Trade (Australia and New Zealand) Bill

Lord Purvis of Tweed Excerpts

Committee stage
Monday 23rd January 2023 Lords Chamber

[Lord Lennie (Lab)]

My Lords, Amendment 1 would prevent regulations being made in relation to cases falling outside the scope of the procurement chapters of the free trade agreements. The noble Lord, Lord Purvis, will speak to Amendments 6 and 19 in this group.

Amendment 1 would remove subsections (2) and (3) from Clause 1. Clause 1 provides a power for appropriate authorities to make regulations for two purposes. Subsection 1(a) allows an appropriate authority to make regulations for the purpose of implementing the government procurement chapters in the FTAs. Subsection 1(b) allows an appropriate authority to make regulations for the purposes of making other changes for matters arising out of, or related to, the government procurement chapters in the FTAs.

The Explanatory Notes state:

“Clause 1(2) allows the regulations under subsection 1(b) to be made also for cases falling outside the scope of the government procurement Chapters to provide for general application”,


and that

“Clause 1(3) clarifies that a case is outside the scope of a government procurement Chapter if that Chapter does not impose an obligation on the UK in respect of that case, i.e. it is not an obligation owed specifically in the Chapter … The effect of subsection 1(b) read with 1(2) is that certain changes made to domestic law to implement the UK-Australia FTA, i.e. in respect of the rules in the text of the government procurement Chapter … can apply generally and not only to suppliers from Australia. This will ensure procurement regulations remain uniform and coherent by not imposing different or conflicting procurement procedures on contracting authorities for procurements covered by the FTA, and ensure the UK can implement its obligations in the FTA in a way that is consistent with the UK’s other international procurement obligations.”

This explanation makes sense; it is of course important that procurement regulations remain uniform and coherent.

Our intention with this amendment is simply to probe the scope of this, as it reads as almost limitless. Can the Minister tell me whether any case could be outside the scope of the Government’s procurement chapters? Are there any limits on this? What is a “case” defined as?

[Lord Purvis of Tweed (LD)]

My Lords, I will speak to Amendments 6 and 19 in this group. The questions posed by the noble Lord, Lord Lennie, in moving Amendment 1 are very sensible. I look forward to the Minister’s reply.

According to today’s press, we are now 15 years behind on the commitment that we would reach £1 trillion of trade within a decade. It is now estimated that the target set by the coalition in 2012 will not be achieved until beyond 2035. This highlights the fact that we are starting to see the consequences of the significant non-tariff barriers introduced by this Government over recent years. Therefore, it is vital that mechanisms are as streamlined as possible for procurement and the rest of the trade agreements.

Amendment 6 is designed to probe the discrepancies in threshold levels in the Government’s procurement legislation, currently going through the House of Commons and which has been through scrutiny in the House of Lords. It probes why they are different for those seeking procurement opportunities for Australia as compared with those seeking them here at home. If you are a business seeking to bid for procurement in the UK, you now have to operate under quite a markedly different approach from that if you are looking for procurement opportunities within Australia.

I welcome the Minister’s letter to noble Lords, which he promised at the end of Second Reading and fulfilled. It highlights what we knew: that, factually, there is a difference in the threshold levels. The letter simply states that Australia was not willing to have the same thresholds as us, and so we simply said that we would have its thresholds. What did we get in return? If this is a concession to Australia then surely we got something in return as far as access is concerned.

The report on the agreement from the Australian Parliament’s treaties committee makes for interesting reading, as does our own report from the House of Lords International Agreements Committee. The Australian report is 225 pages long and can be summarised as: “We got a good deal.” Our House of Lords report, which is 36 pages long, can be summarised from our point of view as: “No, we didn’t.”

The Australian report highlights the fact that the Australians wanted to maintain their levels of thresholds—that was very clear. Thresholds are important; a considerable amount of scrutiny that we did on the procurement agreement was about whether the procurement would be below or above the threshold. If it is below the threshold, the reporting mechanisms, the contracts approach, and the way that schemes or pooled contracts can be put together are different. So we now have a higher rate for Australia.

At Second Reading, I raised the fact that this was done by subcentral contracting bodies. The Minister’s letter to me says that in effect I was wrong in saying that Australia was unique, because Canada has the same approach as Australia’s—but not for subcentral levels. The agreement that we rolled over for Canada for the CETA agreement, has the lower threshold, and we have now gone to the higher one. We are simply trying to find out what we got in return for providing a concession to Australia over the threshold levels. The higher threshold means that there will be extra complexity for businesses.

Amendment 19 is simply a probing amendment on the point that was raised earlier on the Procurement Bill by the noble Lord, Lord Lansley, which was simply trying to seek protections. If we try to change this Bill and its mechanisms for the good, those changes will be protected by the Procurement Bill, which, as the Committee will be aware, will automatically repeal this one. We have the rather ridiculous situation that we are in Committee for a Bill that will be automatically repealed by a Bill that is going to go into Committee in the House of Commons. This is a mechanism to try to protect any of what we do. On that basis, I hope the Government might be minded to accept Amendment 19, or indeed they might have their own mechanisms or commitments, so that we are not wasting our time in Committee.

[Lord Lansley (Con)]

My Lords, three important issues arise from the limited number of amendments here, and I want to say something about each of them.

I shall start with the last amendment, Amendment 19. The noble Lord, Lord Purvis of Tweed, referred to the debates on the Procurement Bill, in which many of us participated. We are in a situation where the Procurement Bill will in due course repeal this legislation. We can see the timing a little more readily now: all being well, we should complete the passage of this Bill and I hope it might reach Royal Assent if not by the end of February then certainly very early in March.

The Procurement Bill in the other place still has a substantial amount of work to be done, and doubtless it will return here with amendments. That being the case, I suspect it would be rash to assume that it would pass before late May at the earliest, especially since the Session is to run longer. The Procurement Bill brings its provisions into force two months after the Bill itself is enacted, so in my view we could be in July at the earliest, and maybe in August or September, before the relevant provisions and the repeal take effect.

That being the case, there seems to be a perfectly good rationale for this Bill being used to create the necessary regulations. One matter that we did not get quite clear in our previous discussion is that this Bill, once enacted, can be used to make regulations. Those regulations will subsist even though this Act will subsequently be repealed by the Procurement Act, as it will become. So there is a purpose in passing the regulations in the meantime. There is a particular purpose, which I will not trespass into, relating to the relationship with Scottish legislation. The fact that this Bill can be used to make those regulations is particularly helpful.

The noble Lord, Lord Purvis of Tweed, knows that I agree with the proposition that, if an amendment were to be made in this House to this legislation, it would be inappropriate for it to be automatically repealed. However, we secured assurances from my noble friend Lady Neville-Rolfe to the effect that the Government under those circumstances would make whatever changes might be necessary to the Procurement Bill in another place. I am hoping that my noble friend Lord Johnson of Lainston will have a similar briefing and a similar reassurance to give us.

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I cannot speak for the Australians, but it is clear that they decided that they wanted the availability of procurements in their regional entities to have a higher threshold applied to them, to which we would then have access. Of course, the same thresholds would then apply back to our subcentral entities. I do not really need to judge whether that is reasonable on their part; what is sufficient for these purposes is that that is what they asked for and they get the same benefit in relation to us. We therefore all get a benefit in access to procurements below the federal level in Australia—and, to some limited extent, in New Zealand—for additional entities. It would be, in my view, impossible for us, through the legislation, to seek to impose on Australia or New Zealand thresholds that are different from those that were agreed in the FTA. Indeed, if we were to try to do what the noble Lord, Lord Purvis of Tweed, is suggesting, we would effectively constrain ourselves back to what is available under the WTO general procurement agreement and remove a significant part of the available benefit to us—so I just do not think we can go down that track.

[Lord Purvis of Tweed (LD)]

I am very grateful to the noble Lord; as usual, he is extremely perceptive. The point I am seeking to make is that, under the GPA, subcentral and regional bodies are covered. We have existing arrangements under the previous EU rules for subnational bodies, and we currently have subnational special drawing rights with the EU. My question is: what impact will the higher threshold that we have conceded to subregional bodies within Australia have on those businesses? I fear that it means a great deal of complexity, so, for us to say back to the Government that they should be having discussions with Australia to bring the thresholds down, rather than just give up, would make sense for British businesses.

[Lord Lansley (Con)]

Well, obviously, if we were in the course of further discussions through the Joint Committee arrangements on the free trade agreements to modify the agreements so as to reduce the thresholds, I imagine that there would be some benefit to our businesses—but that is not the position we are in at the moment. I certainly do not see that we can arbitrarily and unilaterally impose different thresholds through our legislation. The Minister will have to confirm if I am correct, but I did not understand it to be the case that the WTO general procurement agreement gives us existing access to entities in Australia’s procurement below the federal level. I stand to be corrected if I am wrong about that, and I have no doubt that the Minister will have the briefing to tell me if I am wrong. For those purposes, I just do not agree with Amendment 1 as moved.

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In our trade agreements, the UK wants other countries to match the threshold level that we have in our domestic system, so where a party keeps a higher threshold in the GPA or in an FTA, as has been discussed, the UK typically raises the corresponding threshold in the trade agreement in response. This is the case in the UK-Australia FTA. To reassure the noble Lord again, this does not increase the burden on UK suppliers or government bodies.

[Lord Purvis of Tweed (LD)]

I am grateful to the Minister for giving that information. I would just like to get this clear in mind. If a local authority in the UK—a combined authority, say, or subnational authority—sets its procurement scheme, operating under the Procurement Bill, at the £213,000 level, which is 200,000 SDRs, it can operate below or above the procurement threshold. Is the Minister saying that an Australian firm can challenge that regional authority on the basis that, under the agreement, for the Australian firm the threshold is higher? Is that understanding correct?

[Lord Johnson of Lainston (Con)]

I thank the noble Lord. I am not 100% clear on the point he is making. Thresholds are set at whatever is negotiated. Any contract above the level of the threshold is protected from discriminating or unfair practices. Any contract below the threshold is not protected in the same way, in terms of challenge in the courts. It would be unusual for any contracting authority to design its tender to make sure it was not allowing an Australian or New Zealand contactor, or indeed any other contractor, to be below the threshold. The point is it does not make any difference to their thresholds.

[Lord Purvis of Tweed (LD)]

I will not pursue the point much further, but as we discussed during the Procurement Bill, one of the points about thresholds is that companies will not know that the procurement exists; they can be exempted as far as the Procurement Bill is concerned—that is the point of the thresholds. So an Australian firm could challenge an entire scheme on the basis that it would not be aware of the procurement that is happening in that area because of the non-reporting requirements below the threshold. I will not pursue the point any further, but I hope that, as a result of any regulations that come out of the Bill or the Bill itself, there will be guidance to businesses on how to operate with procurement. If those areas could be spelt out in guidance, I think that would be quite helpful. I will certainly read the guidance, because I am finding part of it difficult to understand myself.

[Lord Johnson of Lainston (Con)]

I thank the noble Lord. As I say, this does not change the process in any way. It is simply about protection for people bidding for contracts. In terms of advertising for contracts, the UK threshold levels remain the same—whatever they may be, given the various national or subnational governmental entities. That does not change. So for a local council tendering for, say, printing services, it makes no difference to its actions whatsoever. The only thing it does, from an Australian or New Zealand tenderer’s point of view, is that they may decide the threshold for them that affords additional protection to not incur unfair or discriminatory practices. Frankly, I think it is a highly unlikely situation that any contracting authority would try to bend the rules in order to ensure that Australian and New Zealand contractors could be excluded. That simply would not occur, in my mind. It does not require any additional work; it is simply about the challenge on unfair practices in tendering. That is the reason why the thresholds are set, and they reflect the same thresholds that were offered at national and subnational levels in Australia. That is the reason they are set at that level.

I am happy to go into more detail at a later date. Certainly, I am delighted to work with any Members of the Committee on this but, as I say, it is much simpler than it sounds. It is, in some respects, given the efforts prescribed for local authorities and authorities tendering, not relevant from their point of view.

Amendment 19, in the name of the noble Lord, Lord Purvis, addresses concerns around what would happen to any amendments to the Bill that might be passed during scrutiny by noble Lords. The noble Lord, Lord Purvis, raises an interesting point, and I was extremely pleased that my noble friend Lord Lansley explained the position very clearly and takes a strong interest in this—I am very grateful for his interventions. I have enjoyed the intellectual discussion, by the way, and I think this is precisely the sort of matter that this House is purposed to investigate: these are complex issues and we are absolutely right to be discussing them.

I understand the noble Lord’s point that this may appear, on the surface, an unconventional way to legislate; however, we have pointed out the importance of getting these agreements into force, as my noble friend Lord Lansley mentioned. No one in this House would want to delay the benefits conferred on our consumers, business and government by waiting unnecessarily for a later piece of legislation. It would be unfair to our citizens and also, in my view, against the spirit of the FTAs with our sister nations of Australia and New Zealand. Indeed, I met the Australian Agriculture Secretary and the high commissioner last week and they both expressed their keen desire to see this agreement brought into force as soon as possible. I also know that the Labour Front Bench met these individuals, I believe on the same day, to discuss the agreement.

The sense of urgency is also present within industry. I am sure noble Lords will remember the clear and powerful message from the British Chambers of Commerce during the evidence it presented before the other place’s Public Bill Committee:

“Overall, we want to see the agreements ratified as quickly as possible.”—[Official Report, Commons, Trade (Australia and New Zealand) Bill Committee, 12/10/22; col. 8.]


Returning to the core point, and recognising this novel approach, I repeat again the quotation given earlier. My noble friend Lady Neville-Rolfe made an important commitment that, if noble Lords were to amend this Bill, the Government would look to ensure that any necessary changes might be made to the nature of the repeal during the passage of the Procurement Bill in the other place. I personally reiterate this clear commitment today.

I hope I have provided the noble Lords, Lord Lennie and Lord Purvis, with enough reassurance on the Government’s position on these matters, and I therefore ask them not to press these three amendments.

[Lord Purvis of Tweed (LD)]

Before the Minister sits down, I ask for a final point of clarification and then I will shut up on this group. If the Bill passes, does that mean that we have implemented our domestic legislation in order to say to the Australians and the New Zealanders, through a diplomatic note, that we have put in place our domestic legislation so that this agreement can come into force? Or is that at the point when the regulations under the Bill are made? If it is the regulations, then, as I understand it, one of them will depend on what the Scottish Government and the Scottish Parliament will want to do, because there will be a concurrent power. Just for clarification, is it this Bill or the Procurement Bill, whichever the sequencing, or is it the time when the regulations are made?

[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.

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[Lord Johnson of Lainston (Con)]

My Lords, this has continued to be—and I am not just talking about the words we have exchanged today—a very important debate on devolution and the role of the devolved Administrations in our trade agenda. I am grateful for the interventions from the noble Lord, Lord Howell, and the noble and learned Lord, Lord Thomas. They were very helpful in order to clarify the mind and work through some of the rationale behind the situation we are in.

I will make an important point that may help answer some of the questions. We do not operate a federal structure. We have one Government where there are devolved powers to nations, regions and other authorities. Treaty-making and foreign policy is necessarily a national endeavour, benefiting all. It is this coherence of a national structure that gives us negotiating strength and desirability as a single market access point which enables us to pursue our free trade agenda—something which, I believe, this whole House is united behind. All regions benefit from this process, above and beyond their own specific interests; the sum of the parts is greater than the constituent. We should not confuse the actions here, either. Treaty-making is the reserve of the UK Government. Finally, it would be unfair on our treaty partners not to act in good faith in taking forward legislation which implements these agreements by the most efficient means possible.

Amendment 2, in the name of the noble Lord, Lord Lennie, would require public consultation with devolved Administrations and representatives of English regions before making the secondary legislation which implements the UK-Australia and UK-New Zealand FTA procurement chapters under Clause 1. I know the noble Lord also mentioned the impact assessment, which, if it is okay, I will address in the following section.

Your Lordships will be aware that the Minister for Trade Policy chairs the Interministerial Group for Trade, previously known as the Ministerial Forum for Trade. This forum provides an opportunity for discussion on all matters of trade policy, including the implementation of UK free trade agreements. This group, by the way, last met on 9 January, so very recently. It is not the only opportunity for ministerial discussions and there are frequent bilateral meetings between Ministers. In addition to ministerial engagement, discussions with devolved Administrations at official level have totalled hundreds of hours across both the UK-Australia and the UK-New Zealand FTAs. This includes frequent updates by chief negotiators and detailed discussions on draft text. We are aiming to create—and believe we have—free trade agreements that benefit our nation in its entirety, and factoring in the requirements of each nation is at the very core of our work. In the case of procurement chapters, in both the UK-Australia and UK-New Zealand FTAs, we have found common ground between the UK Government and devolved Administrations in our objectives in the negotiations on this matter. I believe the honourable Member Dame Nia Griffith remarked during the Public Bill Committee in the other place:

“On procurement, the Welsh Government go as far as to say that there may be scope for businesses in Wales to take advantage of the provisions included in the UK Government procurement agreement, and that some Welsh interests in procurement were protected during the engagement with the Department for International Trade.”—[Official Report, Commons, Trade (Australia and New Zealand) Bill Committee, 18/10/22; col. 77.]


As we move toward implementing these agreements, there have already been preliminary discussions on the drafting of secondary legislation. This Government will continue conversations with the devolved Administrations as drafting progresses, in keeping with the Bill’s passage. I also remind the House of the commitment we have made never to use the power in Clause 1 without consulting the devolved Administrations first. I restated this commitment at Second Reading, and I assure noble Lords that this is a sincere commitment that His Majesty’s Government will honour.

On consulting the English regions, they do not have the same role in implementing legislation and these agreements as the devolved Administrations. Given our approach, as demonstrated to date, to engagement in all areas and with the industry and other stakeholders, and given our commitment to continue to consult with appropriate authorities on the use of the power in Clause 1, I believe that the amendment is unnecessary. This was also the conclusion when similar amendments were tabled in the other place. I therefore ask the noble Lord to withdraw the amendment.

[Lord Purvis of Tweed (LD)]

Before the Minister sits down, may I ask about the interaction of this Bill and the Procurement Bill and the commitments on consultation? We know that Clauses 1 to 4 of this Bill address devolved areas for Wales and Scotland, and that this Bill introduces the concurrent mechanism. The former Secretary of State, Anne-Marie Trevelyan, said that regulations made under these powers that relate to devolved competencies would not be made concurrently without seeking the consent of the devolved Parliaments or, at the very least, consulting with them. If this Bill is repealed by the Procurement Bill and these elements of the Procurement Bill do not apply to Scotland, what is left of the consultation mechanisms for the devolved Administrations in this Bill? They would be repealed by the Procurement Bill.

[Lord Johnson of Lainston (Con)]

I always thank the noble Lord, Lord Purvis, for his academic approach to these debates, and I am grateful to him for those points. The former Secretary of State was right when she said that we were seeking consent; the Government have sought consent, and we have consulted. Regarding the relationship between this Bill and the Procurement Bill, I am not sure what the relevance of consultation is in relation to Scotland. A number of the actions in this Bill will continue, since they are not being cancelled by the Procurement Bill. I understand that the Procurement Bill will retain the other parts of this legislation. Certainly, we have committed very clearly to making sure we seek consent and consult.

Without prolonging this debate, I think it is essential—I have said this before—that we engage with everyone in this country and all the devolved nations to ensure that we create trade deals that benefit them. I am sure the noble Lord will be aware of and celebrate the opportunities that his own food and drink industry will have under these new agreements. We are reducing tariffs on a great variety of spirits so that industry can sell more at lower prices or use that additional income to market its goods. All the manufacturers I have spoken to were extremely positive about those measures, which will, I am pleased to say, directly benefit Scotland. The intention here is to create powerful free trade agreements that work for the entirety of the United Kingdom. As a result of that, it makes absolute sense—not just in the specific legislative format but in a fundamental negotiating sense—that these are reserved powers for the United Kingdom, and that we have the opportunity to implement them.

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[Baroness Humphreys (LD)]

My Lords, I apologise for not having spoken at Second Reading on this Bill. I am afraid that, like many others including my noble friend, I failed to dodge a couple of viruses and their aftermath recently.

I am grateful for the opportunity to speak briefly on this group, and in particular to support Amendment 15 in the names of my noble friends Lord Purvis of Tweed and Lady Bakewell of Hardington Mandeville. This amendment reflects the concerns of UK farmers and has a particular relevance to Welsh farmers. It seeks to ensure that the Secretary of State reports on the impact of the procurement chapters on different types of farmers and farms. Here, for the first time in my nine years in this House, I find myself slightly at odds with the noble Lord, Lord Kerr.

With the trade deal set to provide a mere 0.08% boost to the UK economy, it appears that both New Zealand and Australia, with economies many times smaller than ours, are set to benefit. New Zealand, for example, will have access to a UK market of some 67 million people if it chooses to, whereas our farmers will find New Zealand, with its market of some 5 million people, a much less attractive prospect. Both New Zealand and Australia will have almost unfettered access to UK markets. This places UK and Welsh farmers at significant risk, with apparently almost nothing gained in return.

For those of us who live in Wales, there is an additional impact that will not appear in the list contained in this amendment but is nevertheless important to us—the impact on the Welsh language. Some 42% of our farmers speak Welsh, as opposed to 19% of the general population. They are the guardians of our language, traditions and culture. Anything that impacts on the viability of our farming communities will eventually impact on our language.

Our farmers are concerned about their futures and, as a recent edition of Farmers Weekly reported, this concern has resulted in a large reduction in the level of support for the Conservatives among UK farmers. Where 72% of farmers in 2020 said that they would vote Tory, now only 42% would do so. One supposes this result reflects the reality of “getting Brexit done” on our farming communities and fears for the future of farming. However, this is an opinion poll; what we need is hard evidence.

The Minister can perhaps suppose that this trade deal will be a great success; I can suppose that it poses a significant threat to our farming communities. Only a comprehensive impact assessment, such as the one called for in Amendment 15, can provide us, as legislators, with the evidence we need to justify our positions and decisions. Like my noble friend, I hope the Minister will agree to this amendment.

While I have the Minister’s attention, could I ask him to further comment on his assertion that eating New Zealand lamb is better for the environment than eating lamb from around the UK? Imported lamb from New Zealand can be produced to lower standards than our own foods, using methods that are unacceptable here. This is why my preference has always been for the taste and quality of Welsh lamb over New Zealand lamb. I fail to see how importing lamb from half way around the world makes that lamb better for the environment than locally produced and sourced lamb. Welsh lamb is among the most sustainable in the world, produced using non-intensive farming methods and high standards of husbandry. When the Minister responds to this group, would he care to take the opportunity to offer Welsh and UK farmers a few words of support in recognition of the work they do to produce such high-quality produce?

[Lord Purvis of Tweed (LD)]

My Lords, it is a pleasure to follow my noble friend. I agree with 99% of what she said—the 1% is that lamb from the Scottish Borders could even just edge Welsh lamb. But I will allow the Minister a life-raft after what he said at Second Reading: he does not necessarily need to choose between Scottish and Welsh lamb, he just needs to say that he will back British producers over Australian and New Zealand producers. He is the British Trade Minister, so he needs to bang the drum for our sectors.

We have heard from the noble Lord, Lord Lennie, on whether George Eustice’s comments were in breach of the compact made in accepting everything bad that is done by your Government once you leave office. The noble Lord, Lord Lansley, is scrupulous in doing that and protecting the previous record.

I turn to the point made by the noble Lord, Lord Kerr, on impact assessments. When it comes to the impact on some of our sectors, the Government themselves have touted the protective measures. They have indicated that this could go wrong and therefore that protective measures could be triggered. The NFU is quite clear that they are insufficient; nevertheless, Boris Johnson and others have said that there are protective measures and that we need not worry. So we need to know the baseline information about that—it needs to be transparent and open—otherwise we will not know whether we are getting close to understanding whether a triggering mechanism will be required or not.

As my noble friend Lady Bakewell indicated, we are starting from the basis that cattle and sheep production in the UK are having difficult times. I noticed, just this morning, from statistics on GOV.UK that this is the first time since 2012 that total UK meat production has

“decreased by 0.8% to 4.1 million tonnes.”

That is a reduction in cattle of 4.6% and in sheep of 9.5%. The sectors are having a difficult time, for a whole set of reasons that have been indicated, and therefore the last thing that they needed was an agreement that did not sufficiently offer a degree of protection that there would be like-for-like competition.

As we all know, this was an agreement of liberalisation, but it was a liberalisation from our end and not theirs, because they were already liberalised. So the only opportunities that could arise would be if Australia or New Zealand either seek or want to capitalise on that. The Minister made the point at Second Reading—he made it very clearly—that it was unlikely that they would want to take all the quotas and capacity they have now secured; he said that it would be unlikely that that would be the case. However, that does not recognise, as the NFU and others have said in very clear briefings, that it is not just the overall volume of imports; it is also what kind of cuts and meats they are and what kind of competition exists.

One thing that, I confess, I had not noticed—it was subsequently drawn to my attention—is that, unlike normal practice, this is an agreement on shipped product weight; it is not an agreement on carcass weight equivalent. That is absolutely desirable for the Australians and New Zealanders; they want to ensure that the good cuts for our markets will be shipped in a way that is super-efficient and is not an overall carcass-equivalent weight. That means that every percentage point that they increase on shipped product weight that comes directly to our markets will have a disproportionate impact on our own ability to compete with that, because our farmers are ordinarily trading on a carcass weight equivalent basis. Unless I am incorrect, I understand that we trade with the EU on carcass weight equivalent, but we are giving Australia and New Zealand the advantage of trading on shipped product weight. I would be grateful if the Minister could say whether that is the case.

My second point is about the Government’s own estimates, which say that we are likely to see a 5% contraction in the sheep sector and a 3% contraction in the beef sector. As the noble Baroness, Lady McIntosh, indicated when putting that in GVA terms, the NFU has calculated that that would result in £464 million lost to GVA. That is not an insubstantial sum when it comes to a sector that operates in some of our most remote and rural areas and, as indicated before, in areas that have received considerable challenge over recent years.

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[Lord Purvis of Tweed (LD)]

Was it from the UK?

[Lord Johnson of Lainston (Con)]

It was locally sourced—that is my focus, but lamb from anywhere in the UK is delicious, as is all our produce.

I reiterate my personal passion for and commitment to this important sector of our economy and the people in our farming and rural communities who work in it. This is one of the most special and unique features of our nation. As someone who grew up on a farm—many of my family are farmers and I spend what time I have, when not here working with noble Lords to promote our free trade agenda, on a farm—I can say that there is no one more sensitive to and aware of the effects of these changes on farmers and their communities. I continue to bang the drum for our agricultural products whenever I travel around the world.

It is important to emphasise that this Government consider agriculture a key part of UK trade policy. We have made this a key focus in designing these deals. British farmers are among the best in the world, and we want to ensure that farmers and producers benefit from the opportunities provided by UK FTAs, while ensuring that appropriate protections are in place for the most sensitive products. This is why we have invested so much in concepts such as farming advocates around the world and why I spend a great deal of my time trying to get investment into agricultural technology developments that will ensure that our farmers are equipped for the future and can profit fully from this work. We are a world leader in agricultural technology and new methods of planting, harvesting and husbandry. We need to repoint this important discussion—I hope to do so in future—to focus on the possibilities for the future as much as to protect the treasure that we already have.

I acknowledge the concerns that noble Lords have raised, most recently at Second Reading, pertaining to the liberalisation of agriculture, in particular that of beef and lamb. The Government have sought to balance the benefits of free trade for UK businesses and consumers with robust protections for our agricultural industry. Within the Australia and New Zealand agreements, the Government have secured a range of measures to safeguard UK farmers, which my noble friend Lady McIntosh and the noble Baroness, Lady Humphreys, wanted me to focus on in particular. I apologise if this is too detailed, but they include tariff rate quotas for a number of sensitive agricultural products, such as cheese and butter as well as beef and sheepmeat, product-specific safeguards for beef and sheepmeat from Australia, and general bilateral safeguard mechanisms that provide a safety net for industry.

The noble Lord, Lord Kerr, raised the very important point of whether this is a template for other free trade agreements. I stress that we look at every free trade agreement on its own merits; it is absolutely right that we should negotiate each one separately. What is in this agreement will not necessarily be replicated in other agreements, but I think that we have been very successful in the way we have structured these deals to provide safeguards and, as I have said in this Chamber before, the flexibility built into these FTAs to enable us to evolve the specifics over time. I hope that the broad concept and structure of how we enter these FTAs will be replicated and continue to be appointed as successfully as possible.

On agreements around agriculture and sensitive industries, we are clearly aware that every trade deal must be negotiated specifically to ensure that we get the best deal for this country. It is very important that we take the right amount of time to execute them. I hope noble Lords will join me in wishing our Secretary of State all speed in coming to sensible conclusions, while always ensuring that the quality of the deal is not sacrificed to try to conform to some arbitrary timeline. We want the best deals for the future, and it is important that they are specific to each country with which we sign treaties.

Within the Australia deal, the first measure—known as the tariff rate quota—lasts for up to 10 years. There was some discussion around this, so I would like to clarify it. Depending on the product, higher tariffs are automatically applied to imports above a certain volume threshold, known as the quota. The second measure—this is for the Australia deal—from years 11 to 15, is known as a product-specific safeguard, which has a broadly similar effect. It allows the UK to apply significant tariffs—for example, 20% for beef and sheepmeat—above a volume threshold. Additionally, on sheepmeat, if volume thresholds under tariff rate quotas in years 1 to 10, or product-specific safeguards in years 11 to 15, for sheepmeat are consistently filled, there will be an automatic reduction of the quota safeguards by 25%. That is very important. If we see a continued excess of imports in those products, we can then reduce the quota allowances to ensure that more pay higher tariffs. That is quite an innovative measure that has been put into these mechanisms.

[Lord Johnson of Lainston (Con)]

I thank my noble friend for those comments. I do not know our previous treaty structures—those that were pre-EU were long before I was alive, but I am happy to see whether these have been replicated in other trade agreements. The point is that they are innovative, and they are designed to ensure that we can protect ourselves over a prolonged period of time, which I think is very important. We are not looking at immediate liberalisation in these sensitive areas; we are looking at having complex and well-thought-through mechanisms that protect our agricultural industry while allowing for the gradual liberalisation of our trade.

If I may carry on, it may clarify the answer to my noble friend’s question. The third measure, a general bilateral safeguard mechanism, will provide a temporary safety net for industry if it faces serious injury from increased imports as a result of tariff liberalisation under the FTA. This applies to all products. This protection is available for a product’s tariff liberalisation period plus five years, in order to allow domestic industries time for adjustment.

I hope the Committee is reassured to know that the New Zealand deal includes a range of tools to protect sensitive agricultural sectors in the UK. Tariff liberalisation for sensitive goods—for products such as cheese and butter, as well as beef and sheepmeat—will be staged over time to allow time for adjustment. There are tariff rate quotas on a range of the most sensitive agricultural products. These limit the volume of duty-free imports permitted and, in the case of sheepmeat, will be in place for a total of 15 years. A general bilateral safeguard mechanism, which provides a temporary safety net for industry if it faces serious injury, or threat of serious injury, from increased imports as a result of tariff elimination under the FTA applies to all products.

I raised at Second Reading why we do not expect products from Australia or New Zealand to flood the UK market from the current low levels at which they are imported. I believe the noble Lord, Lord Kerr, also raised this. The fact is that, in kilogram terms, 80% of Australian beef and 70% of Australian sheepmeat exports in 2021 went to markets in Asia and the Pacific. We would expect any increase in imports into the UK to displace other imports, probably those from the European Union, rather than compete with UK farmers. I think this is very important in the sense of where we see these exports going. We can be reassured that the main market for Australia and New Zealand absolutely is, at the moment, Asia. Further, diversifying the potential source of imports will help UK food security.

I point out that New Zealand already has a significant volume of tariff-free access into the UK for sheepmeat, but last year used less than half of that quota. That means that New Zealand could already export more sheepmeat to us, tariff-free, but chooses not to. I think that is something that we should bear in mind. In many instances, the quotas—particularly for sheepmeat in Australia—are not being utilised by a significant margin. That should give us some reassurance.

During this debate, noble Lords—my noble friend Lady McIntosh in particular—have also raised concerns over standards of production in Australia and New Zealand, particularly in relation to animal welfare and the environment. This is a very important point on which I want to reassure noble Lords. We are proud of our standards in the UK, which, importantly, we have retained the right to apply and to regulate in future. The deals do not provide for any new regulatory permissions for imports. All animal products imported into the UK must continue to comply with our existing import requirements—including hormone-treated beef, which was and remains banned in this country.

I am very aware of my noble friend Lady McIntosh’s comments about the Food Standards Agency. I will look into that, but I believe she is implying that there are no checks at our borders for imported meat products, and I would be completely surprised if that was the case. I will certainly look into it, but I am reassured by my officials that we run a coherent inspections regime, and that will not change. It is very important that we feel reassured that we have this regime. In fact, the reports I have read from the Trade and Agriculture Commission have referred specifically to that.

On animal rights and welfare—which is a particularly important issue to me personally—I spoke to Minister Watt, the Australian Minister for Agriculture, last week. In particular, I went to see him to discuss his commitment to this area, which he reiterated to me significantly. He also updated me on the progress of appointing a new inspector-general for animal welfare; I think the noble Baroness, Lady Bakewell, will be pleased to hear that.

The independent Trade and Agriculture Commission —a body my noble friend Lady McIntosh was instrumental in establishing—concluded on this point that the UK-New Zealand and UK-Australia FTAs do not affect the UK’s statutory protections for animal and plant life and health, animal welfare and the environment, and in some areas actually strengthen the UK’s right to regulate. It concluded in relation to the UK-Australia deal specifically that

“the FTA does not require the UK to change its existing levels of statutory protection in relation to animal or plant life or health, animal welfare, and environmental protection.”

I raised these points at Second Reading, and I believe I used that quote then. I hope I have made it very clear that our standards and protections do not change on account of our FTAs with Australia and New Zealand—I ask all noble Lords, please, to hear this. The TAC continued:

“even to the extent that the FTA imposes greater trade liberalisation obligations on the UK, as it does, for example, by reducing customs duties, the UK not only has the same rights as it would under WTO law to maintain and adopt protections in the areas covered by this advice, but in relation to animal welfare and certain environmental issues it has even greater rights than under WTO law.”

I take this opportunity to say that this is not the end of the agreements but the beginning. These deals also establish a forum for the UK to raise concerns, co-operate and share information under the FTA committee structure. This structure spans the whole of the FTAs. For example, the UK-Australia FTA provides for sub-committees covering technical barriers to trade, working groups on animal welfare, dialogues on legal services, and numerous other sub-groups and committees that will allow us, if we feel at any point that these FTAs have issues, to raise this with our trading partners formally or through other mechanisms to ensure that we come to a resolution.

I appreciate that I have gone into some detail—

[Lord Purvis of Tweed (LD)]

I am grateful to the Minister for giving way. Since the noble Lord, Lord Lansley, mentioned the TAC letter to the Secretary of State when it reviewed the agreement, let me quote just one part, because I am having difficulty squaring what the TAC said and what the Minister has just said on environmental aspects of the agreements. The TAC report says that

“we determined that it was likely that products affected by the practice at issue would be imported in increased quantities under the FTA. This was true, for instance, of plant products produced using pesticides and fungicides that are not permitted, or being phased out, in the UK.”

If the Minister is so clear, I do not know how it is possible that we will import under the FTA increased amounts of products which use things we have banned here.

--- Later in debate ---

[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.

[Lord Purvis of Tweed (LD)]

I—

[Lord Johnson of Lainston (Con)]

I am going to come to a conclusion and then I will hand back to the noble Lord.

I ask that these amendments not be pressed, and maintain that Clause 2 and Schedule 2 should stand part of the Bill.

[Lord Purvis of Tweed (LD)]

Just before the Minister finally sits down, I wonder whether he might be kind enough to write to the noble Lord, Lord Kerr, and ensure that copies are sent. These powers are a perplexing issue. The Explanatory Notes say they are necessary for consequential elements, but that would be covered by Clause 1(1)(b). The Minister says we need these powers in the long term, but they are repealed by the Procurement Bill as soon as that Bill becomes an Act, because this Bill is superseded. There is no part of this Bill that is protected by the Procurement Bill; this Bill will be repealed entirely. I do not expect him to reply now, but, if he could explain that point in writing in advance of Report, that would be very helpful.

[Lord Johnson of Lainston (Con)]

I appreciate that intervention, and I will certainly do so. I am happy to have further meetings on this issue. I thank the noble Lord for that comment.

Trade (Australia and New Zealand) Bill

Lord Purvis of Tweed Excerpts

2nd reading
Monday 9th January 2023 Lords Chamber

[Lord Purvis of Tweed (LD)]

My Lords, I think I followed the first eight minutes of the interesting speech of the noble Lord, Lord Hannan, which were against government intervention, followed by four minutes of supporting state subsidies, but I will read Hansard tomorrow to see if I have got that wrong. I am also keen to find out how long the new year’s resolution of the noble Lord, Lord Kerr, lasts. With all this optimistic chat about scotch whisky, my one for dry January will not be lasting very long.

I thank the Minister for engaging with me and others before this debate. I note that he said in his opening remarks that he has a continuing financial interest in New Zealand. I wonder if he could provide some more information on what that is and place it in the Library. That would be useful to know, since he is the Minister for Investment implementing this series of agreements. I also welcome the maiden speech of the noble Lord, Lord Swire. I can reassure him that if he marches in the wrong direction towards a different Lobby from that of his Government, he will not be roundly condemned by all sides. I welcome him to this House and look forward to his contributions.

Last week was going to be a momentous week for us regarding trade. It was to be the week in which we secured, according to the promise in the 2019 Conservative manifesto, that 80% of our trade would be conducted through trade agreements, but that has been missed by a very large margin. Instead, we have seen new barriers and burdens on businesses trading with our nearest neighbours repeatedly increase, while trade with and imports from less free countries, such as China, also continue to increase. But we should take solace that this agreement, representing 0.08% over 15 years, will edge us that little bit closer to the 80% mark.

I also welcome the Minister’s enthusiasm for these debates. He was giving full-throated support for FTAs, but I noted that just a few days ago it was reported that the Secretary of State, Kemi Badenoch, told MPs that she

“wanted us to move away from the DIT being seen as the Department for free trade agreements and back to the Department for International Trade”.

I am not sure how it can go back to being that department, given that there has been list after list of boosterism with regard to FTAs. I understand that her favourite quote refers to trade deals being like motorways. She has said that if cars are not going back and forth, then you might as well not have built them in the first place. The problem is that we are building one lane for exporters from the UK to their markets, and three lanes from theirs to us. As George Eustice highlighted in the debate, on this agreement we

“gave away far too much for far too little in return”—[Official Report, Commons, 14/11/22; col. 424.]

Agreeing with the Conservative former Secretary of State for Defra does not necessarily make you anti-free trade. It just means that you are concerned about poor negotiations in free trade agreements. They are not necessarily inconsistent. It is interesting that George Eustice, Liam Fox and others now say that it would strengthen their hand in these negotiations if Parliament approved negotiating mandates. I disagree with the noble Lord, Lord Marland, on this. At the time, Ministers say that it will weaken their hand in negotiations. But when they are no longer Ministers, all of a sudden, they say, “I wish Parliament had approved my negotiating mandate because it would have been stronger”. How much precedent do we need to be persuaded about this?

I have a collection of press releases on my desk in the Lords because I have been covering international trade for a wee while. Those press releases relate to agreements. There could be a quiz at the end of the year on which press releases relate to which trade agreements. “Gold standard” is one; “world leading” is another; “Brexit bonanza” is a third; “most advanced ever signed” is a fourth and

“a major moment in our national history”—[Official Report, Commons, 14/9/20; col. 25.]

is a fifth. If boosterism was a commodity, then we would be world leading. That does not necessarily bring about any extra GDP growth. My favourite one was from Anne-Marie Trevelyan, the former Secretary of State, when she was in Australia last year. She said that this agreement would bring down UK inflation. She said it as a Minister on a visit to Australia. I would be grateful if the Minister could write and say how much it is going to contribute to this and how.

The Australians, probably quite rightly, referred from their perspective to this as a “once in a generation” agreement. It is not a good deal for us, as George Eustice has said, but the Australians, to give them credit, have negotiated a good deal. The noble Lord, Lord Liddle, is absolutely right that there was a degree of suspicion among government that extra scrutiny would not help the Government’s case on the agreement they signed.

On the Grimstone rule, I would say to the noble Lord, Lord Lansley, that he is right. We debated the Australia agreement in Grand Committee, but the Commons did not have an opportunity to do it and had to call for an Urgent Question to have time to discuss it. What had then been the Grimstone rule—on cue, the noble Lord is soon to resume his place as I refer to him—no longer applies. When he gave that commitment with great sincerity in debate on 23 February 2021, he replied to the noble Lord, Lord Lansley, and me:

“What have we done? It includes committing to allow time for the relevant Select Committees to report on a concluded FTA before the start of the CRaG process.”—[Official Report, 23/2/21; col. 729.]


It is not before the conclusion, or during the scrutiny period, but before the start of the CRaG process. That is no longer in place, which is to be regretted.

I asked the Minister a Question before Christmas on a separate agreement to incorporate human rights in all FTAs, which has now been reneged upon. The noble Lord, Lord Udny-Lister—I was interested in his contribution today—asked a follow-up question and said that he hoped FTAs would not be “Christmas trees”. The Minister agreed with him. However, he is supporting a bauble of a Bill, because procurement is not trade but public finance policy. How Governments choose to spend taxpayer money is not like businesses doing business with others or the consumer. It is about public taxpayers’ money being spent; it is extra. If it is okay to have procurement, then it is also okay to look at labour standards, human rights, sustainability and indigenous communities. That is what makes these deep and comprehensive agreements about the trading relationship—and, critically, fair trade.

I have to warn the Minister that his comment on setting aside trade and human rights, which I hope he will reflect on, will concern those in Northern Ireland, because human rights is hard-wired into both trade agreements and procurement rules within the United Kingdom. Moving dramatically away from that will mean that we will also have to change our development policy and strategy, because trade, human rights and trading with free nations with human rights standards is an integral part of the development strategy published by this Government. If that is no longer the case, we need a new development policy as well to remove this utter incoherence.

A ridiculous element raised in this debate is that we are almost going through the last rites of a Bill before it is made deceased by the Procurement Bill, which is receiving its Second Reading in the Commons today. This is simply not the way we should properly legislate—but we will do our job and scrutinise it properly. But, yet again, we are debating a Bill that has a significant impact in devolved areas and that is introducing new concurrent powers. I remind the House that concurrent powers are the invention of this Government, where they say that, if a devolved Government do not make a decision to act in their areas of competence, the UK Government will do so if they want. This is not consistent with the principle of devolution, and it is therefore no surprise that there is significant concern in the Welsh Senedd and the Scottish Parliament. Due to the fact that statutory instruments will likely be brought forward to directly act on devolved policy—without LCMs themselves—we need to know what they are before the conclusion of the Bill in this House. So I hope that the Minister will be able to publish draft instruments expected from the Bill.

As we have heard today, a question then arises about the impact the Bill will have overall. We know that it is likely to cause 0.08% to 0.1% GDP growth over 15 years, but I note what the former Secretary of State said about giving away “too much” for “too little in return”. From the contributions of the noble Baroness, Lady McIntosh, and others, we know that some of these critical sectors—beef and lamb—will decline by 5% and 3%. This will disproportionately impact areas such as those in the lowlands of Scotland that I was elected to represent. The noble Lord, Lord Hannan, made the point, which I referred to, that that is okay because you can give state subsidies to those areas, presumably as long as it is consistent with WTO subsidy rules. But, as the noble Baroness indicated, what is the point of having a procurement policy that proactively supports purchasing from a sector of the economy that the Government know is being reduced by an agreement that they negotiated? This is utterly contradictory and pointless.

On the procurement side, the Government’s press release indicated that the agreement

“gives UK firms guaranteed access to bid for an additional £10 billion worth of Australian public sector contracts per year.”

I was interested in this because, according to the Australian finance ministry, total public procurement spend in Australia was £46 billion. The UK equivalent is £379 billion, so there is no dispute about who is more attracted to getting access to a bigger market. But from that 81 billion Australian dollars, you deduct 10 billion for thresholds differences, 12 billion for things already procured by overseas interests and another 11 billion for defence. You are therefore left with a total market of £27 billion, which is already governed by the GPA. So I simply do not know where this extra £10 billion-worth of opportunity, which we were not able to access through global procurement, comes from. I would be grateful if the Minister could give a detailed breakdown, because I am interested in how we are able to get another £10 billion—which does not exist—from that £27 billion. Perhaps this is boosterism, but I will allow the Minister to write to me with a detailed breakdown.

I would be grateful to know, because it has not been mentioned so far, why there is no detail in the Government’s impact assessment on the fact that the Australian approach is to allocate at least 20% of all their procurement to their SMEs, which means that that element of the market is still closed. I would also be grateful to know if the Government could say why we acquiesced to Australia’s carve-out for local government to be excluded from the agreement—we only found out about that in a side letter which confirmed it. Why is local government procurement, which the Minister did not mention, not included in the agreement?

There is a very interesting contradiction between this Bill and the Procurement Bill, which the Commons is discussing at the moment: unique to the agreement on procurement with Australia, and to satisfy the Australians, we have increased the threshold for procurement. We did not receive any information on this from either the noble Lord, Lord True, or the noble Baroness, Lady Neville-Rolfe, during the many debates on the Procurement Bill. All procurement for subcentral government levels in the UK is £213,477, but for Australia that figure has gone up to over £350,000. I do not know why the threshold for procurement, as it stands in the UK across all areas of procurement, is different for the Australians. That is deeply confusing for all those procurement bodies, because they will likely need to state whether a source of procurement is from an Australian enterprise and therefore operating under a different threshold from all other procurement within the UK. I simply do not know how that will operate, but I would be grateful if the Minister could put us right on that or if we could pursue it in Committee.

I will make two final points in drawing to a conclusion, one of which is a point of principle on some of the differences on agriculture we have heard in the debate. We have heard from some noble Lords—including the noble Lord, Lord Frost, and others—that the elements of agriculture should have been accelerated. It should not have been over a 15-year period, because consumers, as the noble Lord, Lord Hannan, indicated, should receive sooner the bounty of what this agreement was intended to give. Theoretically, that is an interesting argument for full liberalisation, but, as George Eustice has said, we already had full liberalisation from us to them; what we have done is given them full liberalisation to us with nothing in return.

I checked the impact assessment during the debate, and paragraph 5.2 states that the total sum impact on UK consumers of the agreement with Australia is, in the long run, over 15 years, £2.4 million annually—thruppence per person a year in year 15. So what are the consumer bounty benefits that will come at the cost of our hill farmers losing 5% and our beef manufacturers losing 3% of procurement? I do not see the benefit for consumers; the benefits which have been presented today are mythical. But the Bill will go into Committee and there will be ample opportunity for us to learn more about the benefit of 3p a year per consumer while seeing our hill farmers being reduced.

In conclusion, this leads us to a very clear case for a comprehensive trade policy which links to our rural economy sector and the need for parliamentary scrutiny. How many former Ministers in the Cabinet does it take for the Government to realise that Parliament approving negotiation mandates will strengthen the UK, not weaken it? We have FTAs that were a priority, but now they are not. Deadlines, which were previously vital for the agreements, are now not helpful. Human rights were integral to the agreements, but now they are not a priority. Data policy was consistent with the EU and then not, and now might be; we do not know where that stands. Dispute resolution mechanisms are different in Canada, Japan, New Zealand and Australia; they are utterly inconsistent. There is labour mobility in Australia, but the Home Office warns against it for India. There are other contradictory areas in what we are asked to approve by the Government. We need a government trade strategy with a policy that is approved by Parliament; that will help us do our job in this Parliament.

--- Later in debate ---

[Lord Purvis of Tweed (LD)]

Is the Minister saying that the impact assessment is wrong about the 5% and 3% reductions? The Minister has just said at the Dispatch Box that, if this agreement were not in place, there would be no negative impact. However, the impact assessment says that this agreement is bringing a negative impact. Will the Minister commit to revising the impact assessment before we reach Committee, because either he has just misled the House or the impact assessment is wrong? They cannot both be right.

[Lord Johnson of Lainston (Con)]

I am grateful for that point and would be happy to clarify. I will certainly work closely with the noble Lord in Committee.

My point is that Australian imports already operate below the existing quotas. Even if we said that we were not going to have a trade deal with Australia and decided that we did not want to go ahead with a deal that I think will be hugely beneficial, we already have a quota system where the Australians are importing less. If we go to a new arrangement where, over 10 or 15 years, we gradually liberalise our agricultural imports, the very fact that we are increasing that higher level does not necessitate that we are going to put ourselves in a more disadvantaged position. I am not trying to suggest that the impact assessments are not correct. I have been sensitive about that; I said at the beginning that there are impacts and there will be change. We must be sensitive to that. However, I am saying that the claims that we are going to have a significant tsunami of Australian beef coming into the UK simply do not make logical sense when we are already importing less than the quotas imply. It is important to mention that.

We have also touched on another relevant point. There are production differences between Australia and New Zealand; my noble friend Lord Hannan of Kingsclere mentioned this earlier. It is important that we take advantage of that fact. I will not be too much longer but let me quote the TAC, which states that

“different production practices between countries are a function of different climatic, geographical, agronomic, environmental, economic and cultural conditions. Australian cattle and sheep live their lives outdoors, mainly on very large stations, which is different in the UK. It can never be assumed that what is normal in one country needs to be normal in another … Moreover, the international trading system, of which free trade agreements form a part, is predicated upon the understanding that countries should be able to benefit from advantages which they enjoy over their trading partners. Trade law, in principle, prohibits countries from restricting imports of products simply based on how they are made, whether this is by using their more abundant sunshine, land, educational skills or lower labour costs.”

This is important. We are trying to do a trade deal where we have, enjoy and appreciate comparative advantage while at the same time being extremely firm on the controls that we will put in place to make sure that, if there is a significant increase in imports into the UK, we can restrict those imports and ensure that our farmers are protected. Following the 15-year point, we will still have WTO restrictions that we can fall back on.

Bilateral Free Trade Agreements

Lord Purvis of Tweed Excerpts

Tuesday 20th December 2022 Lords Chamber

[Lord Johnson of Lainston (Con)]

I greatly appreciate my noble friend raising that question—and her debate last night—and encouraging attention on central America. I thank her for the work she does as our trade envoy to those countries. Chile is a very important country for trade with the UK. I am very pleased to say that I attended, along with Minister Rutley, a Chile financial services conference only three days ago. Clearly, we have a number of free trade agreements to enact and an extremely busy schedule. When the opportunity comes for us to expand further on the incredible list I have already presented to the House, I have no doubt that countries such as Chile will be under consideration.

[Lord Purvis of Tweed (LD)]

I have been told for years that human rights will be an integral part of all FTAs, but the Minister told the House last night that this will no longer be the case. The OBR has now confirmed that our economy will be 4% smaller because of the enormous trade barriers with our nearest trading partners. The UK is now dependent on goods from China to the tune of a trade deficit of nearly £40 billion. Is it not in our economic and strategic interests to move away from this trend of dependency on autocracies and non-democratic countries and make it easier to have free trade with free nations, especially in Europe?

[Lord Johnson of Lainston (Con)]

I greatly thank the noble Lord for that point. We are all aware of the importance of resilience in our supply chains, particularly when it comes to nations around the world that may not share our values and interests. As for Europe, I refer him to the comment I just made about the export support service and the additional work and funding we are putting in to help our exporters export to Europe.

Central America: Trade and Investment

Lord Purvis of Tweed Excerpts

Monday 19th December 2022 Lords Chamber

[Lord Purvis of Tweed (LD)]

Well, there is no harm in embellishing the point. The noble Baroness, Lady Hooper, has been rightly congratulated on bringing this debate to us on a neglected issue, but one that she does not neglect. She leads for us on this.

I am a member of the Selkirk Merchant Company, established in 1694 and one of the two remaining elements of the Company of Scotland—I am sure that the noble Earl, Lord Dundee, is aware of this. If the Darien scheme on the Isthmus of Panama had gone differently for Scotland, the story of our nation would have gone differently. Our history as a country is entwined with that region, but we continue to punch below our potential weight for our trading relationship.

The noble Baroness, Lady Hooper, introduced the debate so well and set the scene. I have been very fortunate to visit Latin America with her, and with the noble Baroness, Lady Coussins. The closest that I get to accompanying a royal party is whenever I accompany the noble Baroness, Lady Hooper, on a visit in Latin America, or to a Latin American embassy. She does us credit.

The focus of this debate, however, should be on what the Government are doing to promote businesses to take advantage of the potential that is so obviously there. It was referenced earlier that Canning House’s LatAm Outlook process has been illustrative in highlighting the real potential for central America and the Spanish-speaking Caribbean. As it puts it, this is a market of 45.5 million people with a GDP of over $800 billion. It outlines key areas where there is a market and where we should take advantage of that market. This is a region that is demonstrating leadership in green economies, for example, and an eagerness to collaborate with international partners such as the UK. In particular, it highlighted an area that I thought was really interesting: it is seeking companies with expertise in project management and delivery of infrastructure projects to take advantage of that green investment. This is where UK businesses should have an opportunity. Costa Rica is receiving a $700 million loan from the IMF, so there are funds available.

The next area it highlighted was the Inter-American Development Bank, the Central American Bank for Economic Integration—or CABEI, as the noble Baroness referenced—and the Corporación Andina de Fomento. In my view, if the UK took the opportunity to become an early shareholder in the Asian Infrastructure Investment Bank and be part of it from the outset, controversial as it is now, the case to be part of those as willing partners is equally strong. With Costa Rica, the Dominican Republic, El Salvador and Guatemala investing in rail infrastructure, there are enormous opportunities for the UK here, as well as in water and sanitation projects such as the Dominican upgrades to their infrastructure. The list goes on. The opportunities are there.

The challenge we have now is how to meet that opportunity given that in some respects—regrettably from these Benches—we are now a competitor with the EU and cannot take advantage of wider EU opportunities. Of course we have the rollover association agreement which the noble Baroness referenced, but it is now a decade old. I would be very interested to hear from the Minister whether there is consideration of moving the association agreement into an FTA with central America.

One area where we lost in the move from the EU association agreement to the UK stand-alone one was the removal of the number of committees and sub-committees that were part of the EU agreement that we were party to. There were the Board on Trade and Sustainable Development, which is so critical in that region, the committee on SPS and the very important committees on technical barriers to trade, customs and rules of origin, public procurement, market access and intellectual property rights. Interestingly, there was also a civil society forum. All these have met the EU through CIRCABC, as it calls it, within this year. I would be grateful if the Minister could say whether there is any equivalent to those committees in our trade dialogue with central America, especially on civil society and technical barriers to trade. All these are fundamental if we are to see the potential grow.

Reference has been made to Mexico. I have a question about that but, first, I want to say that I am grateful as the Lib Dem spokesperson to receive correspondence from the Secretary of State’s office with very welcome updates on negotiations. The new Secretary of State has been very consistent in providing this, for which I am grateful. She also offered the International Agreements Committee of this House private briefings with the chief negotiator after each round, which is fairly innovative and, I hope, signals openness. I served with great pleasure under the chairmanship of the noble Baroness, Lady Anelay, at the start of the inquiries. I could sense her frustration around trade envoys, which was shared around the table. Hopefully, the sign from the new Secretary of State is one of openness, which we can take advantage of with regard to trade envoys.

It was interesting to hear from the noble Baroness, Lady Coussins, that it is not just Mexico that fires its top people in charge of trade, as I think I am now on my seventh Minister. I am not saying that they were all fired, of course—quite the reverse. I hope that there is no disruption to the Mexico agreement, but clarity on when we can expect to see it finalised will be important. With Anne-Marie Trevelyan as Secretary of State, on the India agreement, having a deadline to work towards was vital; now with Kemi Badenoch as Secretary of State, deadlines are not helpful. Which is it? I would be grateful to know what the Minister thinks is a realistic time for us to see something taken forward with Mexico.

The final issue I wish to raise, which has been raised a number of times, is human rights. Since I have been covering trade in this House, the Government have always said that trade is not at the expense of human rights—that we have tried and tried and will continue to try to get a trade and human rights policy and real clarity as to what role human rights will play. If the noble Viscount, Lord Waverley, is correct that this has been downgraded, and if the noble Baroness, Lady Coussins, is correct that dialogues are not even taking place, that is an unwelcome sign. I very much hope that the Minister can give us a positive response, and that when it comes to critical areas of trade with this region, human rights and relationships with civil society in the region will be at the core. We will not be able to see trade grow in a sustainable way unless people are involved in that process as well.

Iran: Demonstrations

Lord Purvis of Tweed Excerpts

Thursday 27th October 2022 Lords Chamber

[Lord Purvis of Tweed (LD)]

My Lords, I thank the right reverend Prelate the Bishop of St Albans for bringing this Topical Question to debate for us. As he introduced it so well, it is about a blend of our UK strategic interests and human rights and freedom of speech for the people of Iran.

As the noble Viscount, Lord Waverley, indicated, our debate is less about looking at Iran through the prism of its regime—and therefore there is no question of our solidarity with people within Iran—and more about questioning the tactics and brutality of the regime. It is about highlighting in particular, as has been remarked consistently in this short debate, the bravery of women in Iran, and especially—it is what stands out—the young women in Iran, criticising in schools the president in their presence. There cannot be anything more brave than that. It should be an inspiration to the whole world.

I welcome the Minister to his position again. Since he answered his first Question yesterday on the trade deal, he is a slightly more experienced maiden, but I look forward to his maiden speech. His predecessor was exemplary in reaching out to the Opposition Front Benches and keeping us informed and I welcome the commitment he gave yesterday evening that he would carry that on. Because our time is limited, I shall just ask a number of questions, a couple of which were raised so well by the noble Baroness, Lady Jones, and I welcome her contribution.

First, can the Minister give an update on payments with regard to what Iran had claimed? As the Minister will know from the briefing he will have received, these were part of some of our debates about Nazanin. We very much welcome her return, of course, but it was linked by some to payment of what the UK was claimed to owe Iran. If he can update us on the processing of that, it would be helpful.

Secondly, on the global human rights sanctions regime, these Benches welcome the Government putting financial sanctions in place on 85 individuals, on the cyber police and on the morality police. The cyber police sanctions have not been mentioned so far, but they are critical in this and I welcome them. I know that the Minister will have been briefed to say that the Government do not comment on considerations for future sanctions—so he does not need to spend time saying that; we know that—but I impress on him, to add to the comments of the noble Baroness, Lady Jones, that we now need to be in a position where we are preparing an audit of the property and investments of those within the regime in Iran and whether any UK interests have invested in any of the state-owned enterprises linked to the Iranian Government. That audit needs to be carried out and the City of London needs to be aware of it, because we should not be in a situation where we have delays like those we have seen with other regimes, such as Belarus and Russia, where kleptocrats have used the London laundromat approach. We need clarity that the Government are preparing that with the City of London.

My other point is linked to a question I asked in the Chamber a number of weeks ago about the BBC Persian Radio service. The BBC has been in touch with me and I am grateful for its briefing. It is horrific that the BBC staff and families of staff are being persecuted and harassed by authorities in Iran, and that the BBC itself is now under sanction as a criminal entity. That is unacceptable. Will the Government make sure that there is no platform, radio or online, which can be easily reduced by the Iranian regime? I believe that emergency funding should be made available to BBC World Service so that radio service resilience can be provided.

Finally, as requested, I hope the Minister will be able to give an update on the JCPOA. I see the noble Lord, Lord Lamont, in his place. We have had many debates on the JCPOA. It is timely that the Minister can give an update on what British policy is in the current context. If the Minister can respond to these points, I would be grateful.

UK-India Free Trade Deal

Lord Purvis of Tweed Excerpts

Wednesday 26th October 2022 Lords Chamber

[Lord Johnson of Lainston (Con)]

I thank the noble Lord, Lord McNicol, for that follow-up question, and thank him very much for his kindness earlier, as well. He promised to be as kind as possible during this debate, so I thank him for that.

Actually, the Government never promised to conclude these talks by Diwali. We promised to have the majority of the talks concluded by the end of October, which we have: 16 chapters, the majority, are already concluded. This trade deal is actually on track. For me, it is one of the most exciting opportunities this country has had in generations. If we think about what India has to offer us, it is phenomenal. I was in India last week, and I pay tribute to our staff on the ground there, who are doing a huge amount of work to ensure our cordial relations with a country that will, in my view, become one of our greatest partners. I have celebrated Diwali with our high commission office in Mumbai.

Negotiations are ongoing and have been going on today. We have had five formal negotiations so far, I think; we are expecting a sixth in the next month or so. If we expect progression of that, we will be looking forward to substantial progress over the coming months.

[Lord Purvis of Tweed (LD)]

My Lords, I also welcome the noble Lord to his position. Since I have been covering international trade issues for these Benches, he is now the seventh Minister that I have been shadowing, so I wish him a long time in the position. If he lasts more than nine months, he is breaking the average over the last few years.

Given that the Minister has not yet had an opportunity to update his register of interests on the Parliament website—I am grateful for his declaring of that interest at the moment—could he say, given that the UK is seeking to have services as part of this agreement and given that he has a direct financial interest, whether he will recuse himself from any of the discussions on services going forward?

We would support an FTA with India very strongly, and when we debated the issue, we also questioned which areas were still outstanding. Can the Minister confirm that the UK has put wider visa access and mutual recognition of qualifications on the table?

Can he also confirm that—while not disregarding the figures of benefits that he indicated—nearly as much of the benefit for trade with India will be offset by a decline in trade with developing nations through trade diversion, to the tune of about £3 billion, which means that the net benefit for trading with the wider region is far less than what we would expect?

Finally, can he say whether the fact that India has negotiated with Moscow a rupee/rouble swap, for the purchasing of cheaper fuel, has been raised by the UK at the very time that we are discussing services access? Surely it is not right for us to fail to raise issues of such seriousness when we are negotiating with our friendly nation in Delhi.

[Lord Johnson of Lainston (Con)]

I thank the noble Lord, Lord Purvis, for that range of questions, which I am sure we will have an opportunity to discuss at great length personally. I would like to reassure noble Lords that I am very much available to all of them for not only the formal process for discussion around trade deals but also as an individual, to make sure that we share the excitement and the opportunities offered to us and I can give noble Lords as much information as I can, in order that we can progress this process.

I would like to answer, most importantly, the first question. I do not want to go into my financial details now, but I am in the process of ensuring that I will not be presented with a conflict of interest in the next few days—hopefully by the end of the month. Of course, if there is any conflict of interest, I assume that will be addressed in the appropriate manner. I am grateful to noble Lords for your indulgence to ensure that this is done properly and effectively, and I hope that you see me as transparent on this point.

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

Lord Purvis of Tweed Excerpts

Wednesday 1st May 2019 Lords Chamber

[The Earl of Kinnoull (CB)]

My Lords, I congratulate the noble Lord, Lord Whitty, on tabling this Motion and providing a mechanism for the House to discuss these very important issues. I sit on the EU Select Committee and its EU Justice Sub-Committee. The reason for my mentioning the latter committee will become clearer later in my short remarks.

The noble Lord, Lord Whitty, made a good case about the size of the trading relationship between Switzerland and the UK, and a good summary of that is laid out in the Select Committee’s report of 12 March—HL Paper 315. In that summary, there is evidence of an important thing to remember in trade, and that is that services and goods are now interlinked. When you sell a good, you often have a service alongside it. Evidence of that is immediately visible because so much of the goods traded in Switzerland is precious metals, and of course a lot of that is really evidence of the physical delivery of an underlying metal trading mechanism that is going on. Therefore, any damage one does to the ability to trade services will inevitably impact on the ability to trade goods. It is incredibly important to make sure that those two things are in alignment. It is mutually beneficial to have clear arrangements for the trading of both goods and services.

I shall make only two points. My first point concerns complexity. The Swiss ambassador told us in mid-November that he had had a hand in handling more than 100 bilateral agreements that Switzerland has with the European Union, and he explained to us the sheer complexity of that beast. There is one piece of good news about that beast—I am looking at the Minister—and that is that, although the tentacles on the top of the beast are complicated, underneath the surface of the beast is a joint committee which has access to various processes and remedies which are common among the 100 or so agreements. So there is complexity on the top and simplicity on the bottom, but it is very important to marry up the goods and the services.

The complexity that we are already developing has been listed. We have the scheduled air services agreement, the carriage of passengers and goods agreement, the non-life direct insurance agreement, the trade agreement and the citizens’ rights agreement, which I shall come to in a second because the EU Justice Sub-Committee examined it. The complexities were acknowledged to us in a generous and helpful letter from the Minister to the Select Committee on 20 March. Perhaps I may take a brief loop here and say how helpful the officials in the department have been to our colleagues in the European Union Committee and how much we value the quality of that relationship. We are drinking from a firehose in learning how to scrutinise these things, and the officials are being most helpful.

Turning to the citizens’ rights agreement, as the noble Lord, Lord Whitty, has pointed out, the trade agreement contains nothing on services—there are no services provisions at all—and so far we have had two of the five agreements which contain a bit on services. We have my own home territory—non-life insurance—and I can confirm that that agreement, although I was not a scrutineer of it but it did come through the main Select Committee, is word for word the same as the successful agreement that exists between Switzerland and the EU. It is an important piece of the interconnectivity and mutualisation of insurance across Europe that has gone on for many years.

The fifth of the agreements to appear was the citizens’ rights agreement, which includes a big hunk of the freedom of movement agreement within it. Unlike the other four agreements, it is not a rollover, as the noble Lord, Lord Whitty, pointed out; in fact, it is a sort of orderly winding down of the various rights. There is a protection of the rights of the 14,000 Swiss citizens living in this country and the 14,000 British citizens living in Switzerland, and the protection of the rights of about 2,500 border officials. One of its key benefits, as was mentioned by the noble Lord, Lord Whitty, is the 90-day services provision rules, which allow me to go to Switzerland lawfully and talk about insurance with a view to selling a service and to do so for 90 days in a year. It is enormously helpful, both for Swiss people to come here and for us to go there. Suddenly to find that, in this thing that is working so well, there is a sunset clause five years out—a cliff edge—is very disappointing. It would be interesting to hear the logic for having inserted that because, if it was not needed by the EU, I do not see why we need to have one now.

We discussed with officials how Parliament might scrutinise what will be a very important decision of the joint committee to extend that five-year period. It will be an extremely important decision both for Switzerland and for the United Kingdom. They said—I shall quote from our report:

“In response, officials advised that no decisions had yet been taken on scrutiny arrangements for such a decision, given that it would not take place until five years after the specified date”.


It would be very helpful if the Minister could commit to the House that at least there will be a scrutiny mechanism, albeit that I realise that she cannot say at the moment what it would be.

Finally, I feel I must come back to the point on complexity. My mind goes back to the very interesting hour and a half we had with the Swiss ambassador who talked about complexity. It would be enormously helpful if the Minister could commit to provide consolidated guidance on the eventual list of agreements between the UK and Switzerland and to place that on the GOV.UK website. Then British businesses—and, indeed, Swiss businesses—that want to know what the deal really is will not have to look at a lot of different bits of guidance but can look in one consolidated place. That single thing would help trade between our two old and very friendly countries a lot.

[Lord Purvis of Tweed (LD)]

My Lords, we are indebted to the noble Lord, Lord Whitty, and to the other committees that have done such forensic scrutiny on this agreement for highlighting so many constructive areas for questioning by the noble Earl and the noble Lord, Lord Whitty. I have two or three questions to add and I shall emphasise a couple of points.

What we are debating today is a clear example of how it was never going to be simply a “cut and paste” or “merely technical” exercise to roll over existing agreements. Their breadth and complexity are now clear to see, especially in the context that our trading relationship and wider relationship over people, goods and services is included in 140 agreements between the EU and Switzerland, while this agreement covers only eight of them.

It is also worth noting that we have an opportunity to debate this significant measure because of the Motion tabled by the noble Lord. Before the Recess, I tabled similar amendments in relation to the three previous agreements. It surely cannot be the way forward for the only way for us to have parliamentary debate on these agreements and treaties in this House to be for Members from opposition parties to move regret Motions and amendments. There has to be a more constructive way for the Government to bring forward proposals for Parliament to have an opportunity to debate them. We made this case during the Trade Bill, and we are waiting to see whether it comes back to this House after consideration of Lords’ amendments by the other place. Some of those amendments were to try to ensure a greater degree of parliamentary scrutiny throughout the process, from the start of negotiations right through to the end and the approval of the negotiations. We took in good faith the intention expressed in the Government’s Statement about an enhanced parliamentary role in scrutiny, but that will be tested when the Government have an opportunity to consider the amendments that this House made to the Trade Bill. We are waiting to see what they will do.

As the committee indicted, this agreement raises constitutional implications about scrutiny, not only of the merits of the agreement itself but of the mechanism for amending it, about how the joint committee will operate and the noble Lord’s significant point about MoUs. There is quite a lot of leeway for the Government to have trade agreements through memoranda of understanding if domestic legislation does not need to be amended, but it could be very broad leeway when it comes to trading policy, and if it were a means of bypassing Parliament, that would be very regrettable. The single aviation market and the open skies agreement between the EU and the US are very good examples of where proper scrutiny rather than simply an executive-to-executive arrangement is required.

However, we are where we are. This agreement was perhaps started in a very false political context and through a rather unseemly political process to try to get agreements in place before what would have been Brexit day. I hope that this slight window of opportunity allows us to take some deep breaths. What had seemed to be rollover agreements could well now be seen in their proper context of an ongoing permanent trading relationship with those countries, should we leave the European Union. However, as with the earlier rather tortuous Private Notice Question about ferry contracts, it begs the question of what will happen in six months’ time if we are in the same situation as we were before 29 March. The clock is ticking towards another situation—there are about six months to go—and there seems little clarity about our preparedness for it.

I turn to the agreement itself. The noble Lord, Lord Whitty, and the noble Earl talked about the scale of our trading relationship with Switzerland, which is very large. I noted a comment online from a professor at Geneva University which summed up that this is not simply about the UK’s trading relationship with Switzerland; it is also about the UK, Swiss and EU relationship. Going forward we simply cannot separate out those three, as I think is recognised by both Houses. The professor said of the Swiss relationship with the European Union:

“It’s like the moon around the Earth: The force of attraction of the European Union is such that you can’t have all the autonomy that you want”.


Therefore, even in the context of Brexit, we will still have a bilateral relationship which, in many respects, will be dominated by the relationship with the European Union. Brexit will not mean that we are immune from the laws of trading gravity.

The Government’s report on the agreement clearly shows that some of the most crucial elements of the trading relationship, such as customs facilitation and security, or animal and plant health requirements, will still depend on the positon that the EU takes and then the position that we take in our relationship with the EU. Many noble Lords have been aware of this. Some countries were simply not in a position to sign a rollover agreement before Brexit because, justifiably, they were waiting to see what the future relationship would be. Therefore, it is little surprise that, of the 140 agreements with the EU, only eight have been able to be rolled over in this agreement. Even within some of those eight, as the noble Lord, Lord Whitty, said, some key components have had to be disapplied as we wait to see what our future relationship and agreement with the EU is. By definition, in a no-deal scenario much of our relationship would be at risk in six months’ time.

With regard to the agreement itself, I have a number of questions arising from the very thorough contribution of the noble Lord, Lord Whitty. As he indicated, only three of the 20 sectors of the EU-Swiss mutual recognition agreement are covered by this treaty. Of those, as the agreement states, we are waiting on the recognition of equivalence of rules between Switzerland and the EU. When do the Government estimate that we will reach a position of clarity on that? Elsewhere, it is indicated that the Government are looking for “simplified arrangements”. What is being considered as far as mutual recognition agreements and simplified arrangements are concerned, and when are they likely to be brought forward?

On agricultural products and those significant areas that have been disapplied, including sanitary and phytosanitary measures for plant health, animal feed, seeds and the trade in animal products, the Government indicated in their report that there were,

“requirements for equivalence or harmonisation with EU law and systems”.

What is the Government’s intention with regard to those in a no-deal scenario, when there would be no move towards agreement on equivalence or harmonisation? What is the Government’s intention with regard to how those harmonisation elements would be brought about?

--- Later in debate ---

[Lord Purvis of Tweed]

I am anxious that, because she is running out of time, the Minister may not be able to cover the point that I and the noble Lord, Lord Wigley, raised about consulting and involving the devolved Administrations throughout these processes and discussions. Exports from the Scottish economy to the Swiss market are worth about £800 million; this is major for that economy, and has implications for the Welsh economy also. What level of consultation and involvement was there with the devolved Administrations?

[Baroness Fairhead]

I am happy to deal with that. I was given the wrong information that I had two minutes left in which to sum up. I apologise: I rushed through, rather.

We share the text when it is in a stable form; it goes to the devolved Administrations at the same time as it goes to Ministers. We realise that we have to work with the devolved Administrations. We offer briefing sessions on the continuity agreements, and I believe there is ongoing dialogue at official level. For future trade agreements, we are working with the devolved Administrations on a concordat, and that is, I think, progressing.

I can now say what I was going to say to the noble Baronesses, Lady Armstrong and Lady Donaghy, about the need for any future agreements to take into account civic society, trade unions, businesses and consumers. That is part of the consultation process. We also have the strategic trade advisory group. We are trying to make sure that there is a broader discussion on future trade agreements.

[Lord Purvis of Tweed]

I promise I will not take up the Minister’s extra time with other interventions, but I would like some clarity. She referred to ongoing and future consultation on agreements, but the questions asked were about this agreement and this treaty. What was the extent of the consultation with the devolved Administrations on this treaty?

[Baroness Fairhead]

My understanding is that there were conversations at official level. After the debate in this House, we made a change and shared the full text of the agreement. For all agreements in place from 20 March, they will get the full text of the treaty. Prior to that, we gave them the text when it was initialled in draft form. We are learning as we go through this process, and fully understand the importance of that involvement.

Trade etc. in Dual-Use Items and Firearms etc. (Amendment) (EU Exit) Regulations 2019

Lord Purvis of Tweed Excerpts

Tuesday 26th March 2019 Lords Chamber

[Lord Purvis of Tweed (LD)]

My Lords, I am very grateful that the Government have responded promptly to the committee’s report in indicating that they will correct the drafting errors, which were very basic. If it is the Government’s position that they are preparing for exit day by addressing such an important issue as arms exports and controls, for there to be three glaringly obvious mistakes is very worrying. That said, I am grateful that the Government have indicated that they will bring forward another SI to correct the mistakes in this one. It is symptomatic of where we are in the Brexit process, but it is depressing given the seriousness of this issue.

--- Later in debate ---

[Lord Purvis of Tweed]

Part of my point was about exports from, rather than to, the Isle of Man. Currently I am unaware of the Isle of Man taking a very aggressive stance against the rest of the United Kingdom on cyber capability. However, I was anxious about any part of the United Kingdom or the Isle of Man being used for exports to other states. Therefore, it is not only a question of exports from the United Kingdom to the Isle of Man; it is a question of the Isle of Man being the basis for exports from the United Kingdom.

[Baroness Fairhead]

There are two points that I would like to raise on cyber capability, and to some extent they will also address the process that the noble Lord, Lord Stevenson of Balmacara, asked about. There will be an open pro forma licence for materials going to what we consider to be low-risk territories—that is, the EU. Where there will be a change is if the products go into the EU and are then exported from the EU to another part of the world. Cyber and cryptographic goods are an area that we are taking increasingly seriously. The noble Lord, Lord Purvis, mentioned some of the open general export licences, but only those absolutely consistent with our consolidated criteria are included. All high-risk capabilities are deliberately excluded. As your Lordships will know, the controls on cryptography come from the Wassenaar agreement. There are various agreements that we comply with. The EU Parliament has suggested removing regulation from dual use, but we believe that we have international obligations to implement the controls and we do not agree with that. To be absolutely clear about cyber surveillance, which I believe is a key concern in the work that the noble Lord is doing, cyber surveillance equipment is not included in the open licence.

Regarding the more general impact of our exit on future co-operation with the EU, we absolutely recognise the importance of maintaining close co-operation and hope it will be a key part of the negotiation on our future partnership with the EU.

The noble Lord, Lord Stevenson of Balmacara, raised a subject that is probably for another day. I can just give some reassurance that the Export Control Joint Unit has been created with the Ministry of Defence, the Foreign Office and DIT. DIT is essentially the regulator; the other two departments provide their input, advice and challenge. The unit is established and populated. It is a very important subject but, as I said, one for another day.

I think we all agree that it is critically important that we maintain robust strategic export controls, to fulfil our international obligations and to keep the world safe. I hope that I have been clear about the Government’s commitments to this regulation. I finish by reiterating a key point of my opening statement: that if we do not retain and amend this EU legislation, we will no longer control the export of dual-use goods or firearms. We have a responsibility to ensure the security and safety of our people, and this legislation supports that objective. I commend this Motion to the House.

Cat and Dog Fur (Control of Import, Export and Placing on the Market) (Amendment) (EU Exit) Regulations 2019

Lord Purvis of Tweed Excerpts

Tuesday 26th March 2019 Lords Chamber

[The Minister of State, Department for International Trade (Baroness Fairhead) (Con)]

My Lords, the regulations are necessary to maintain the ban on trade in cat and dog fur following the UK’s withdrawal from the European Union. We recognise the strength of feeling in the UK against a trade that could encourage killing cats and dogs to make money out of their fur. The regulations are most certainly needed to continue to meet the public’s expectations. Without them, the legislation imposing the ban would be inoperable.

The regulations were laid before Parliament on 4 March. They are made under powers in the EU withdrawal Act 2018. Noble Lords will know that, given the context, those powers are limited and allow only the correction of technical deficiencies in existing EU law that, by the operation of the Act, will be retained in UK law following withdrawal. The regulations correct such deficiencies, for example by replacing references to the EU and its institutions with the appropriate UK references.

To be clear, such powers cannot make policy changes. I add that it is beyond the scope of the regulations and today’s debate to consider wider changes to the ways in which animals with fur, and indeed other creatures, are protected. This is about ensuring continuity and making sure that the legislation is operable. To ensure that the ban on trade in cat or dog fur is maintained, I commend these regulations to the House.

[Lord Purvis of Tweed (LD)]

My Lords, if we are to leave the European Union and crash out in a way I consider disastrous, a degree of legal certainty is necessary for some of the areas where protection for animals is provided. Indeed, the Minister will recall that this specific example was raised in the Trade Bill.

I welcome putting this mechanism in place to ensure that there are no gaps in this heinous trade, which British criminal proceedings established as a crime more than a decade ago. I also welcome the high penalties for this crime being maintained. In doing so, I wonder whether the Minister can address a few points of clarification. It is important to note that the Government’s Explanatory Memorandum highlighted the fact that the European Commission found little evidence of trade in this area. Nevertheless, regrettably, if those in the criminal fraternity see an opportunity or an opening, they are likely to exploit it.

With that caveat, I ask for further explanation on the instrument. Its existing power to derogate, contained in the EC regulation, will be transferred to the Secretary of State. The Minister said that this measure would not be a vehicle for making new policy, but this power would provide Ministers with the ability to derogate. Where will potential derogations occur? If they have already been highlighted for educational or taxidermy purposes, are those purposes defined in current legislation? I know through my links with the textile and fashion industry in Scotland and across the UK that, regrettably, companies could set themselves up as taxidermy companies to exploit a loophole. Clarification from the Government on that point would be very welcome.

The second area was that the current approach, as the Explanatory Memorandum states,

“allows the European Commission to adopt an analytical method to identify different species of fur”,

and, if necessary, to amend on that basis. This will now be a power of the Secretary of State, so how will the Government consider this analytical method for considering which species are covered by this regulation?

My final point relates to the devolved Administrations, which I am sure the Minister will not be surprised about. While this will be considered as part of a reserved power—I have no dispute about that—inevitably there has been an interaction with devolved Administrations. When I served in the Scottish Parliament there were proposals for legislation to ban puppy farming and the consequential element of what would potentially become a product from that puppy farming. Indeed, legislation exists in Scotland on other wild animals and the pelts derived from them. If the Minister were able to clarify what discussions the Government have had—primarily in Scotland, which has some complementary areas of primary legislation in this area—it would be most welcome.

--- Later in debate ---

[Baroness Fairhead]

My Lords, I will try to address a number of the concerns raised. The noble Lords, Lord Stevenson of Balmacara and Lord Purvis of Tweed, both mentioned a broader, more extensive ban. There may be time another day to talk about extending the ban. There have been no challenges to this ban under WTO rules. Our position is that that is beyond the scope of this statutory instrument, and therefore it is not a subject for discussion today.

There is a power to derogate in the current regulations. Because we are required only to correct technical deficiencies and because it exists, removing it would amount to more than correcting a technical deficiency. The power is there so that it is appropriate to bestow it on the UK. But let me be absolutely clear here on the Floor of the House—and this is why I am not going to address the other detailed questions of the noble Lord, Lord Purvis—that the Government have no plans to use that power. As the noble Lord said, the derogation is for education and taxidermy. We have no plans to make use of that power.

The noble Lord, Lord Purvis, asked about the use of specific analytical methods. The requirement to report was to the Commission. We no longer need to do that, because we can determine what analytical methods we use. As the UK uses DNA-based methodology, we consider that to be the most appropriate overall and expect to continue to use it.

On the agreement of the devolved Administrations, it is recorded in the Explanatory Memorandum to the 2008 regulations on this subject that this is a reserved matter. The international trade regulation falls within the general reservation for international affairs set out in the Scotland Act 1998. We have shared these regulations with the devolved Administrations in draft, and, in practical terms, we are confident that there is consensus across the UK on the desirability of maintaining the ban.

I can confirm to both noble Lords who have spoken that we expect these regulations to continue to be rigorously enforced. HMRC will continue its role. It inspects consignments of fur at the point of entry into or exit from the UK, and on retail premises, to ensure they do not contain any cat or dog fur. It will retain its existing power to seize goods it considers to be in breach. It can also bring criminal proceedings against any persons found to have breached the prohibitions.

With that, I hope I have addressed the noble Lords’ questions.

[Lord Purvis of Tweed]

One might assume that this is an area where, if the border with the European Union is in Northern Ireland, capacity will have to be in place to ensure there is no opportunity for the importation of illegal goods through that border. How do the Government intend to ensure that the checks that the Minister said will be required, and that it is the Government’s intention to carry out, will take place at the Northern Ireland border?

[Baroness Fairhead]

I will have to write to the noble Lord on that point; I do not have the specifics of how it will be managed. It is important we maintain these prohibitions, and the country believes that too. I commend the regulations to the House.

Protecting Against the Effects of the Extraterritorial Application of Third Country Legislation (Amendment) (EU Exit) Regulations 2019

Lord Purvis of Tweed Excerpts

Tuesday 26th March 2019 Lords Chamber

[The Minister of State, Department for International Trade (Baroness Fairhead) (Con)]

My Lords, EU Council regulation 2271/96, which protects,

“against the effects of the extra-territorial application of legislation adopted by a third country, and actions based thereon or resulting therefrom”,

is commonly known as the EU blocking regulation. It seeks to protect UK and EU businesses from the harmful effects of the extraterritorial application of legislation adopted by another country.

Extraterritorial application of legislation refers to a situation where a country has enacted certain laws, regulations and other legislative instruments which purport to regulate activities of natural and legal persons outside its jurisdiction who are not its citizens or legal persons incorporated in that jurisdiction. This could, for example, result in penalties against a UK citizen for carrying out activities in the UK which we consider to be fully legitimate under our law. The UK and EU have long opposed the extraterritorial effect of sanctions legislation on our businesses and the dissuasive impact that this can have on legitimate trade. In fact, the UK’s opposition to such actions predates the blocking regulation. We have had regulations on our statute book since 1980.

The blocking regulation seeks to protect UK businesses in two key ways. First, Article 4 of that regulation guarantees that courts in EU member states will not recognise or allow the enforcement of judgments against EU businesses for fines that they incur in a third country for breaching sanctions with extraterritorial effect. Secondly, its Article 6 enables businesses to seek damages through the courts in any member states, should they be negatively impacted by the application of extraterritorial legislation in scope of the regulation.

Of course, there may be occasions where compliance with third-country sanctions regimes is necessary. Where these instances arise, the EU has the power to issue authorisations for businesses to comply with third-party sanctions regimes. Such compliance can include seeking permission from a third country to continue doing business with countries affected by that third country’s sanctions, such as approaching OFAC for a licence to continue operating in Iran. This form of compliance preserves and increases trade, although without such authorisation it is technically illegal under the blocking regulation. For this reason, compliance authorisations may need to be issued by Her Majesty’s Government after Brexit. Currently, requests for such authorisations are considered by the EU Commission in accordance with the process and criteria set out in Commission implementing regulation 2018/1101 of 3 August 2018, referred to as the implementing regulation.

This SI amends the blocking regulation and the implementing regulation as retained in UK law, using powers under Section 8 of, and paragraph 21(b) of Schedule 7 to, the EU withdrawal Act 2018, and fixes it for the UK-only context. It ensures that the UK statute book on leaving day remains equivalent to that on the day before we leave. The SI, generally speaking, transfers the functions of the European Commission to the Secretary of State, as would be expected of SIs made under the EU withdrawal Act 2018. For instance, once the SI enters into force, UK businesses will be able to apply to the Secretary of State for permission to comply with extraterritorial sanctions, and the Secretary of State will be able to grant this permission if he or she judges the application to be consistent with the criteria set out in legislation.

Currently, the Commission defines the scope of the blocking regulation—which specific pieces of legislation it applies to—through tertiary legislation amending and updating the annexe to the blocking regulation. The SI transfers this power to the Secretary of State through the mechanism of laying of a negative SI. As we leave the EU we must ensure that we continue to protect UK businesses from the effect of extraterritorial legislation. We firmly believe that our operators should be able to continue legitimate trade free from the harmful effects of the extraterritoriality that we consider illegal under international law. This statutory instrument is a key part of this policy stance and is particularly relevant given our foreign and trade policy stances on Cuba and Iran. I welcome the opportunity for scrutiny of it and I look forward to hearing the contributions of noble Lords.

[Lord Purvis of Tweed (LD)]

My Lords, I do not think there will be any difficulty on these Benches about ensuring the continuity we will require in order that there is certainty for British businesses that they can operate on the correct side of international law. The only areas that I hope the Minister will clarify—her introductory remarks were quite helpful—concern, first, the application process that will be required if we are to have a stand-alone position outside European regulations. The applications for authorisations will have to be made to the Secretary of State, as the regulations state. Will the Minister indicate what process such applications will involve?

The second area, which the noble Baroness will not be surprised that I raise, concerns the matter of another judiciary within the United Kingdom. While, as part of Scottish criminal law, this will be a reserved power, nevertheless the criminal penalties that may well apply on the potential breach of some of these things by Scottish businesses would have to be prosecuted by the Scottish courts. One of the examples the Minister raised, that of Iran, is very relevant for the very large Scottish oil and gas industry that trades across the whole region, including within Iran. It is a relevant point, given the not-so-subtle threats from the United States that it will consider breach of its sanctions policy by those British businesses that continue to trade with Iran under a perfectly legal framework. If we are to have a stand-alone approach, absolute certainty, clarity and reassurance would be very helpful. The Government indicated that no consultation was necessary in bringing forward the statutory instrument. I was slightly surprised about that, given that we have two distinct judicial systems in the UK.

The Government also indicated that before the UK leaves the EU, guidance on how a blocking regulation would apply to the UK would be published. Given that when this instrument was drafted the intention was that, potentially, we would leave on Friday without an agreement, can the Minister say whether this guidance has been published? If it has not, when will it be, to offer that reassurance?

Finally, the Explanatory Memorandum states:

“The Blocking Regulation currently provides that the Commission is to regularly report on the effects of the extraterritorial third country legislation. This will become a requirement on the part of the Secretary of State in the retained version”.


Through what mechanism do the Government intend to do that? Will it be through Written Statements to Parliament, or will a public document be laid before Parliament to provide that transparency? I hope that the Minister can clarify all those aspects.

[Lord Stevenson of Balmacara (Lab)]

I, too, am very grateful to the Minister for her very full introduction to this SI. It took us into areas new to me, such as the intersection between foreign policy and trade policy. That is an interesting issue and the noble Lord, Lord Purvis, was right to focus his remarks on how these things will work in practice. I look forward to the Minister’s response.

When the Minister introduced the SI, she pointed out that much of the regulation that has been transposed was originally introduced in 1996 in response to the extraterritorial reach of certain sanctions imposed by the US in relation to Cuba in the 1990s. Obviously, it has been updated since then, particularly with reference to Iran. It set a train of thought in my mind about how exactly our current foreign policy meshes with these regulations. With particular reference to Iran, the commentary I have been reading seems to suggest that the package of measures that is being transferred across would encourage the European Investment Bank and banks in the UK—possibly even the Bank of England—to finance activities in Iran and to strengthen ongoing sectoral co-operation and assistance to Iran. That would include financial assistance through development corporation or partnership instruments, and encouraging the UK to explore the possibility of one-off bank transfers to Iran’s central bank, which would allow Iranian authorities to receive oil-related revenues.

I suppose this is all right—I do not really understand very much of this; it is way above my head—but when the Minister responds perhaps she could explain exactly how that meshes with our current policy towards Iran, which I understand is not as sympathetic or supportive as might be suggested by the rather large cash transfer opportunities which were being discussed.

This statutory instrument follows on from activities that have been going on in Europe for a number of years in relation not just to Cuba but to the other countries that were mentioned. It requires companies to notify the Commission within 30 days whenever renewed US extraterritorial sanctions directly or indirectly affect the economic or financial interests of the company in question. Various other things apply. EU companies can recover damages in EU courts from persons causing damage as a result of the sanctions, and it nullifies the effect of any court judgments or decisions of administrative bodies that are based on the reinstated US sanctions. My question here is: has anything happened in that regard? Do we have details on the number of companies that have notified the Commission within 30 days, as required? How much money has been recovered, and how many times have the courts been subject to recovery requests? I am sure that it will not affect the way in which we respond to the SI, but it would be interesting to have on the record whether this has been an active process or one that is more observed in the absence of activity than in the reality.

My attention was drawn to a quote from what is in some senses a rather unusual source, since I do not often quote this person. The UK Foreign Secretary at the time that this instrument was brought in, Boris Johnson, said that he thought it was rather difficult to protect European businesses due to the extraterritorial effect of US sanctions and the difficulties companies have when they touch the live wire of the American financial network—they find themselves sanctioned almost immediately. So my third request for more information is to ask whether the former Foreign Secretary is right that this has been rather difficult for companies to access and use.

I suppose I am leading to this question: what rationale do the Government give for continuing this transfer? It would clearly be inappropriate to have a situation in which an EU regulation had legal effect in the UK when we had not properly transferred it. If the ends do not justify the means, I am rather surprised that the Government are taking this step forward, so could the Minister reassure me when she comes to respond that this is a necessary instrument, that it fits with our current foreign policy operations and thoughts and that there is no concern in that respect?

--- Later in debate ---

[Baroness Fairhead]

I do not deny that other issues are at play. For the purpose of this debate, the question is whether the blocking regulation supports our approach to the JCPOA, and I think it absolutely does.

[Lord Purvis of Tweed]

I thank the Minister for giving way. On the JCPOA, the core members of the EU, including the UK, have established a financial mechanism which will effectively protect British businesses conducting business with Iran. If we are moving to having a distinct system outside that mechanism, which is protected through the European process, if the SI is passed and we leave without a deal, where will British businesses be with regard to that mechanism set up through the aegis of the European Union? If British businesses cannot have the reassurance that they will have that European Union protection, they will feel vulnerable and be in a weaker position than they are now.