European Union: Negotiations (European Union Committee Report)

Baroness Falkner of Margravine Excerpts

Monday 16th March 2020 Lords Chamber

[Baroness Falkner of Margravine (Non-Afl)]

My Lords, I agree with the EU Select Committee’s report and support the Motion in the name of the noble Earl, Lord Kinnoull. I was a member of that Committee until last summer and I know how carefully it strives to be as objective as possible. This report upholds that tradition of neutrality. However, I do not support the amendment to the Motion in the name of the noble Baroness, Lady Hayter, for reasons that I will set out.

The EU Committee’s report notes the change in the Government’s Command Paper of February to the political declaration of October 2019. Again, I agree that there is a change, but I point to the significant fact that explains that change: the event of a general election on 12 December 2019. This was contested on the basis that, if the Conservatives won the election, they would seek a very different settlement from Prime Minister May’s withdrawal agreement in terms of the sovereign autonomy of the United Kingdom. They won that election resoundingly, hence the hardening of the autonomy provisions in the UK’s negotiating position.

The Committee also notes the EU’s new hardening of its own position on provisions to implement a level playing field, almost predicating the deal on this proviso. This change of position has some history. During my time on the committee, we had several meetings with Mr Barnier through the course of the negotiations. The quest for a level playing field was there, but mainly in regard to market access for, for example, financial services. I recall one meeting in, I think, November 2018 when there was a robust exchange between us when I asked him why he thought the UK would wish to leave the EU if it would end up as a rule-taker with no rights but having to abide by EU rules. I remember his answer in the margins of the meeting, which was simply, “Well, it is your choice.”

Regulatory autonomy is particularly relevant at a time of rapid technological and economic change, which will undoubtedly impact the prospects for all advanced economies in the relatively near future, so dynamic alignment with EU rules in areas such as environmental protection and workers’ rights come at a time when most independent states will seek as many levers at their disposal as possible to mitigate the effect of job-displacing technology. In plain English, every country wants to do what it needs to do to protect the jobs and prosperity of its citizens. That is why carve-outs and exemptions exist in all trade agreements.

Regarding state aid, Mr Johnson, in his speech of 3 February 2020, detailed the enforcement taken by the EU against EU member states. He did so to prove that the UK is not front of the pack in diverging from EU rules. The UK, he said, was subject to four actions in 21 years, compared with 29 against France, 45 against Italy and 67 against Germany. The record speaks for itself.

A further change to the EU position not mentioned in the report is the reluctance of the EU to envisage a Canada-style CETA. Again, Mr Barnier’s sideshow, wheeled out frequently during the negotiations, had several levels of relationship on offer, depending on what the UK sought to do in its withdrawal agreement and future relationship. If we wanted untrammelled market access, we had to be in the single market and the customs union. At the other end of the scale was the Canada CETA as an ordinary third country. So it is surprising to see that once the UK has resolved to be a third country, the EU now discovers, three and a half years later, that we have a close geographical proximity and are a large economic power—which are the reasons it gives for why a Canadian-style CETA is inappropriate for us.

The UK position, reflecting the Government’s majority, can be summed up by the observation made by John Maynard Keynes: “When the facts change, I change my mind.” However, instead of a similar realisation that the facts on the ground have changed, the EU seems to move away from the political facts in the UK, its negotiating partner. However, I hope that these are just negotiating positions through which a consensus will emerge.

My objections to the Labour amendment are mainly in its seeking an analogous position to the European Parliament, not in its desire for greater scrutiny, which to a great extent I share. This comparison with the European Parliament has been a long-standing ask from those in the Lords and the Commons, and was promised by the Government in response to a question that I asked Mr David Davis in 2017 during EU Select Committee evidence sessions. I was surprised that he agreed to grant the committee that, and I continue to be surprised that the Lords continues to ask the question as the Government move away from that offer.

The Motion seems to imply that Parliament should be given the same rights as the European Parliament. That in turn implies that the UK Parliament is similar in composition and powers to the EU, whereby it should have the same rights. First, the European Parliament was given the powers under Lisbon as the Commission, post Maastricht, had come under attack for being insufficiently democratic. The status quo ante had been that the Commission negotiated agreements and the European Council agreed them. Post Lisbon, the European Parliament forms a bicameral legislature with the Council of Ministers. This is not analogous to the role of the UK Parliament vis-à-vis the UK Government; I think that should be self-evident. As the EU institutions—

[Baroness Smith of Newnham (LD)]

I am a little confused. I thought that the point of the United Kingdom voting to leave the European Union was to take back control and that Parliament was sovereign and no Parliament could bind its successor. In such circumstances, is it not wholly appropriate for this Parliament to seek to hold the Government to account? Why is there anything peculiar about this?

[Baroness Falkner of Margravine]

I fear that the noble Baroness is a little enthusiastic in jumping in before I have concluded setting out my rationale for why I think that this is not analogous. I will not go into “taking back control” because we are a bicameral Parliament and the European Parliament is not, so it is a different entity entirely.

As the EU institutions practise in an area of trade policy that is not analogous, there is a distinction between straightforward trade agreements and mixed agreements, with differing procedures as the CETA debacle apropos Wallonia demonstrates. I remind noble Lords that CETA remains a provisional agreement; as yet it has not been ratified by all member states. So I would argue that how the Commission works through blockages is still a work in progress. My prediction is that the EU will find it increasingly difficult to pass the kind of comprehensive deals with either the US or other large countries that it seeks if such divergent and multiple checks on its autonomy prevail.

I turn to the noble Baroness’s question about the UK Parliament and the attempt to replicate the European Parliament’s powers here. One singular distinction is that we are bicameral and the European Parliament is a single Parliament, as I have just reminded her. Moreover, we have an elected Chamber, the Commons, which is similar to the European Parliament, and a further appointed Chamber, the Lords. Were we in the Lords to seek to put up objections to a trade deal that had been agreed by the Commons potentially where the detail may not have formed part of that Government’s manifesto, where would we be if the Commons cleared it but the Lords did not? Moreover, if one takes the EU analogy for mixed agreements and replicates it at national level, is one not saying that the devolved nations should also have a veto on the deal?

I am all for involving the devolved powers in the details of free trade agreements as in the end they have to implement them. The current mechanism for consultation should be improved. Would that be against changing our settlement for reserved matters? If that is the case, I will need to look again.

It seems to me that this ongoing quest for analogous powers to those of the European Parliament on the part of some sides of this House is misguided.

[Baroness Hayter of Kentish Town]

Will the noble Baroness accept that the amendment only asks for access to documents, not for powers over their content?

[Baroness Falkner of Margravine]

I will read the wording of the amendment, which

“calls on Her Majesty’s Government to ensure that, in a manner consistent with the European Commission’s treatment of the European Parliament, both Houses … are able to receive regular updates from Ministers”—

and so on. In my view, that goes too far, because it draws the analogy with the European Parliament. I also say that to the noble Baroness, Lady Hayter, because I have noticed sections of this House consistently making that analogy.

The noble Baroness may be interested to know that I would seek powers of scrutiny over future trade deals through a Select Committee on international trade—perhaps a Joint Committee of both Houses that would have several and various powers of scrutiny that the Government have said that they are perfectly willing to consider. I see benefits to Parliament, the public and the Government in that pathway, as Governments undoubtedly benefit from the early warning of problems that comes through Select Committees. But ultimately it is the Government’s prerogative to be the sole negotiator of trade agreements and, while the UK should improve its own constitutional arrangements, it should not seek to emulate processes designed for other institutions.

--- Later in debate ---

[Lord Whitty (Lab)]

My Lords, I thank the noble Earl, Lord Kinnoull, and his committee for producing this report. It is very timely and clear. I will be supporting my noble friend Lady Hayter’s amendment and I thank her for tabling it. I will say something towards the end of my remarks about the whole issue of accountability.

I also thank the noble Lord, Lord Kerr, even though he has largely pre-empted some of my more important points. Like him—and the committee, rather more delicately—I regret that there has been a departure from the spirit of the political declaration. There has been a bit of a departure by the EU, one has to say, but a very substantial departure by the British Government from a political declaration that was, after all, signed by this Prime Minister. That is serious enough but, as the noble Lord, Lord Kerr, has just said, even more serious is the apparent departure from what is already in a signed treaty in relation to Northern Ireland and the protocol in the withdrawal agreement.

My main remarks will be about trade, which is, after all, the most important dimension of our joint relationship, although it is not the only one. I had to look back; it was as long ago as December 2016 when the committee I was then chairing jointly produced for the then EU Committee a document entitled Brexit: The Options for Trade. I had another look at it over the weekend. We were very prescient and far-sighted in the options we looked for. We accepted that Britain would be outside the EU and that we would leave in formal terms the customs union and the single market. I remember saying several times in this House and elsewhere that, in that situation, frictionless trade is a relative term; you have to look at the different implications of the different arrangements.

We looked at a number of arrangements, ranging from membership of the EEA through to trading under WTO rules. It seems to me that all those outcomes might still conceivably be the case. We are no further ahead. In effect, in the latest Council decision, the 441-page treaty which the noble Earl, Lord Kinnoull, has clearly read—he might send me one of his four copies, even if it is in French—the EU clearly goes for the option of something very like an association agreement. In fact, in treaty terms, it will be under Article 217 relating to association agreements.

The British option, as far as one can interpret it, is much closer to the arrangements with Switzerland, as the noble Lord, Lord Kerr, has said. They are looking for a trade agreement but also a whole suite of other agreements. That was an option that we looked at but largely dismissed. It could still be a form of free trade agreement, similar to that agreed with Canada or Japan, or to what the Government used to talk about—Canada-plus-plus-plus. That has been relegated to just one “plus” in recent ministerial announcements, but all those options are still there, as is the bare-bones agreement of limited clauses and effect that was once referred to by David Davis; or it could be on WTO terms, as I say, which is now known as Australia. They are all still available, although the one that we identified at the time as the easiest and least disruptive course to take—namely, to join on EEA terms: the Norway option—although we did not actually advocate it, has been clearly rejected by the Government and, in effect, by the EU. So there are still a lot of potential outcomes between now and the end of December.

It is three and a half years after our report, after two general elections, two Prime Ministers, three Governments and four Secretaries of State. Until very recently, the only continuous presence was that of the noble Lord, Lord Callanan, on the Front Bench opposite—I am pleased to welcome the noble Lord, Lord True, in his stead. There have been many changes in the British political situation since we produced that trade report. However, there has been no serious progress regarding relations on this key issue between ourselves and our largest and closest trading partner.

Do the Government mean what they say about wanting a Swiss-type suite of separate agreements with separate Governments? That has caused many ructions between the EU and Switzerland, and it is a relatively small part of EU trade compared with the EU’s trade with the UK. I am not sure why we need that suite. In the British government documents and the other pronouncements there is, for example, a reference to a bilateral aviation agreement. I hope we have one, otherwise aviation range will fall on 1 January. There was a reference in the timetable for the trade talks—before the virus slowed them down a bit—to talking about a separate aviation safety agreement and a general aviation agreement. I have a Question set down for later in the week about the European Aviation Safety Agency. The situation there, as both the airlines and the aerospace manufacturing industry recognise, is that if we are not careful and do not continue to act very closely with EASA, the airlines will be faced with a situation where their aircraft, their components, and the qualifications of their personnel may be legal at one end of a short European hop but queried at the other end. If we want to diverge, there are consequences. If we do not want to diverge, why do we not say so and reach some sort of association agreement with EASA?

The same applies to many of the other EU agencies, which, during the course of several different withdrawal Bills, I raised in the House. Mrs May, when she was Prime Minister, recognised that there would need to be some separate arrangement on aviation, as she did on chemicals. We had a Question today from the noble Lord, Lord Fox, and the Government were not at all clear on what arrangements would be made for that vital industry. Environmentalists and the industry itself are deeply concerned about the capability of the HSE and air authorities to reproduce the arrangements in the European Chemicals Agency. Indeed, even if we manage to duplicate those arrangements, it is a double administrative cost and charge, and a potential delay for our chemicals-based sector and the industries that use chemicals.

If we are going to have separate agreements on separate areas that are covered by such things as the aviation or chemicals agencies, now we ought to be particularly concerned about the medicines agency, which was of course based here and has already left—and there are many others, for example on food safety. If we are to have a separate agreement on fisheries, the EU will insist that that is reached before we reach a general agreement. Indeed, because of the timing of this, the Government seem to be going along with the view that we can reach a fisheries agreement by June. I think that is unlikely. It is equally unlikely that we will reach a financial services agreement by July. The noble Lord, Lord Kerr, and my noble friend Lord Hain spelled out the ambiguities in meaning of the Northern Ireland protocol and whether we can reach mutual understanding on that in time for this to be all agreed, broadly speaking, by September, and ratified through the European Union and ourselves by December. It is about time for the Government to recognise that, leaving aside the current serious difficulties because of the coronavirus, the timetable they set themselves was never achievable and is certainly not achievable now.

Other issues, such as the level playing field—where we started from the position in Mrs May’s Chequers proposition that we were talking about a common rulebook but ended up with the Government making a virtue of maximum divergence—and state aid, also need to be resolved. There is certainly deep anxiety among our former partners in Europe that there will be heavy state intervention to support competitors against their own industries. Not that long ago, during the election, it was regarded as a very leftist position to look to subsidise British industry—people were worried about Jeremy Corbyn breaching the state aid rules in that regard—but now, with this big-state Toryism, the Government in Brussels and Governments throughout the continent are worried about this Government causing unfair competition. These issues are not easy to resolve and are unlikely to be resolved in the timetable currently announced—but they need to be resolved.

My last point is on accountability to Parliament, which is the main point of my noble friend’s amendment. I understand what the noble Baroness, Lady Noakes, said about the political situation having changed but, like the noble Baroness, Lady Falkner, we are not asking for the exact equivalent of the European Parliament. We are simply asking that both Houses of Parliament are kept informed on the progress of these negotiations and can comment on them.

The strange thing is that, in discussing the potential trade treaty with the United States, the Government have, in effect, given that guarantee, at least to the House of Commons. When we talk about a prospective treaty with the United States, they are prepared to be accountable to Parliament; when we talk about a trade agreement with our largest and closest neighbour, they are not. That needs to be addressed; Parliament needs to assert itself in that process. I support my noble friend’s amendment.

[Baroness Falkner of Margravine]

Does the noble Lord agree that there are many routes for Parliament to carry out that scrutiny? One route could be a Joint Committee of both Houses or a dedicated Select Committee—possibly even an extension of the European Union Select Committee. It does not have to be a replication of the European Parliament’s powers but can be something where scrutiny is undertaken adequately.

[Lord Whitty]

I thank the noble Baroness. I agree. We need the principle of scrutiny; the form of it we can debate. We can debate the correct structure within our two Houses but, without the principle being conceded by the Government, we are in an anomalous situation in relation to Europe and to what has been promised on this side of the pond in potential trade negotiations with the United States.