European Affairs

Greg Hands Excerpts

Wednesday 14th March 2018 Commons Chamber

[The Minister for Trade Policy (Greg Hands)]

I beg to move,

That this House has considered European Affairs.

I welcome the fact that we are having this debate, which is perhaps a return to the tradition of a pre-European Council debate in the House of Commons. I used to take part in those twice-yearly debates. When I checked my last contribution, which was in June 2008, I was reminded that I, like so many other Conservative Members, called for a new approach in Europe in the immediate aftermath of the Irish rejection of the Lisbon treaty. The purpose of today’s debate, however, is not to dwell on missed opportunities in the past, or to reflect on what might have been had the EU reformed itself; we are here to look to the future, and the Department for International Trade is at the very centre of that bright future.

Before I turn to the future of our trade with Europe and the negotiations under way, it is important to take stock of what we have achieved so far. The joint report issued in December sets out a financial settlement that honours commitments we undertook as EU members, just as we said we would. It agrees to avoid a hard border in Ireland, while respecting the UK’s integrity, which was and is one of the Government’s priorities for these negotiations. Very importantly, it safeguards the rights of EU citizens living in the UK and of UK nationals living abroad, which the Prime Minister has always said was her first priority. Some 17% of my constituents in Chelsea and Fulham are nationals of other EU countries; indeed, my wife is an EU national. I have put in a lot of time and effort in outreach to them, and I can report to the House that the December agreement landed very well among EU nationals there. Ireland, the budget and citizens’ rights—these are strong foundations for the ongoing negotiations, and we should all welcome the progress that has been made on them.

[Emma Reynolds (Wolverhampton North East) (Lab)]

I have listened very carefully to what the Minister has said. Will he acknowledge that there are still very serious concerns about what needs to happen to preserve an invisible border on the island of Ireland—one that does not have any physical infrastructure—and that there is seemingly a misunderstanding in some parts about what is actually meant by the fall-back option of full alignment?

[Greg Hands]

We have been absolutely clear that we will of course abide by the December agreement in full. Let me remind the hon. Lady that the three priorities we laid out include a strong commitment to avoid a hard border, but also to preserve the integrity of the UK market—I remind her that having access to the UK market is very important for the people of Northern Ireland. No UK Prime Minister could accept a new border down the Irish sea.

We are also making strong progress on our trading relationships outside the EU, which is my primary responsibility as Minister for Trade Policy.

[Mr Kenneth Clarke (Rushcliffe) (Con)]

To follow on from that point, my right hon. Friend has repeated two points from December, and at Prime Minister’s questions the Prime Minister repeated her full commitment to the December agreement on Ireland. When he says there will be no hard border, I assume that means there will be no physical infrastructure. I of course recognise that we will not have a border down the Irish sea, but does he accept that, if there is no other way of achieving it, we are going to have the full regulatory convergence to which the Government signed up in the December agreement?

[Greg Hands]

I reiterate that what the Prime Minister said at Mansion House and at Prime Minister’s questions this week still stands. I refer my right hon. and learned Friend to the papers published last summer by the Department for Exiting the European Union on how a proper border between the two parts of Ireland can be effectuated through the two possible types of customs agreements between the UK and the European Union.

[Karin Smyth (Bristol South) (Lab)]

I asked the Prime Minister during her statement, and I have written to her, about paragraph 47 of the December agreement, which mentions the mapping exercise on north-south co-operation. Will the Government commit to publishing that mapping exercise?

[Greg Hands]

The Government are undertaking analyses of so many different factors involved in this particular arrangement and question. We have always made clear our commitment to ensuring that the House is properly apprised of all the relevant facts when it comes to examine the actual withdrawal agreement in due course.

As we prepare the ground at the Department for International Trade, its Ministers have made more than 100 overseas visits in the past year and a half. We have set up 14 trade working groups, covering 21 countries with a substantial market size. None of that would have been possible without the excellent work of our Department for International Trade staff, both at home and in post in 108 countries around the world. I put on the record my thanks for their hard work, professionalism and invaluable expertise.

[Chuka Umunna (Streatham) (Lab)]

The Minister is right to pay tribute to his Department’s staff. First, has he noted the comments of the Department’s recent former permanent secretary to the effect that, if we are to leave the European Union, non-EU trade will not make up for the loss of trade that we currently enjoy with the EU? Secondly, the Secretary of State was part of a campaign that promised that we would start negotiating new trade agreements with other non-EU countries as soon as we voted to leave. How many of those new trade agreements are being negotiated right now?

[Greg Hands]

The hon. Gentleman knows full well that this is not an either/or situation: it is not a choice between having trade with the European Union or with the rest of the world. The Government’s objectives are clear, namely, to secure a deep and comprehensive partnership with the European Union while still being able—crucially, outside the customs union—to pursue an independent trade policy and to secure those agreements with the rest of the world.

On what was said during the campaign, the Department for International Trade has the capability in place and we have built up the Department. I have mentioned the 14 trade working groups. We are clearly not able to carry out a trade negotiation while we are still members of the European Union, but the hon. Gentleman seems to be demanding that we have those negotiations while at the same time saying that we should stay in the EU, which would prevent us from having the negotiations in the first place.

[Vicky Ford (Chelmsford) (Con)]

Does my right hon. Friend agree that, given the incredible depth and complexity of the UK’s trade with Europe, there is no off-the-shelf solution available from any other trade relationship? Does he also agree that, if we are to have as frictionless trade as possible, there clearly needs to be some form of agreement for what will happen at our customs, such as a partnership or another type of agreement?

[Greg Hands]

My hon. Friend is right on both counts. There is no off-the-shelf agreement that would be suitable in this case. We are clear that we are seeking a bespoke arrangement between the United Kingdom and the European Union. Neither something like the comprehensive economic and trade agreement nor something like the European economic area would be suitable. On co-operation, we are clear that we seek a good agreement with the European Union that creates as frictionless trade as possible across all our borders, not just the internal border on the island of Ireland.

[Sir Desmond Swayne (New Forest West) (Con)]

May I take the Minister back to the former permanent secretary? When Mr Donnelly was interviewed on the “Today” programme that morning, so keen were the presenters to get his soundbite about the packet of crisps that they gave no analysis whatsoever of his figures, which were about 10% awry from those issued by the national statistics office. Has the Department done any digging into where his figures came from?

[Greg Hands]

My right hon. Friend tempts me down a path which I think I ought to resist. I am not exactly sure what figures the former permanent secretary used, but the figures are clear: European Union trade is extremely important to this country, but it is none the less a declining part of our overall trade, down from 56% in 2006 to just 43% today.

[Anna Soubry (Broxtowe) (Con)]

Will the Minister give way?

[Greg Hands]

I am going to make a bit of progress.

We are not working purely on non-EU trade. A common misconception is that the DIT is a purely Brexit Department. Our ongoing work of encouraging investment and exports is equally important, and that applies just as much to trade with Europe as it does to trade outside it. DIT has over 300 staff across continental Europe. I myself have made 16 European visits to 10 countries while in this position, as have all our ministerial team, including the Secretary of State. We have brilliant teams in commercial centres right the way across Europe.

[Anna Soubry]

I am very grateful to my right hon. Friend for giving way. It is very good, kind and generous of him. May we just return to the comments made by Sir Martin Donnelly, because I do not think the record will be accurate? We have heard mention of a bag of crisps. What he said was that, based on his experience of 15 years and beyond in the specific area of trade, our country was in effect embarking on a course that was the equivalent of swapping a three-course meal for a bag of crisps. Has my right hon. Friend seen the Government’s own analysis of the various options available to us that show that, even if we get a trade deal with every single country with which we do not have one by virtue of our membership of the European Union, which is about 50, we will still not be as prosperous as we are now by virtue of our membership of the European Union?

[Greg Hands]

I thank my right hon. Friend for her lengthy intervention. What I would say is that there is no such analysis of the kind she describes. What I am clear on is that it is our objective to maintain frictionless trade with the European Union as we go forward. It is our objective to conduct an independent trade policy and to seek, when the time is right, trade agreements with those partners. It is also our objective to seek the continuity in existing EU trade agreements for the UK, which I note the Labour party voted against on Second Reading of the Trade Bill. Labour is actually opposed to us seeking the continuity of existing trade agreements.

[Antoinette Sandbach (Eddisbury) (Con)]

Going back to the analysis published by the Government and the risk presented by non-tariff barriers, it was clear in that analysis that, even if we had an EEA-style agreement, there would still be damage to the UK economy. Is the Minister saying that he wants EEA-plus?

[Greg Hands]

I think I understand my hon. Friend’s intervention, but the Government have been clear for more than a year, since the Lancaster House speech, that our objective is not to seek an EEA-style agreement. Nor is it our objective to seek a CETA-style agreement. It is our objective to seek a deep and comprehensive agreement with the European Union, the like of which, I remind my hon. Friend, who I know studies these matters very carefully, was not modelled in those analyses. That is the most important point.

[Christian Matheson (City of Chester) (Lab)]

rose—

[Greg Hands]

I am going to make a bit of progress.

I am going to give a few examples of our work around Europe. I promoted the UK’s defence industry in Sweden, visiting Saab, whose new generation Gripen fighter jet could be worth £1.1 billion to UK industry. I and my colleagues engaged with the Polish Government directly on behalf of UK companies to discuss high-value retail opportunities in the Czech Republic—in Czech, I might add, Madam Deputy Speaker. I and my colleagues from DIT and the Department for Exiting the European Union have addressed chambers of commerce right the way across the European Union—in Austria, Hungary and Bulgaria, among many others. I enjoyed making use of my language skills when I gave speeches in German to senior business leaders in Munich, Düsseldorf, Osnabrück, Tegernsee and so on.

DIT’s relationship with Europe does not just extend to export and investment promotion. The vote to leave the EU was not a vote to undermine the EU. It is very important to understand that it is in this country’s interest to have a strong and effective EU. We continue to engage constructively in ongoing EU trade policy, as we currently are a full and equal member of the EU. As the House heard on Monday, we are working closely with our European partners as well as bilaterally to respond to President Trump’s decision to impose tariffs on imported steel and aluminium.

[Stewart Hosie (Dundee East) (SNP)]

Will the Minister give way?

[Greg Hands]

I will make a bit more progress. We are committed to ratifying the CETA agreement with Canada, which provisionally came into effect in September. I was delighted that we were joined by 86 Labour MPs—many of whom are in the Chamber at the moment—who, in defiance of their Front-Bench team, supported the EU’s trade agenda in making sure that CETA was passed. In defiance of the party Whip, they voted for that important agreement with Justin Trudeau’s Canada.

We are supportive of the EU’s work to sign third-country trade agreements in future, and I have attended four Trade Ministers’ Foreign Affairs Councils, which included discussion of these. The Commission has been particularly focusing on agreements with South America’s Mercosur union and with Mexico. We continue to support the ongoing negotiations for both free trade agreements. On Mexico, we would like to see progress made wherever possible in the negotiations, although we recognise the complexity of North American Free Trade Agreement renegotiations running in parallel. We will continue our support for EU-Mercosur trade negotiations and would like to emphasise the urgent need to progress the trade components. It is essential to keep momentum and to achieve a swift political agreement.

Another high-profile agreement is the EU-Japan economic partnership agreement, which the Commission is strongly pushing to fast-track, so that it can be signed during Japan’s Prime Minister Abe’s visit to Brussels in July 2018. As a champion of free trade, the UK has been one of the strongest advocates—actually, I believe the strongest advocate—of this EPA, and we warmly welcome the work of both sides to reach this agreement, which will support global prosperity. We continue to engage constructively on EU business and with our European partners, and we continue to push UK trade and investment to businesses on the European continent. It is important that our trade engagement includes Europe, because our trade with Europe—our nearest and largest neighbour—will always be of great importance.

I often hear the criticism that trade deals outside the EU cannot make up for a loss in EU trade—that has already been referred to in a couple of interventions—but, as I say, this is not an either/or choice. I can assure the House that the Government fully understand the importance of European trade. The EU is our largest trading partner, accounting for 43% of our exports and 54% of our imports. Complex and integrated supply chains across the UK and EU show the importance of making cross-border trade as free and frictionless as possible, and that is why it is important that we get our relationship with Europe right.

[Phil Wilson (Sedgefield) (Lab)]

On frictionless trade, will the future be better than what we have now or worse?

[Greg Hands]

As I said, we are seeking a good, comprehensive, deep and wide trade partnership with the EU that is as frictionless as possible. That is why the right relationship is this deep, comprehensive and unique free trade agreement with Europe, based on the principles the Prime Minister set out throughout 2017 and in her speech a fortnight ago. We should oppose Labour’s latest Brexit policy of apparently keeping the UK in the, a, or perhaps any customs union with the EU. We want the greatest possible tariff and barrier-free trade with our European neighbours, as well as to negotiate our own trade agreements around the world.

[Mr Alistair Carmichael (Orkney and Shetland) (LD)]

In the pursuit of this future relationship, will the Minister update the House on what progress has been made on the continuity of trading terms for our food and drink producers, especially in relation to the protected designation of origin and protected geographical indication schemes? Last week, the Secretary of State for Scotland guaranteed that there would be absolutely no change, but yesterday the Minister for Agriculture, Fisheries and Food said that absolutely nothing could be guaranteed. Who is correct?

[Greg Hands]

It is a bit rich for the right hon. Gentleman to vote against the European Union (Withdrawal) Bill and then to call for something that would be a consequence of that Bill: creating a new geographical indication scheme—by the way, we will be doing that in consultation with the devolved Administrations—to make sure that we continue to protect the UK’s 84 registered GIs within the UK. That is the Government’s objective, which I would hope he would support.

[Hilary Benn (Leeds Central) (Lab)]

Will the Minister give way?

[Greg Hands]

No, I will make a little more progress.

We have heard questions about why we would want a bespoke trade agreement rather than taking one off the shelf, which, the argument goes, would involve easier negotiation. I remind the House of the Government’s reasons for choosing this approach over existing models, such as the EEA or CETA, and why whatever model we choose must involve leaving the customs union. A Norway-style deal might seem superficially attractive, but we would be subject to any new rules that the Commission chose to enact, automatically and in their entirety, with no endpoint. Most importantly, we would have little influence over those rules and no vote, which would be too much of a loss of democratic control, and also no guarantee—far from it—that whatever the EU27 did would also be in the interests of UK businesses and consumers.

Nor should we look to a Canadian-style agreement for the answer. Even if it were easier to achieve a CETA-style deal, we start from a unique position of regulatory alignment with the EU. Unlike other countries, we start from the position that our systems are already the same. It is precisely because the Government recognise how important EU trade is that we must look to an ambitious deal, rather than starting our relationship from scratch with something like CETA.

As important as trade with the EU is, however, we must also look outside Europe. The IMF—this statistic is also on the Commission’s website—estimates that over the next decade or so, 90% of global growth will come from beyond the EU. China adds an economy the size of Switzerland every year. There will be over 1 billion middle-class African consumers in 2060, and Commonwealth GDP is predicted to hit $13 trillion in two years. These represent unprecedented opportunities, yet they are harder to reach from behind the EU’s customs wall. Only once we can sign our own independent trade deals can we take full advantage of them.

Signing those deals means being outside the customs union. We need look only to Turkey to see that being in the customs union, in whole or in part, can sometimes be the worst of all worlds.

[Several hon. Members rose—]

[Greg Hands]

I want to make progress—it is very important that Members understand the point that I am making.

The EU is currently negotiating a deal with Japan. If it finalises that deal, of which, as I say, we are strongly supportive, Turkey will need to reduce tariffs on Japanese imports, but it will not get reciprocal access to the Japanese market. It will have to negotiate its own access, but those negotiations will be more difficult because Turkey will already have reduced its own tariffs and therefore will not have as much to give in return. As the Prime Minister has set out repeatedly, we are looking for a bespoke agreement. For goods, this will be based on a comprehensive system of mutual recognition, so that products need be approved only once. On services, we have an opportunity to establish a broader agreement than ever before.

[Anna Soubry]

My right hon. Friend is being very kind and generous in giving way, especially as I am really not helping him. With the greatest respect, he knows, as everyone else does, that we will and can achieve all these deals with countries such as China as a member of the EU. By way of example, I have met the Australian ambassador, and while he would of course want to do a trade deal with our great country, Australia will look first to do a trade deal with the EU, with its 500 million customers. Is it not important that we make all these things very clear to the British people? We do trade deals at the moment by virtue of our membership of the EU, and the only reason why we are leaving the customs union is to chase unicorn deals, but we can get deals with the EU.

[Madam Deputy Speaker (Mrs Eleanor Laing)]

Order. It was quite in order for the Minister to give way to the right hon. Lady, but she knows that her intervention was too long, because she said so the last time—I heard her.

[Greg Hands]

It was a long intervention, Madam Deputy Speaker.

With all due respect to my right hon. Friend—she and I served alongside each other in government—the British people have made the decision to leave the European Union. That was the crucial decision made in June 2016. The Government’s purpose is now to ensure that we have the best possible frictionless trade deal with the European Union, while still being able to take advantage of trade opportunities beyond the EU. As I have stated repeatedly during this debate, that is the Government’s objective.

[Stewart Hosie]

Will the Minister give way?

[Greg Hands]

No. I have already used up 25 minutes, and I am going to make a little more progress.

On services, we have the opportunity to establish a broader agreement than ever before. Of course we recognise that we cannot have the rights of single market membership, such as passporting for financial services, just as we understand that we cannot have all the benefits of single market membership without the obligations, but that does not mean that we should be shackled by existing precedent.

I know that some Members will ask how we can be sure that the EU will agree to our approach. The main point to bear in mind is that it is strongly in EU countries’ interests—economic and otherwise—to sign and agree such a deal. On the day we leave, the United Kingdom will overnight become the EU’s second largest trading partner—larger than China, Japan or India. The Commission estimates trade between the UK and the EU27 to be worth €812 billion. That is only 8% behind the EU27’s main trading partner, the United States, but it is 60% more than with China, which comes third.

Given the effort that the EU has put into deals with the likes of Mexico, Vietnam and Singapore—all of which, crucially, we support, but each of which is significantly less important to the EU than ours—it would be odd indeed for it to reject proposals from us. Furthermore, both the EU and the UK need to send a loud and clear message that we are strong believers in free trade. What message would be sent if we could not reach a free trade agreement?

However, even that underestimates our importance to the EU, because it is the type of trade that matters, not just the volume. Our strongest comparative advantages are in the business, professional and financial services that other businesses need to grow, and in the pharmaceutical goods that no one wants to exclude. For an advanced economy, good financial infrastructure is just as important as physical infrastructure, even if it is not as obvious. Restricting Europe’s access to the City’s financial infrastructure would be the act of a latter-day Beeching—although this time the main line would be closed, not the branch. Yes, the rest of the network could try and pick up the slack—the Frankfurts or Parises—but as I know, because I have worked in the sector, that network has less capacity and is less efficient, and EU businesses and manufacturers could not connect with the capital market that they need. The EU talks about a capital markets union, but how tenable is that without access to Europe’s main capital market?

Our relationship goes beyond mutual economic interest, however. Our membership of the EU is only one part of our relationship with Europe. We can still be neighbours when we leave: we are 30 km from the coast of France. We have cultural ties from before the EU was founded. We will still be in the same core organisations that the EU or its members are part of, from the European Court of Human Rights to the UN to NATO, and from the International Monetary Fund to the World Trade Organisation—the economic, security and humanitarian firmament that holds the international system together.

[Vicky Ford]

Will my right hon. Friend give way?

[Greg Hands]

No. I am about to finish.

Nevertheless, the Department for International Trade is preparing this country for life outside the EU. We are proceeding with trade and customs Bills that will give us a functioning customs regime on day one. As one would expect, they have been designed to prepare us for every eventuality, although they will be needed regardless of the outcome of our negotiations with the EU. They will give us a strong trade remedies regime. Free trade does not mean trade without rules, but Labour opposed these new powers when they were considered on Second Reading. Our independent trade remedies regime will allow us to protect UK industry from unfair dumping or subsidy, while balancing its interests against the interests of UK consumers and other UK businesses. It will be delivered through an independent trade remedies authority, so that businesses have the confidence they need that it will be impartial and will not act against the interests of wider industry. I want to make sure that this new regime works as well for business as it should from the start. We are consulting on which existing EU trade remedies we should carry over, and I encourage any business with an interest to respond before the consultation closes at the end of this month, and any Members with producer or consumer interests to help to publicise this.

The Taxation (Cross-border Trade) Bill will also allow us to create a UK unilateral trade preferences regime for developing countries. Shockingly, this was also opposed by Labour, the Scottish National party and the Liberal Democrats on Second Reading. The UK is a proud advocate of supporting developing countries to reduce poverty through trade, and I hope that Labour will reconsider its stance. This Bill will let us continue the UK’s existing system of preferential access for developing countries, which reduces or removes import tariffs from a number of countries, while also allowing us to explore improvements on the EU’s current system.

Leaving the European Union will allow us to negotiate trade deals across the world, but at the same time, this Government understand the importance of EU trade. That is why we seek a deep and special partnership with the EU. This is the only appropriate option. Members of all parties should be optimistic that that can be achieved.

[Several hon. Members rose—]