Agreement Establishing an Economic Partnership Agreement between the Eastern and Southern Africa States and the United Kingdom of Great Britain and Northern Ireland

Lord Stevenson of Balmacara Excerpts

Wednesday 13th March 2019 Lords Chamber

[Baroness Neville-Rolfe (Con)]

My Lords, I commend the noble Lord, Lord Purvis of Tweed, for initiating this debate and agree with many of the points that he made—for example, publishing the agreements and those that they replace together. I also agree that there should be consultation wherever possible—for example, with the Scottish Parliament on the Faroe Islands.

Like my noble friend Lady Verma, I sit on the European Union Select Committee. We have been helping the scrutiny process in this House by reviewing the international agreements laid before Parliament in accordance with Section 20 of the Constitutional Reform and Governance Act 2010. The EU Committee was asked to take on this task rather late in the day, and it has involved a commendable cross-party effort by the committee and its sub-committees. However, as has already been said by previous speakers, the main credit should go to the clerks and our expert advisers, who, frankly, have done a fabulous job, working long hours and diving into the wearying complexities of these agreements. As we have heard, we published our sixth report in this series today—HL Paper 315, for the enthusiastic.

I am not sure that I have the chutzpah to table a Motion on this issue myself when there is so much parliamentary business to progress. However, I take this opportunity to draw attention to our work on treaties and to mention the UK-Swiss trade agreement, on which we reported today. This example is “illustrative”, in the word of the noble Lord, Lord Purvis. I very much understand that my noble friend the Minister may not be able to comment on this agreement, although she is very good at pulling rabbits out of hats. Switzerland is the 10th largest trading partner for the UK. As a committee, we were disappointed that the Government, in bringing forward the UK-Swiss trade agreement for scrutiny, had not provided an explanation of the plans for future UK-Swiss services trade, which accounts for 52% of overall trade between the UK and Switzerland. Services are as important as goods to our economy. Given that they now represent nearly 85% of GDP, you might say that they are even more important to the wealth and success of our islands. I am sorry that the process gives them so little focus.

In the meantime, I support the words of the noble Viscount, Lord Waverley, about the importance of parliamentary scrutiny. I would like to see the three agreements before us passed without delay. I look forward to many further debates on the very important area of future trade agreements, which will potentially have big implications and lead to big changes to our country.

[Lord Stevenson of Balmacara (Lab)]

My Lords, I suppose this is in the nature of an experiment. This is the first time we have had an opportunity to go into detail about the new world that beckons, whichever side of the Brexit divide one is on. At some point in the future, whether sooner or later, the UK will certainly be faced with making a very large number of these treaties. We need to get used to wading through them and investigating in detail.

I had only a short time to go through the agreements on the Order Paper, but I was left reeling, not only from the pages that dealt with the individual tariff lines—I know I will have to do more work on these because of the Government’s announcement today. Even so, it was a pretty scary moment to try to realise exactly what was going on there, equally so to recognise the point made by the noble Baroness, Lady Neville-Rolfe, that a modern trade agreement is not just about widgets and physical objects but trade in services, attitudes, approaches, commitments to work together, future developments—all sorts of areas. It is a very complex area. I do not think one quite has a sense of how that works in practice until one reads the raw text.

The noble Lord, Lord Purvis, is right to ask us to dwell on how the process works. Obviously, the committee’s work is exemplary in this way. It may have been short of time and the necessary expertise, but it certainly managed to get access to quite a lot of information. It is full of information that would be very difficult to get if one did not have access to our expert support. It is very useful to give an initial sense of what we are really up against and to take the benefit of those who have gone before us. I do not think there is much more, other than to listen to the Minister’s response, which I am sure will be very fair and cover all the ground.

I want to flag up that I will be looking at these with one particular issue—investment—in mind. That should not be a surprise, since I have been raising this issue over all these trade agreements over a period of time. I looked through the agreements on the Order Paper today and could only find one reference to investment in Article 39 of the agreement establishing an economic partnership agreement between eastern and southern African states and the UK. Is this the only one with an investment chapter in it? Will the noble Baroness comment on whether that is a trend or just the way things are? I probably know the answer to that.

Given that this one has an investment chapter in it, what is the meaning behind paragraph 1(e) of Article 39? It says that the parties recognise the importance of investment and the objectives in this case are to,

“develop a legal framework that promotes investment by both Parties, with a view to promoting and protecting investment and work towards harmonised and simplified procedures and administrative practices”.

Does this mean motherhood and apple pie, or is it code for some new system of secret courts meeting in secret locations and taking decisions on investment with an adverse effect on the political and social economy of the countries concerned? I may have extended slightly to make my point, but I would be grateful for a response.

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

My Lords, I thank all of your Lordships who have contributed to this debate for the many insightful points raised and the informed speeches made. I join my noble friend Lady Neville-Rolfe in commending the noble Lord, Lord Purvis of Tweed, for raising what is, as the noble Viscount, Lord Waverley, agreed, a very important subject. It is critical that we transition these three trade agreements, which cover countries accounting for £3.5 billion of our trade.

The noble Lord, Lord Purvis, has raised a concern with the scrutiny processes with respect to these continuity agreements. Let me reiterate what has already been done on scrutiny to date. For the sake of clarity, these are existing EU trade agreements that we are transitioning to bilateral agreements between the UK and third countries. Therefore, they have already been subject to a scrutiny process at EU level, and this was overseen in our Parliament by our EU Select Committees. Ratifying these agreements means that we can provide assurance to business in the UK and third countries that there will be trade continuity in any EU exit scenario.

However, we hear the noble Lord’s concerns that Parliament should have appropriate opportunities for scrutiny, and it is absolutely an objective of the Government that Parliament is afforded these opportunities. That is why the Government agreed to go over and above the requirements as laid out in the Constitutional Reform and Governance Act by setting out in a report to Parliament details of any significant trade-related differences between the UK and EU free trade agreements, and explanations for the changes. These reports must be published 10 days before implementing regulations are laid under the Trade Bill or before ratification, whichever is earlier. Indeed, I will shortly take the House through a precis of the three agreements and the reports that were laid alongside the texts. I hope this will demonstrate the detail that they include to those who have not had the opportunity to go through them, and will reassure the House about our approach to transparency.

I start with the UK-Chile agreement, which reproduces the effects of the EU-Chile agreement as closely as possible, making only technical changes to ensure that the agreement can continue to operate between the UK and Chile. It means that our businesses can, for example, continue to sell cars to Chile on existing terms. In fact, according to HMRC data estimates, 2,400 VAT-registered businesses in the UK exported to Chile in 2017 alone. Trade in goods and services between the UK and Chile was £1.8 billion in 2017—the top goods imported from Chile being edible fruit and nuts, beverages, spirits and vinegar, while our key exports to Chile were machinery and mechanical appliances.

In transitioning the agreement, the tariff-rate quotas in the UK-Chile agreement have been resized from the original EU-Chile ones to reflect that the UK is a smaller import and export market than the EU 28. These quotas were agreed following examination of a range of evidence including historical usage data and trade flow data.

I turn now to rules of origin. When the UK leaves the EU, the designation of UK exports will shift from EU-originating to UK-originating. To ensure maximum continuity for business, the UK-Chile agreement provides that EU materials can continue to be recognised in UK and Chilean exports to one another. Furthermore, EU processing can be recognised in UK exports to Chile.

The noble Lord, Lord Purvis, raised an important issue on where the new agreement differs from the original, and that is with regard to parliamentary committees. The original EU-Chile agreement established an association parliamentary committee as a forum for members of the European Parliament and the Chilean National Congress to meet and exchange views. The EU-Chile committee may, for example, make recommendations to the EU-Chile Association Council. Given the principle of continuity, it has been our intention to replicate the institutional structures of the original EU-Chile agreement where possible. With respect to the association parliamentary committee, we did not consider it appropriate to bind Parliament to this commitment without prior consultation. We have therefore agreed treaty text which reserves the right of UK parliamentarians to their position until such consultations have been concluded. The association council provides a mechanism that allows for the establishment of the association parliamentary committee at the request of the parties. If Parliament considers that it wants this committee to be set up, then DIT officials will work with Chilean counterparts to seek to establish this committee at the earliest possible opportunity.

Turning to the economic partnership agreement between eastern and southern Africa countries and the UK, this maintains the effects of the ESA-EU EPA in a bilateral context. As the noble Lord, Lord Purvis, reiterated, EPAs are asymmetric in favour of developing countries and are therefore critically important to their progress. The UK signed the agreement on 31 January with Mauritius, Seychelles and Zimbabwe, and we expect Madagascar and Comoros to sign in the near future.