Brexit: Options for Trade (EUC Report)

Baroness Mobarik Excerpts

Thursday 2nd March 2017 Lords Chamber

[Baroness Mobarik (Con)]

My Lords, I am very grateful to the noble Lord, Lord Whitty, for tabling this debate and for his excellent speech. I also thank the EU Internal Market Sub-Committee and the EU External Affairs Sub-Committee for their report, Brexit: The Options for Trade, which provides a rigorous analysis of how the Government might approach a new trading relationship with the European Union. The committees will now have received the Government’s response to their report.

As your Lordships will know, my noble friend Lord Price appeared with my noble friend Lord Bridges before the committees in October last year, and again last month to discuss the upcoming publications, Brexit: Future Trade Between the UK and EU in Services and Brexit: Future Trade Between the UK and EU in Goods. I am looking forward to the contents of these two reports, which have been informed by evidence from key sectors as diverse as pharmaceuticals, food and automotive.

As a businesswoman and former chairman of CBI Scotland, I know that trading continuity is vital during times of change. That is why the Government have held thousands of visits, meetings and events with businesses since the referendum. My noble friend Lord Price alone has met more than 50 Ministers from foreign Governments since the referendum, 18 of whom are in the EU. The reason he is unable to attend this debate is that he is on his way to attend the informal Foreign Affairs Council on trade in Malta. I take this opportunity to pay tribute to him for the work that he is undertaking, and to wish him a happy birthday. In addition, Ministers from the Department for Exiting the European Union have met more than 150 businesses through round-table meetings with key sectors.

I am very pleased to be able to wind up for the Government in this debate, and will now address the points raised. I will also set out the Government’s plans. Since the publication of this report, the Prime Minister has set out Our Plan for Britain, including the 12 principles which will guide the Government during negotiations on the UK’s withdrawal from the European Union. The Government have also published a White Paper on the UK’s exit from and new partnership with the EU. In response to the points raised by some noble Lords on the Government’s narrative on these issues, our strength is speaking with one voice. Speaking with one consistent voice is a negotiating strength.

As the Prime Minister has said, we will not seek membership of the single market but will pursue instead a new strategic partnership with the EU, including an ambitious and comprehensive free trade agreement. We want the UK to be able to negotiate its own trade agreements. We want our new relationship with the EU to aim for the freest possible trade in goods and services, and for cross-border trade to be as frictionless as possible. I thank my noble friend Lady Verma for her question on a customs agreement with the EU. We are seeking a new customs agreement with the EU. There are a number of options for any new customs arrangement, including a completely new agreement or for the UK to retain some elements of the existing arrangements. The precise form of this new agreement will be subject to negotiation.

I remind noble Lords that we start from a unique position. On day 1, we will have exactly the same regulations and standards as our negotiating partners. This provides an unprecedented starting point for our negotiations with the EU. We will aim to have reached an agreement about our future partnership by the time the two-year Article 50 process has concluded. Article 50 states that the process of withdrawal will take account of the framework of the leaving member state’s future relationship with the EU, and there is a clear connection between the terms of our withdrawal and the future relationship we want to establish.

As we have said before, it is in no one’s interest for there to be a cliff edge for business as we change from our existing relationship to a new partnership with the European Union. That is why the Government have announced that we will establish the UK’s independent position at the WTO, of which the UK is a full and founding member. We are currently represented by the EU at the WTO, but as a post-EU member we will need to separate our schedules of commitments, which are currently integrated into the schedule for the EU as a whole. We will do this in a way that causes the least disruption possible to our trading partners. To address the concern raised by my noble friend Lady Verma about the UK’s technical rectification of WTO schedules, I tell the House that the WTO director-general, Roberto Azevêdo, stated in support of the UK’s position:

“The UK is a member of the WTO today, it will continue to be a member tomorrow. There will be no discontinuity in membership”.


Our ambition is clear: we want Britain to become a champion of free trade, working with our partners across the world to remove barriers. As the Prime Minister has said, we want to build a truly global Britain that is one of the foremost advocates for free trade anywhere in the world. We cannot negotiate and conclude trade agreements while a member of the EU, but we can have discussions on our future trading relationships. We have announced a series of working groups with key partners and are seeking to ensure that we deploy the right trading tools with each market to take best advantage of the opportunities available to us, both now and as we leave the EU. With some of our partners an FTA might be the right solution. In other cases, other trading arrangements may be more appropriate.

I am keen to address the concerns of the business sector. I hope I am able to answer the very important question raised by my noble friend Lady Verma. The noble Lord, Lord Aberdare, asked a very sensible question: what criteria will the Government use in assessing when they have achieved a good deal? The key is engagement. The Department for International Trade and the Department for Exiting the European Union have been engaging widely with businesses at all levels since the referendum, as have other departments, such as the Foreign and Commonwealth Office, the Department for Environment, Food and Rural Affairs, the Department for Culture, Media and Sport and HM Revenue & Customs.

I thank the noble Baroness, Lady Donaghy, for her point on ensuring engagement with industry. I can assure her that, as we prepare for the negotiations over the UK’s future relationship with the EU, the Government will continue to have open and honest conversations with businesses and trade associations to understand issues, limit uncertainty and ensure that our new relationship with the EU works for business.

The insight we are gaining from our engagement will play a vital role in informing the development of trade policy that works for the whole of the UK. I confirm the intention raised by my noble friend Lord Green. The Government are determined not to allow any part or nation of the United Kingdom—Scotland, Wales, Northern Ireland or England—to lose out in this process. The Department for International Trade is dedicated to serving the whole of the UK, now and when we leave the EU. Officials from DIT have been engaging with counterparts in each of the devolved Administrations.

This engagement is stepping up. Last week, DIT hosted officials from the Governments of Scotland, Wales and Northern Ireland for an in-depth discussion of our WTO membership, the rights and obligations that come with membership, and the impact that Brexit will have on our relationship with the WTO. The Department for International Trade will be engaging further on a wide variety of trade-related topics over the coming weeks and months, and the Government are of course taking into account the specific circumstances faced by businesses in Northern Ireland. The Prime Minister has been clear that there will be no return to the borders of the past and that retaining trade will be important. She agreed with the Taoiseach that we will work to ensure as seamless a border as possible with Ireland and to continue the common travel area.

We are clear that we want Britain to have the greatest possible tariff and barrier-free trade in goods and services with our European neighbours, and to be able to negotiate our own trade agreements. As the Prime Minister said, we want to have reached an agreement about our future partnership by the time the two-year Article 50 process has concluded. We approach these negotiations not expecting failure but anticipating success. As we have always said, of course there will have to be give and take, as in any negotiation, but a punitive approach by the EU that punishes Britain would be an act of self-harm for the countries of Europe. Britain would not and could not accept such an approach.

My noble friend Lady Verma and other noble Lords were concerned, I think, about the costs of leaving and trading on WTO terms alone. In the event that it is not possible to reach a positive agreement—a scenario the Government are confident need never arise—the Government are clear that no deal for Britain is better than a bad deal for Britain, because we would still be able to trade within Europe and free to strike trade deals across the world.

Ahead of and throughout the negotiations, we will provide certainty wherever we can, and as much information as we can without undermining the national interest. Noble Lords will recall that the publication of impact assessments was discussed in detail in Committee on the European Union (Notification of Withdrawal) Bill earlier this week. The challenge we face is to get the balance right between enabling scrutiny and ensuring that our negotiating position is not revealed. A cardinal rule of negotiation is not to tell those on the other side how much certain scenarios and outcomes would cost or benefit you, but that is what publication of an impact assessment would do.

A number of noble Lords have asked whether the Government are able to deliver Brexit. Do we have the right staff? Will our customs arrangements be sufficient? The Civil Service is well equipped to deliver the UK’s exit from the EU and has substantial experience of negotiations with it. Alongside the increase in staff and resourcing in my department, the Department for International Trade, and the Department for Exiting the European Union, as part of the Autumn Statement, we also secured funding for additional staff in key posts overseas. Our diplomatic network will be absolutely key in delivering the best for the UK. As I said, DIT is working closely with the Department for Exiting the European Union and other departments to contribute to the Government’s preparations for Brexit, advising on the implications and operational aspects of EU exit for our trading relationships.

At the end of 2016, DIT’s trade policy team consisted of around 150 staff. This team of trade policy officials has now increased to 185 and is continuing to grow. This includes policy and country specialists as well as expert economic analysts and lawyers. We will continue to develop our existing expertise as well as hire the brightest and best talent from within and outside the UK Civil Service to deliver the best outcomes for the UK. The Department for Exiting the European Union now has more than 300 staff, and is growing fast. It is also supported by 120 UKRep staff based in Brussels, who report to Ministers in the Foreign and Commonwealth Office and the Department for Exiting the European Union.

Parliament will of course be involved in helping to shape the UK’s future as we leave the European Union. There have already been 70 parliamentary debates on Brexit, as well as 36 Select Committee inquiries. The House of Commons voted overwhelmingly for the Article 50 Bill to pass Third Reading unamended. As noble Lords know, the Bill passed the House of Lords Committee stage with an amendment last night. It will now pass back to the House of Commons and approval of the Bill will provide a key step towards a smooth and orderly exit from the EU.

The Government will bring forward legislation in the next Session that, when enacted, will repeal the European Communities Act 1972 on the day we leave the EU. We will bring forward a White Paper on this great repeal Bill, which will set out our approach to giving effect to withdrawal on the domestic statute book. We will ensure that it is published in time to allow Parliament to digest its contents in advance of the introduction of the Bill in the next Session. Many noble Lords, including the noble Lord, Lord Liddle, and my noble friend Lord Risby, asked whether the Government would seek equivalence of EU regulations and standards. Equivalence will be an important part of any discussion on our future trading relationship and the great repeal Bill will convert current EU law into domestic law while allowing for amendment in future. How we go about ensuring the fewest possible barriers to trade between the UK and EU is a matter of negotiation. We will inform the House about the detail and timing of the repeal Bill legislation in due course. We have always been clear that Parliament will have every opportunity to scrutinise the great repeal Bill and we are considering the best way to enable that. Of course, Parliament must be consulted before ratification of any future trade agreements that we negotiate.

We recognise the importance of access to EU markets. As my noble friend Lord Gadhia and others have raised, financial services contribute more than 7% of UK GDP and its exports account for over 12% of the UK total. Around half of the world’s largest financial firms have their European headquarters in the UK. We are listening to what the financial services industry has to say on the key issues it faces and we will be looking for a sensible discussion in negotiations.

On the UK being outside the jurisdiction of the ECJ, we are preparing a UK trade remedies framework for when we leave the EU, which will enable the UK to be a leading proponent for free trade while providing a safety net for its industries if dumped, subsidised or surges of imports cause injury to UK producers, as set out by WTO agreements. The UK remains committed to pursuing free trade, and this includes seeking to achieve continuity in our trade and investment relationships with third countries, including those covered by EU FTAs or other EU preferential arrangements. We are actively exploring what may be possible with our trading partners to achieve this.

I want to respond to some of the points raised by my noble friend Lord Green with regard to UK trade statistics. In 2016, UK exports were £544.8 billion—up by 22.6% from 2010. While there was a trade deficit in goods last year, there was a £98.1 billion surplus in trade in services. This is a positive picture, but the Government wish to build on it and ensure that the benefits of trade reach as many across the UK as possible.

Many have commented on the complexity of the task ahead; I assure noble Lords that the Government do not underestimate this—the Government will not, and must not, do this alone. We must take a “whole of the UK” approach, drawing on the skills and expertise of the Members of this House and the other place and the key learnings that we can draw from business and civil society. I am confident that if we seek to work together we can get the very best outcomes for the UK.

I conclude by thanking noble Lords for their contributions over the course of this debate. I am sure that this House will continue to play a valuable role and will work pragmatically towards building our future.