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

Lord Whitty Excerpts

Wednesday 1st May 2019 Lords Chamber

Moved by

[Lord Whitty]

That this House regrets that the Trade Agreement between the United Kingdom of Great Britain and Northern Ireland and the Swiss Confederation, while differing significantly from the precursor European Union-Swiss Agreements, does not make adequate provision for trade in services.

Relevant document: 33rd Report from the European Union Committee

[Lord Whitty (Lab)]

My Lords, I tabled this Motion to Regret, effectively on behalf of the EU Select Committee, as the only way available to us to register with the House as a whole our concerns over these so-called rollover treaties—rolling over from EU treaties to UK treaties. There are also implications in the way we are dealing with these for the role of Parliament and of this House in dealing with trade treaties in the future.

First, I emphasise that, contrary to frequently heard claims that these rollover treaties are simply a matter of “delete ‘EU’ and substitute ‘UK’ and all will be fine and relations will continue more or less as before”, in fact this Swiss treaty in particular is decidedly not an equivalent substitute, either in form or in substance, to the arrangements with Switzerland that the UK enjoys as a member of the EU. This is despite the fact that both the UK Government and the Swiss Government genuinely wished for as little change as possible.

Secondly, unlike most of the other treaties with smaller states that our committee has so far reported on, Switzerland is a major trading partner for us in the UK. Indeed, in terms of goods and services, Switzerland is our 10th-largest trading partner. Of course, seven of the first nine are members of the EU; hence, after the US and China, Switzerland is actually the third-largest non-EU global market for the UK. That makes the treaty important in itself, as well as for what it implies for the process.

Thirdly, the House needs to understand the difficulties of having allocated the scrutiny of these rollover treaties to the EU Select Committee and its sub-committees, which have very limited powers. In effect, they are dealing with a fait accompli: a treaty already concluded and signed by the Government.

Lastly, I want to cover the long-run situation, which may be the most important. There is no way in which this Parliament and this House should accept that this extremely limited role for dealing with future trade treaties should apply after this rollover process. I thank the Government for the various publications they have provided as background to this and for continuing to do so for all the treaties we consider. I also thank the Minister for her letter on 20 March, which set out some of the understanding behind this treaty. The House needs to understand, however, that the EU Select Committee’s work in scrutinising this treaty and all the other treaties is a completely new and major task for the committee, and particularly for its staff.

The committee recently published its 10th such report, and those 10 reports cover more than 40 separate treaties. We have gained experience in analysing these agreements, but they have actually raised new issues for this House and for Parliament as a whole. Initially, the draft treaties coming through to us were either to deal with relatively small volumes of trade with small trading partners, or else agreements with larger trading partners but for only one particular sector. The sequence of treaties coming through was a little odd and seemingly random. At one point it appeared that either the Department for Trade or the FCO had a policy of prioritising all such treaties that dealt with the wine trade: perhaps Members of the House would appreciate that sense of priority, but it did seem slightly odd.

Dealing with bitty treaties such as this means that some important, multifaceted agreements that the EU previously had with Japan, South Korea, Canada, and Mercosur in South America have yet to be concluded by the Government, let alone seen by Parliament. Of course, originally all this process was supposed to have finished by 29 March.

Scrutiny of treaties has by necessity been improvised and is limited in two senses: by the limits of Part 2 of the Constitutional Reform and Governance Act 2010 in general, and in particular in relation to this House. That Act constrains the role of this House effectively to comment and advise, the House of Commons having the sole right to reject or send back any treaty. Even then, as I say, the parliamentary scrutiny is limited to the very end of a negotiating process. None the less, I emphasise the importance of this exercise and I hope that as we go forward, and certainly as the larger treaties move centre stage, the House engages with the committee’s report. In addition, it also leads on to the way in which post Brexit we will be dealing with trade around the world.

It is perhaps an unsought benefit for the Government that the extension of the date of the end of the Article 50 process has given us a bit more time to consider these treaties. However, we will need to be quite focused during that time if we are to finish even by the latest putative date of Halloween.

On the Swiss treaty itself, much of its complexity reflects the fact that pre-existing relationships between the EU and Switzerland have been complex and subject, frankly, to some disputes and historic vicissitudes. As a result, there has been no single comprehensive free trade agreement between the EU and Switzerland; instead, there are over 100 bilateral treaties. This treaty itself claims to roll over eight of those existing treaties, which are the most important trade-related treaties. In format, therefore, this treaty is nothing like the pre-existing EU arrangements but the substance is more important, and I will focus on that.

First, and most blatantly, there is the lack of coverage of trade in services and the interrelationship between the trade in services and the movement of people. There are also a number of EU-Swiss provisions which have been disapplied in this rollover agreement or are dependent on further agreements, either between the UK and the EU or Switzerland and the EU, and in some cases feature agreements with third countries. The extent to which any future changes will be subject to an appropriate level of parliamentary scrutiny is also an important issue.

On services, therefore, this agreement almost exclusively covers trade and the procurement process. However, over half the UK’s trade with Switzerland consists of services. Indeed, whereas on goods the UK is in slight deficit with Switzerland, in services the UK has a substantial surplus of £8 billion, including £5.5 billion on business services and £1.5 billion on financial services. My sub-committee, which dealt with this, had highlighted the importance of services trade to the UK economy in one of its early reports on the Brexit process. It is therefore regrettable that the agreement before us fails to account for future UK-Swiss trade in services. The parliamentary report accompanying the agreement and the subsequent letter from the Minister state that there is no comprehensive agreement on trade in services between the EU and Switzerland to replicate. I accept that, but the same can be said of goods, as I have been explaining, in that there are several agreements between Switzerland and the EU on goods, yet the Government have contrived here to present us with a single trade agreement.

This is in sharp contrast to the patchwork approach to services. In addition to this supposedly comprehensive agreement on goods, the Government have so far laid four separate agreements relating to particular aspects of EU-Swiss trade in services, all of which were presented to Parliament in January and February and dealt with by the EU sub-committees last year.

There is the agreement on air services, on international carriage of passengers and goods—although the pre-existing agreement also covered rail, which this one does not—on direct insurance other than life insurance, and on citizens’ rights. This fragmented approach to services makes it very difficult to assess the totality of future UK trade in services and to understand what are the gaps and what the impact will be. I will touch briefly on the substance of the other agreement I just referred to. I note in particular the agreement on citizens’ rights, as it includes citizens’ ability to deliver services—much of services trade depends on the free movement of persons. It includes, for example, the temporary preservation of the current 90-day service provision, but only for five years. Do the Government wish to extend that in subsequent agreements? The agreement was separately scrutinised by the EU Justice Sub-Committee but, because freedom of movement and such issues as mutual recognition of qualifications have such an important implication for trade in services, they also need to be considered in this context.

--- Later in debate ---

[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.

[Lord Whitty]

My Lords, I thank the Minister very much for her comprehensive reply, and underline my thanks to her officials for taking us through this process.

I do not intend to keep the House much longer; I have already indicated that I will not move this Motion to a vote. I thank everybody who has taken part in the debate. It indicates that, while this may be an umbrella agreement—and the Government clearly needed to provide a degree of continuity with what is, I repeat, our third-largest non-EU trading partner, and mainly in high-value trade—we need to ensure that the holes in that umbrella are rapidly filled, particularly in relation to the whole range of service industries, as noble Lords have raised.

Hardly anyone has disagreed with the findings on the Swiss treaty. The most wounding disagreement came from the noble Lord, Lord Kerr, who, in effect, said that we are being far too optimistic about potential future trilateral arrangements with the EU. Of course he is right—and that is the difficulty. It demonstrates that unless we can reach accommodation with the EU, the arrangements with Switzerland will be more difficult.

It will be even more difficult with the other big trade treaties. A great deal of reference has been made to the good will of both parties on this treaty, but it will not be so easy with Japan and many other countries. Unless they are played against the background of a positive arrangement with the EU, they will run into difficulties. This provides for no deal, but we hope that we will not be in that situation and will move to a broad understanding with the EU. However, if we do not, those problems will undoubtedly arise.

On the wider problem of scrutiny, Parliament has to take a decision and I am glad that the Minister has indicated that the Government are thinking about it. The noble Lord, Lord Robathan, is right that in the past Parliament did not get much involved in these matters or in treaties as a whole. However, since 2010 it has begun to get involved in treaties but, as far as trade treaties are concerned, until we leave that is a matter for the EU. The point I am making is that parliamentary scrutiny was at the EU level. It was not that the noble Lord, Lord Robathan, was asleep in the House of Commons when treaties were considered—not on that occasion anyway—but that they received the detailed involvement of the European Parliament, in a way similar to Congress’s involvement in trade agreements in the United States, as the noble Lord, Lord Kerr, pointed out.

That had the benefit of allowing time and interface with the devolved Administrations and civic society as a whole. That is the way in which we will have to approach the future pattern of our trade—not long-term continuity arrangements—and it will involve a profound rethinking of the role of Parliament in that respect. For all the reasons the Minister has just adduced, we will return to that issue. This treaty demonstrates the need for that. It also demonstrates the shortcomings of simply trying to roll over and the fact that this House and Parliament as a whole will have to return to these issues in short order—particularly if, regrettably, there is no deal. I beg leave to withdraw my Motion.

Motion withdrawn.