Trade Bill

Lord Bates Excerpts

Report: 1st sitting: House of Lords
Wednesday 6th March 2019 Lords Chamber

[Lord Bilimoria (CB)]

I emphasise how important this issue is. From my experience, the UK has arguably the finest legal services in the world. As the founding chair of the UK India Business Council, I am aware that foreign lawyers are not allowed to practise in India. That makes it very difficult for our lawyers to provide advice not just to British companies in India but to Indian companies, and that is a huge loss for India and our British legal services. The ability of our lawyers to practise abroad is crucial. The EU is another area where we have taken mutual recognition for granted. All sorts of situations could arise in a no-deal scenario—situations involving not just advice to companies but disputes. What about consumer rights, for example? British consumers will no longer be able to sue in relation to a European product here in the UK. It will have to be done in the country of origin in the EU and, if our lawyers cannot help out, that will be to the detriment of our consumers. Therefore, this is a very important point that cannot be taken for granted and should be included.

[The Minister of State, Department for International Development (Lord Bates) (Con)]

My Lords, I thank my noble friend Lady McIntosh for presenting this amendment and for giving us the opportunity to put on the record further remarks on where we are with regard to legal services. As she reminded us, legal services contribute around £25 billion to the UK economy, with a trade surplus of around £4 billion. They directly employ well over 300,000 people in the UK, two-thirds of whom are outside London. The UK is a world leader in the provision of legal services, as the noble Lord, Lord Bilimoria, also pointed out, and English law has a reputation for excellence across the world. We are determined to continue to build on this success.

We acknowledge that leaving the single market might have implications for market access and that some UK and EU service suppliers will not enjoy the same rights as they do today. That point was made by my noble friend Lady McIntosh when referring to Implications for Business and Trade of a No Deal Exit on 29 March 2019, published by the Government on 26 February—specifically paragraph 40, which sets out a case study on legal services. In a sense, that underscores that the Government see this as a key priority in the future economic framework negotiations.

That is why, in the political declaration on the future relationship between the EU and the UK, there will be comprehensive arrangements on the trade in services, covering a wide range of sectors, including legal services. The political declaration includes a commitment to conclude arrangements for services and investment that go well beyond WTO commitments and build on recent EU free trade agreements, as well as a commitment to make appropriate arrangements for professional qualifications.

The Government want to secure positive outcomes for the professional business services sector, including legal services. However, as my noble friend will be aware, our future trade relationship with the EU is subject to negotiation with the EU. A trade deal must be negotiated before its terms can be set out in law. I am aware that this is perhaps a probing amendment that seeks to get some points on the record, but clearly the Government’s view is that what my noble friend proposes is not the correct vehicle.

I am aware that in previous debates on this Bill and on some no-deal secondary legislation my noble friend has raised concerns about the impact of a no-deal outcome for lawyers. We do not want a no-deal scenario but, as a responsible Government, we have to prepare for it.

The no-deal SI relating to the practising rights of European lawyers in England and Wales and Northern Ireland, which this House debated in January, and was made on 13 February, provides transitional arrangements for EU-EFTA lawyers. The purpose of this no-deal SI is to clarify the position of EU qualified lawyers who are practising in England, Wales and Northern Ireland immediately before exit day, so that they can be secure in the knowledge of what their position will be in the event that we exit without a withdrawal agreement.

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[Lord Stevenson of Balmacara]

I rise briefly to support the amendment in the name of the noble Lord, Lord Lansley, which I have signed up to. The meeting that he referred to was extremely helpful in drawing out some of the confusion that emerged during our first debate in Committee. The issues of how countries get on to the lists, how the lists get managed and shaped, and how the changes might come forward were all explored carefully; we now have a much better understanding. In these lists, there are bound to be curious decisions which do not seem to match up to one’s perspectives. I was in Tanzania on holiday recently and it certainly did not come across as one of the least-developed countries, although clearly there are issues around how it will progress and develop its own trading arrangements.

The point behind the amendment is to get on record some further points that have emerged. The noble Lord was kind enough to suggest that we might have further questions, but his all-encompassing knowledge and brilliant, incisive questions are quite enough for me.

[Lord Bates]

I thank the noble Lords, Lord Lansley and Lord Stevenson, for moving the amendment standing in their names and giving us another opportunity to discuss this important area. We are moving to a stage where we can consider how having an independent trade policy could provide opportunities, particularly to the least developed countries in the world.

I also thank the noble Lords, Lord Lansley and Lord Stevenson, as well as the noble Lord, Lord Fox, and the noble Baroness, Lady Neville-Rolfe, for the debate we had in Committee and for then participating in what I was glad to hear reported as a helpful meeting. I join noble Lords in saying that I found it an incredibly helpful meeting, which improved my own understanding not only of the barriers and hurdles but of the opportunities that are there.

I should perhaps deal directly with my noble friend Lord Lansley’s questions, rather than outlining issues that have been previously discussed in Committee and on which the House is already aware of our position. The noble Lord asked whether it is the Government’s intention to identify a sub-category of vulnerable countries. The answer is yes: we will be replicating the GSP+ tier of economically vulnerable countries.

The noble Lord asked whether these trade preferences would undermine human and labour rights. The UK has a longstanding commitment to universal human rights, and this will be reflected in our trade preferences schemes. As part of transitioning the EU preferences scheme, we will be maintaining a similar approach to human rights commitments.

On the question of who will investigate accusations of subsidies, dumping, surges of imports et cetera, the Trade Remedies Authority will be able to investigate cases against any country, including preference-receiving countries. In doing so, it will consider allegations of dumping, subsidies and unforeseen surges in imports which cause injury to UK industry. Where the TRA determines that a trade remedy measure should be applied, it can make a recommendation to the Secretary of State, who can accept or reject that recommendation. Such measures usually take the form of an additional amount of import duty above the most favoured nation rate.

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[Lord Stevenson of Balmacara]

I have a private joke with the former Minister, the noble Baroness, Lady Neville-Rolfe, that there is a small and declining number of people in this House with an interest in intellectual property, and that we used to gather to discuss arcane issues using incomprehensible language to our hearts’ content. The noble Lord, Lord Clement-Jones, is clearly a member of that group, and there are one or two others. The noble Baroness, Lady McIntosh, who is unfortunately not in her place, has joined the group recently. I say that because the discussion of the WTO tariff rate is coming down to that rather narrow group of people who have a deep knowledge of and fascination for the issues and are interested in exploring them, but are frustrated by the fact that the Taxation (Cross-border Trade) Bill, on which we should have had the chance to discuss the points so ably made by the noble Lord, Lord Lansley, was held back from us by procedural rules and went through without much debate. We are therefore having to invent a way of getting into that discussion.

The noble Lord, Lord Lansley, has done a great service to the House by going through some of the very intricate and complicated issues around setting tariffs and rates and how you play the game against the very complicated rules of the WTO. He does it, however, from a position of knowledge and experience that, I am afraid, will be frustrated again tonight, because there is not the will in the House to go through it in detail. Indeed, I tabled an amendment a week or two ago—when I thought there would be more time to discuss these things—on the prospect of the GSP tariff rates, setting and mechanisms. He is right that there are broader issues around those that we should discuss. However, this is not the time—and we do not have the time—to go into the detail, so I will not press my Amendment 14, which comes later, because the noble Lord, Lord Lansley, has raised the same points in a broader context. I hope that the Minister will respond briefly to the points raised, so that some of the issues that need to be on the record are on the record, but perhaps we should save some of the more detailed issues for another day.

[Lord Bates]

I thank my noble friend for moving the amendment. The noble Lord is right: my noble friend has raised, effectively, three issues that need to be examined. One is the level of tariffs. In that regard I will probably disappoint my noble friend by referring back to my noble friend Lady Fairhead’s response from the Ministers’ Bench to the invitation of the noble Lord, Lord Kerr, to set out a timetable for when those tariffs might become known. She made her points and they stand on the record; I probably do not need to repeat them. I also draw to the attention of the House The Implications for Business and Trade of a No Deal Exit on 29 March 2019, which was published on 26 February. On this occasion I draw my noble friend Lord Lansley’s attention to the section on tariffs, beginning at paragraph 31 and continuing into paragraph 32, which explores some aspects of the setting of tariffs.

Those are two aspects on the level of tariffs, but I now turn to some of the specifics to which my noble friend referred. He asked about the status of the common external tariff applied by the WTO. The noble Lord is correct that we have notified our bound tariff schedule to the WTO. Our bound schedule represents the upper limits of what tariffs the UK could apply on imports. If, for example, our bound schedule says 10% for product X, we could choose to apply 9%. The Government have yet to announce their applied tariffs for a no-deal scenario, but the noble Lord, Lord Lansley, is correct to say that on leaving the EU we will be free to set out tariffs within the parameters of the bound schedule that we lodged last year.

The EU’s common external tariff—as referred to by the noble Lord, Lord Lansley—is the EU’s version of its applied tariff schedule. These are the tariffs that will apply to UK exports to the EU in a no-deal scenario. My noble friend also referenced the Taxation (Cross-border Trade) Act, which states that the first time a tariff is set, and whenever an import duty rate increases, the made affirmative procedure will apply; otherwise the negative procedure will apply.

These amendments would make the made affirmative procedure apply in different circumstances. In the case of Amendment 10, that would be any time the rate of import duty diverged from the bound commitment made by the UK to the WTO; in the case of Amendment 14 the made affirmative procedure would apply in all circumstances. However, under both amendments it is currently stipulated that the setting of the tariff would remain a matter for the other place. The Act ensures that the scrutiny procedures applied to the exercise of each power are appropriate and proportionate, taking into account the extremely detailed nature of the tariff and the frequency with which it may be changed. The tariff is long and complex; it currently contains 17,000 types of goods and is more than 1,000 pages long. The EU tariff is subject to regular, almost daily, amendment, so the current balance of the chosen procedure reflects that understanding.

Once again, I express the Government’s appreciation to my noble friend Lord Lansley for moving this amendment, giving us the opportunity to expand on our positions and put those additional remarks on the record. I hope that is helpful and reassuring to him, and that he feels able to withdraw his amendment at this stage.

[Lord Lansley]

I am grateful to my noble friend, and to the noble Lord, Lord Stevenson of Balmacara. This debate has been very helpful, and the takeaway from this—one I am grateful to my noble friend for confirming—is that the bound schedule has already been notified to the WTO. People need to be very clear about the fact that if we leave without a deal and the Government come forward and say, “These are the tariffs that we intend to apply”, they are not varying the WTO bound rate but saying that, on a most favoured nation basis, they will apply these rates. That provides a basis for negotiations on preferential schemes that could emerge over time. I read the document about the implications of no deal for tariffs, and it is correct: the Government must balance the desirability of supporting liberalised trade, with benefits for consumers through price and choice, with protection for producers in this country. That will be a delicate balance to strike. If people are aware that we can behave in this way with an applied rate that varies from the bound rate, it removes the argument that by applying a lower rate in the short run we have prejudiced our ability to conduct trade negotiations with other countries in the future—we have not done that. If we get rid of that argument, it helps to shift the balance in many cases in favour of lower rates in the short run, rather than higher rates. I am most grateful to my noble friend for his response. On that basis, I beg leave to withdraw the amendment.

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[Lord Bates]

My Lords, I am conscious of the time, but I also want to ensure that noble Lords have an opportunity to reflect on the serious issues raised by the noble Lord, Lord Lea. We may deal with them briefly this evening but we did not deal briefly with them when they came up in Committee. There was quite some debate on them on 4 February, and for those noble Lords who are interested, they can read it in glorious technicolour between columns 1360 and 1370 in the Official Report of those proceedings. Perhaps if the noble Lord, Lord Lea, will permit me to summarise what the key arguments were at that point, I will try to answer two of the points that he raised.

EFTA membership would not be acceptable because it would mean accepting the free movement of people between its four existing members. To gain access to the 29 existing free trade agreements negotiated by EFTA, the UK would have to negotiate its way into each and every one of them with the relevant third countries. There is no guarantee that that would be successful: EFTA’s trade agreements were not negotiated with the size and type of Britain’s economy in mind. Were the UK to join EFTA, it would constitute 71% of the enlarged area.

If we rejoined the European Economic Area to stay in the single market, we would not have control over our borders. It would mean having to accept all four freedoms of the single market, including free movement of people across the 30 EEA states. On laws, it would mean having to implement new EU legislation covering the majority of the sectors of our economy. In contrast, we are making an up-front sovereign choice to commit to ongoing harmonisation with EU rules on goods, covering only those necessary to provide frictionless trade in the context of our agreement.

The noble Lord, Lord Lea, said that if we crash out, we need to keep the right to rejoin EFTA. If we leave the European Union without a deal, we fall out of the EEA and EFTA. We would be able to apply to rejoin, but this is contrary to government policy for the reasons that I have explained. He asked what the impact on the EEA Agreement would be if we extended Article 50. If we were to extend Article 50, the UK would, of course, stay within the EEA under the EU pillar until we left the EU. With regard to citizens’ rights agreements made with the EEA and EFTA states, these would enter into force only when we leave the EU or at the end of an implementation period.

I hope that, with that brief summary, the noble Lord—whose contributions I always enjoy and listen to attentively—will not feel that I have not responded to him, but in the context of the wider consideration of this issue in the debate, the Government’s position remains as it was in Committee. I therefore ask him to consider withdrawing his amendment at this stage.

[Lord Lea of Crondall]

My Lords, I thank the Minister for that reply. In fact, he did not answer all the questions on 4 February. I could draw attention to some of them, but I will not. This could have been an opportunity today. Free movement of persons is, of course, an issue of which we have experience within the European Union. We would be cutting off our nose to spite our face on areas of the economy, such as the whole entertainment, theatre and ballet industry, as the noble Baroness, Lady Bull, referred to on one occasion. There are many, many others, so these sweeping statements about control of our borders are really over the top and not a sensible way to address this issue.

I am not going to say more at this stage. Suffice it to say that the initiative is now with the House of Commons. I have some confidence that in the next few days and weeks this will become, as my noble friend Lord Monks said, a strong policy in the Commons. I rest on the fact that it is still the policy of the House of Lords, as has been said by my noble friends. On that basis on this occasion, I will not seek to test the opinion of the House.

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[Baroness Falkner of Margravine]

The noble Baroness has just told your Lordships that the House was trying to protect manufacturing through being in “the” customs union. So we have on one side “the” customs union, which is the EU customs union, and on the other side we have a bespoke customs union. That in itself illustrates the problem with those who want to reverse where we are today.

I urge the House to look at the common commercial policy carefully, not only in the light of Articles 206 and 207 of the TFU, and to look at the jurisprudence. The jurisprudence on the part of the CJEU expounds the EU’s common commercial policy into foreign direct investment rules way beyond common commercial policy and into the EU’s external action policy. Some of us may have no problem with that, but the jurisprudence will continue while we are outside the room and not at the table. The jurisprudence will reflect the EU’s priorities, not ours. It would leave us in a vulnerable position going forward whether we were in “a” customs union or the bespoke customs union, which would potentially give us bargaining rights and some say in jurisprudence. Certainly that customs union would give us no rights at all.

I am not used to evoking Mr Blair in support of any cause—I suppose it will have the same impact here as it does elsewhere in the country—but even he has gone public to say that the worst of all worlds would be for us to stay in the customs union. If noble Lords want to support trade in goods they need to move either towards the withdrawal agreement and the FTA that is likely to come with it, or to move to simply remain in the EU. This amendment is an ambush to try to achieve that latter aim. I am pro that latter aim—I am pro remaining in the EU—but I can see, with 20-something days to go, that either we have to agree with the withdrawal agreement, as I voted the last time, or we have to go the other way, as I said in my previous speech, and ask the Prime Minister reconsider our position. A customs union is not going to do that and, on that basis, I will be voting with the Government.

[Lord Bates]

My Lords, at this hour, and given the debate, there will probably not be many Members of your Lordships’ House who are carefully weighing the arguments on either side, wanting to know what the Minister is going to say from the Dispatch Box that could just persuade them another way. We have been around this course many times and the arguments have not changed. The House knows the Government’s position on this: they have set it out many times. The people of the United Kingdom voted to leave the European Union and to take back control of their laws, borders and money, and have an independent trade policy. If we had a customs union, we would not get that. That is the central point against the amendment. On the other hand, we have a withdrawal agreement that allows us to have many of the benefits of our membership of the European Union without being members of it, and honours the referendum result.

I shall come to two points. The noble Lord, Lord Stevenson, when moving the amendment—which is worthy of further examination as to what it is seeking the Government to do—said that he wanted to give the other House an opportunity to think again on this issue. The noble Lord, Lord Kerr, in a brilliant, brief contribution—perhaps because we had heard his eloquence on this point in Committee—reminded the House that it voted in favour of his amendment. What they did not mention was that when it went to the other House, giving it an opportunity to think again, it rejected not only your Lordships’ amendment but the concept of a customs union put forward by Stephen Hammond when the Bill was at this stage in the other place. If the purpose is to give that House another opportunity to think again, perhaps it could shout down the Corridor, “We have already said it; did you not hear us the first time?”

Some noble Lords have pointed out that the uncertainty is damaging for business. I accept that. Uncertainty is always damaging for business. What business needs is certainty. However, right at the 11th hour, when we are within sight of and have an agreement, with an exit day that meets the criteria, the amendment proposes to require Her Majesty’s Government to reopen the whole negotiation process that has taken place over the past two years. Somehow that is supposed to help business. Not many businesses would sign up to that level of reopening negotiations and uncertainty. The presentation of the amendment presupposes that the outcome and benefits of a customs union are known. No—they would have to be negotiated. That would be the case unless, as the noble Baroness, Lady Falkner, rightly said, it actually related not to “a” but “the” customs union. In that case, the noble Lords’ option would be there immediately. That is the position of those who want to stay in the European Union, and we understand it.

The amendment therefore plunges us further back into uncertainty and more years of negotiation. The House has already given its view, not once but twice, on this issue. The other place does not need the chance to think again and I therefore urge noble Lords to vote against the amendment if it is pushed to a Division. Most importantly, I urge all Members in the other place not to listen to the amendment but to look at the withdrawal agreement before them next week and make sure that they vote for it, so that we leave the European Union on 29 March, as the British people wanted, but with a deal.

[Lord Stevenson of Balmacara]

Follow that wonderful peroration! The Minister has been practising, I am sure. I congratulate him on his brilliance in getting out of the Tugendhat trap. He obviously thought that he would be judged on whether he met the very high standards required of an answer in this place before going down to an ignominious defeat—as I hope will be the case. He did it by setting his own bar and then deciding whether he had passed it by inventing, as often happens in these debates, the things that I did not say and then arguing against them effectively. He ended up by appealing to the green Benches down the Corridor, where I think he will probably find a slightly better response than he will get today.

I am sorry that the Minister has to defend the indefensible. As he said, all the arguments have been exhausted. In response to two of the charges, yes, the other place has considered this matter before, but somebody once said, “When the facts change, I change my opinion. What do you do, sir?” On the question of uncertainty, surely it is better to have a certain target, even if it takes time, than the continuing uncertainty of whether there will be a target, and that is what this amendment tries to do.

Customs unions are not very widely found in the world. They are a very special thing, particularly when they involve equality of partners trading with each other. The majority of customs unions in the world involve single dominant economies forcing terms on others. This customs union is a particularly good example of the way in which mature democracies coming together can create good for all and we should be very chary of moving out of it.

The Minister challenged the wording of the amendment but it is incredibly inclusive and was drafted to make sure that it stood the test of time. It simply states:

“It shall be the objective of Her Majesty’s Government to take all necessary steps to implement an international trade agreement which enables the United Kingdom to participate after exit day in a customs union”.


It does not imply staying in the EU. I think that we have had the debate. I wish to test the opinion of the House.