Hamilton of Epsom and Lord Risby asked about the GPA and whether we must accede or lose our access. The truth is that we must accede or we will lose our access, so to provide continuity for UK businesses, we are already working on a timeline which sees the UK accede to the GPA as an independent member in time for EU exit, regardless of whether we have a deal.

I turn to readiness and the question of no deal, which was raised by many noble Lords, including the noble Lords, Lord Butler of Brockwell, Lord Taverne and Lord Purvis of Tweed. I have to confirm that it is absolutely not the Government’s plan to leave without a deal. Our plan A is to secure an agreement with the implementation period. We are confident of securing continuity for our existing trade agreements and indeed securing agreements to the implementation period under the draft withdrawal agreement. A number of noble Lords talked about resources. What I can say in response to my noble friends Lady Hooper, Lord Horam and Lord Astor of Hever is that the Department for International Trade is already recruiting staff to support the trade negotiations. We have recruited approximately 600 staff, who have made significant progress. I hope that that and the fact that we are closely focused on this issue meets the appeal of noble Lords to get on with it.

However, we need to continue to prepare for a range of potential scenarios if we do not reach such an agreement with the EU. In so doing, we will seek to bring into force the bilateral agreements with partner countries from day one. The powers in this Bill are an essential element in that process. We are actively engaged with partner countries. As one noble Lord mentioned, my honourable friend George Hollingbery, the Minister for Trade Policy, has said that it is clearly a challenge. There is no doubt that the timing is very tight but it is still our aim to maintain the effect of those agreements even if there is no deal on 29 March 2019.

Trade and Customs Policy

Lord Liddle Excerpts

Tuesday 5th December 2017 Lords Chamber

[Lord Liddle (Lab)]

My Lords, first, I apologise to the noble Baroness, Lady Fairhead, for not being present for the opening of her speech. That is a great breach of protocol in the House, and I feel very apologetic for it. Secondly, I welcome the Minister to her new role. I am afraid that it is a bed of nails, being a Trade Minister, particularly as we move into the era of trying to negotiate our independent trade deals—and I am afraid that the thrust of my brief remarks will be to try to make those nails a bit sharper so that she realises some of the awful responsibilities that she has taken on, in my view.

My view is that the Government are prioritising the creation of an independent trade policy when they have no need to do so to respect the referendum vote. We could remain in the customs union and leave the European Union, but the Government are determined that we must leave the customs union in order to be able to conduct this independent trade policy. We know already what the downsides of it are, and we know that it raises the risks of chaos at the ports, because the customs arrangements are not in place—and we know that it could potentially set off a chain of events in Ireland that could lead to a serious threat to the Northern Ireland peace process. We already know that, so why are the Government continuing doggedly to pursue that objective?

I am going to ask a series of questions, although I am obviously not expecting a set of instant answers. I would like in due course to receive from the Minister some answers to the questions that I am going to put.

First, have the Government carried out a full economic assessment of the benefits and costs of their decision to have an independent trade policy? Have they compared staying in the customs union and relying on the EU to negotiate trade agreements as against having an independent position?

Secondly, if they have done that analysis, will they please let us all see it? I remain unconvinced that the losses that we will suffer from essentially giving up a free trade arrangement that we have for the 40%-odd of trade with the European Union will be made up, or more than made up, by the gains from trade deals that we can do with the rest of the world. So let us have a proper analysis of this—and is it available?

Thirdly, our trade comes in three categories. This is very broad, but there is the 40%-odd that is the European single market, the 30% or so covered by deals that the EU has negotiated on behalf and the other 30% or so where there are no arrangements at present between the EU and those countries. Where there are no trade agreements, can the Government tell us which of the countries they will prioritise? Is the United States at the top of the list and, if so, can the Government tell us what their negotiating objectives are for their deal with the United States?

When I worked at the European Commission for the Trade Commissioner, they always used to ask, “What are our offensive interests?”. This gives you a flavour of the world of trade, with the bitter battles between offensive and defensive interests. I would like to know what our offensive interests are in relation to the United States and how far they differ, if at all, from the offensive interests that the EU had in the TTIP negotiations. My instinct is that they would be pretty much the same.

How do our defensive interests differ from those of the rest of the EU? At one time, I think that there probably was a real difference, in that Britain would have been less concerned about agricultural protection and would have been prepared to give more on agriculture to get more from the Americans than, say, France, Italy and Spain would have been. However, I am not so sure about that now, as Michael Gove seems resistant to the idea that we should accept agricultural goods into this country that do not comply with our very high standards. Parliament has a right to know where the Government stand on this. Is it their policy to maintain EU standards and not relax them, and therefore exclude this bargaining chip from their negotiations? If that is their policy, it undermines why we are undertaking all this separately from the rest of the EU.

Second in line is India, or it might be, anyway. Would India come near the top of the list? I suppose that it would. Do the Government really believe that Britain has some kind of special relationship with India? If so, can they explain to me why the Germans export three times as much to India as we do? I am very sceptical about a trade agreement with India. I know from my Brussels experience what India’s offensive interests are in terms of trade negotiations with Europe. There is one simple answer—lots of visas for Indian workers to come and work here. How does that square with the Government’s commitment to take back control of our borders and cut immigration? Where is the consistency in the Government’s policy? How does this square with Mrs May’s refusal to abandon the target of cutting immigration to 100,000 a year? I do not see why anyone in India should take seriously a British negotiator who turns up on their doorstep unless the negotiator can state clearly what the Government’s policy is. I bet that we will not hear what it is, as I do not think that the Government know what it is because it is contradictory and all over the place.

The EU has all these agreements with countries that we must now, somehow or other, turn into agreements that we have, as the noble Lord, Lord Kerr, said. The Prime Minister went to Japan with great fanfare. The great triumph of that visit on the trade front, as far as I could see, was that the Japanese Prime Minister said, “We will give you exactly what we have negotiated with the EU”. If that is the limit of what we are likely to get—setting aside all the complications which the noble Lord, Lord Kerr, mentioned about how you renegotiate quotas and all that—is it really worth while having this independent trade policy? I am very sceptical about that. Therefore, can we have a proper analysis? Can the Minister say what the gains will be, as against the losses we know about, in terms of the barriers to free trade with our European partners as they are now?

The phrase of the week is “regulatory alignment”. Do the Government accept that if we depart from regulatory alignment with the EU in order to negotiate independent trade deals with other countries, we will inevitably face tighter customs controls and more difficulties in trade with the EU? How has that trade-off been assessed? I do not think that there has been any proper analysis or reasoning of this decision to have an independent trade policy. I believe that it is all based on religious faith and ideological obsession with the idea of a global Britain that can rule the waves in economics in the 21st century as we ruled them in politics in the 19th century. We are sacrificing the free trade we have for a set of very uncertain benefits. I would like to hear a coherent statement from the Government on where they stand, as that has been completely lacking.