Brexit: Options for Trade (EUC Report)

Lord Aberdare Excerpts

Thursday 2nd March 2017 Lords Chamber

[Lord Aberdare (CB)]

My Lords, it is a privilege and a pleasure to serve on the European Union Internal Market Sub-Committee under the able and affable chairmanship of the noble Lord, Lord Whitty. The report we are debating today gave us the welcome opportunity to work in tandem with the EU External Affairs Sub-Committee, chaired by the noble Baroness, Lady Verma. This proved both enlightening and somewhat daunting, and I am grateful to both chairs as well as to the clerks and other staff—and of course to my committee colleagues and other noble Lords speaking in this debate—for their contribution, at least to the enlightenment part.

The report provides an essentially factual analysis of available options, and its findings have already been outlined very clearly and succinctly by other noble Lords, so I will try just to highlight some issues that strike me as significant. The Government have made clear that their aim is to achieve an ambitious, comprehensive and bespoke free trade agreement with the EU, together with a new customs agreement. The Prime Minister has stated that no deal is better than a bad deal. So what would a good deal look like? What criteria will the Government use to determine whether the outcome of the negotiations is good enough for the UK to sign up to it?

I recently received a helpful document entitled A Successful Brexit: Four Economic Tests from a body called The UK in a Changing Europe, based at King’s College London. This sets out a series of tests under four headings. Will Brexit make us better off economically? Will Brexit make Britain fairer? Will Brexit make the UK a more or less open economy and society? Will Brexit increase the democratic control of the British people over their own destiny? These tests make a lot of sense to me but it is of course down to the Government to determine the actual criteria to be used. So I ask the Minister, first, how do the Government plan to define the criteria against which the merits of a deal will be assessed? Secondly, how will these criteria be tested to determine their acceptability to business and other affected interests, Parliament, the devolved nations and, of course, the electorate? Thirdly, what sort of process will the Government conduct to evaluate the terms of a deal against the criteria and to explain the conclusions that they reach? Finally, what are the options being considered if a deal is found not to be acceptable against those criteria?

My next point relates to the negotiating process and the engagement in it of business and other parties affected by the outcome. When I worked on trade issues for IBM in Washington in the early 1980s, in the lead-up to the GATT Uruguay round, I was struck by the wide range of mechanisms used by the US Administration to involve business and other groups in establishing negotiating objectives and priorities, and indeed to encourage such groups to do their own horse-trading among themselves, so as to present an agreed common position—often involving a considerable degree of compromise—to the US Government. IBM had its own trade team and was an active member of organisations such as the American Electronics Association, the National Association of Manufacturers, the US Chamber of Commerce, and other bodies concerned with specific trade-related issues, such as services, intellectual property or overseas investment. Its chairman and chief executive was one of a number of chief execs on a business round-table task force, which provided direct support to the US trade representative.

To me, this points to a responsibility for both government and business in the UK to set up appropriate mechanisms to enable agreed common messages and objectives to be developed and fed into government and the negotiations. What can the Minister tell us about plans to ensure that the Government have access to clear, reliable, broadly agreed input and advice from business, available at short notice, if required? We have been encouraged that most of the businesses that the committee has heard from have been positive about the level of engagement that they have so far had with the Government and Ministers. At the moment, of course, the Government are mainly in listening mode, seeking to understand the range of issues raised by Brexit and how they affect businesses across the 50-plus sectors they are analysing. The real test will come when they need to make trade-offs between different sectors and interests or to determine priorities between competing options.

My third point is about planning for situations that may arise in the negotiating process. I will address this by posing some “what if” questions. What if, even with good will on both sides, a deal takes longer than two years to finalise? Given the challenge of reaching an ambitious and comprehensive bespoke FTA—and indeed in the light of the time needed to agree existing EU FTAs, such as that with Canada—the committee felt that it would not be possible to complete a deal within two years, even though it may be easier to do so as an existing member, already fully complying with EU rules and regulations, than for a country outside the Union. It is surely essential to have a plan B in place. Article 50 allows the possibility of extending the negotiating period beyond two years, but only if all 27 other member states agree. Can the Minister indicate what thought the Government are giving to whether and how this might be achieved?

What if a deal is in prospect but needs time to be brought fully into effect? Our report argues that:

“A transitional agreement will almost certainly be necessary”.


What thinking are the Government doing about how such a transitional arrangement might work and what it might involve—such as a temporary continuation of the UK’s membership of the EU customs union, which is indeed mentioned as a possibility in the Government’s response to the report? Other noble Lords have raised the question of what the difference is between a transitional arrangement and a phased process of implementation.

What if, at the end of the day, no deal proves possible because the various demands and interests of the other 27 countries prove irreconcilable with the goals of the UK? Do we just fall back on WTO rules—which in itself may not be wholly straightforward and is widely seen as highly undesirable?

My final question is: what can the Minister say about possible parameters for dispute resolution mechanisms? Enforcement is one of the strengths of the EU single market. Legal action can be taken both by companies—even relatively small ones—and by individuals in their own national courts. There are also less costly mechanisms for resolving disputes, such as SOLVIT.

None of the example dispute resolution mechanisms in the annexe to the Brexit White Paper comes close to matching the EU arrangements. One possibility that is not mentioned at all, perhaps for obvious reasons, is whether the EU Court of Justice might have a role to play in a new bespoke dispute resolution system, without, of course, having primacy over the counterpart UK court or panel.

In conclusion, this report raises some crucial issues for the conduct of the Brexit strategy and negotiations. I do not for a moment expect all the answers from the Minister today, but I believe that the Government will need to share considerably more of their thinking on such issues than they have been willing to do to date if they are to end up with an outcome that is clearly recognised as a good deal. That means a deal that reflects the needs of business and other interests in a balanced way and that is achievable in the time available, even if that time has to be extended beyond two years. I hope the Minister can give some reassurance about how the Government plan to tackle this challenge and how optimism—as another noble Lord suggested—can be matched by realism.