Brexit: Trade in Goods (EUC Report)

Lord Davies of Stamford Excerpts

Tuesday 18th July 2017 Lords Chamber

[Lord Davies of Stamford (Lab)]

My Lords, it is a pleasure to follow the noble Lord, Lord Horam. He and I have taken part in more debates over more years in both Houses of Parliament than we probably choose to count. I particularly agree with what he said about control and sovereignty, and the problems we have brought on ourselves through this Brexit project that have reduced our capacity to control or influence our environment. They have reduced our sovereignty, not in any way increased it.

It is fairly clear now that the whole Brexit project is ploughing a trail of destruction through the British economy. We are in the very early days and most of our fellow citizens have not really noticed what is going on. Almost every day there is a sad and worrying indication of some strategic loss in the country’s interests and long-term economic assets. The other day we heard the announcement that the European Medicines Agency would be lost. That is 1,000 people, many of them highly paid and skilled pharmacologists and doctors, and more than 10,000 people who come over here to visit them, talk to them and take part in conferences arranged by them. Beyond that, there are people—I cannot calculate the number but it is quite significant—in this country as representatives of international pharmaceutical companies that made their European headquarters here precisely because the EMA is located here. You would think that was a major loss but I have not heard a word from the Government about it. There has not been a word of concern or regret, or any suggestion that they might try to mitigate the damage going on.

With the European Banking Authority there is exactly the same story. Again, a few days ago we heard the news that easyJet is setting up a headquarters in Austria and managing part of its airline from there. Future job creation will be in Vienna rather than in London. Are the Government worried about that? Not in the least, so far as I can see. Perhaps the Government’s attitude is, “It can go to blazes—it’s nothing to do with us”.

Significantly, there is more of a row in the press about the threat of our no longer being a member of Euratom, with real problems created for the NHS, in both diagnosis and the treatment of patients, and for our nuclear industry. For once, the Government responded. Mr Damian Green said that the accounts were scaremongering. He accused leading scientists—including my noble friend Lord Winston, who made a distinguished speech on the subject in this Chamber not long ago—of not knowing what they were talking about, and of saying there was something very troubling going on when there was nothing troubling going on at all. Apparently, the Royal College of Radiologists was scaremongering, according to the First Secretary of State. This is a Government who have not even bothered to respond to the report before us. Serious things are in the report and the Government have no answer to them. Of course, that can only further depress potential investors in this country, because not only do they see the problems, the issues and the anxieties that are expressed but on the Government’s side there is complete and utter silence—either silence or, frankly, comments that can hardly be expected of intelligent and responsible people.

Obviously, this is a deeply worrying situation for the whole country and it is against that background that I read the report. It is a very good report and I agree with what everybody has said—I think the noble Lord, Lord Horam, described it as a cornucopia of information on this matter. But I thought when I began to read it, “At least it won’t be as bad as some aspects of this story. This will not be quite as depressing because it is about goods. There is a better chance of us getting a reasonable deal on goods in the context of a free trade agreement with our European partners than there is with services”.

I think there is very little chance that we shall get passporting rights in financial services; I would be amazed if we did. I cannot see why we would for a moment. It seems to me that the continentals would be very ill-advised to do so, not least because we have learned from the Lehman Brothers crisis how vital regulation and supervision are in maintaining financial stability. You really do not want people practising financial services in your country or in your market who are not directly under your supervision, where you can decide that a director of a bank is not a suitable person and remove him; or where, in a crisis, you can give instructions to institutions as to how to behave and they do not have the opportunity to object or say, “I am sorry, we have to go to an arbitration tribunal. We cannot obey your instructions directly”. So I would be very surprised if the continentals allowed us to have banking passporting rights.

If we were allowed banking passporting rights, presumably the Swiss would have to be allowed them. The only reason the Swiss have located their wholesale banking operations in the City of London is because we are in the EU and they are not, and they get banking passporting rights by having those operations in London. It would be very odd indeed if, when we have left the EU, the Swiss could come to London and have passporting rights but could not enjoy them in Zurich or Geneva. That is not going to happen so clearly if the continentals gave those rights to us they would have to give them to the Swiss. I do not think they will give them to the Swiss so they will not give them to us. If they gave them to the Swiss, they would have to give them to the Japanese. If they gave them to the Japanese, they would have to give them to the Chinese.

We all know that any Chinese-owned company, whether a bank or a trading company of any kind, is ultimately taking orders from the Government in Beijing, whatever the theoretical allegiance of that business to the regulators in a particular country. Politically, it would be quite impossible to argue that there should be discrimination against China on those grounds, so the continentals would have to give those rights to China. I do not think they will do anything of the kind.

The position on services is really rather grim. I thought the position on goods might be a little better but then what did I read? I read on page 29 of this excellent report:

“All our witnesses said that the imposition of tariffs on trade with the EU would be deleterious to businesses in their sectors”.


There are few phrases more likely to make a parliamentarian stop in his or her tracks than “all our witnesses”. How often do we get all witnesses in any of our inquiries, or all participants in any debate, for that matter, or all people you happen to interrogate on a particular subject saying the same thing? But there it is. The Government have not responded to it. Presumably the Government are embarrassed by it and do not have an answer to it but there it is: “all our witnesses” feel that.

The report says on page 4:

“In the absence of a FTA with the EU after Brexit, tariffs would apply. These would incur additional costs for many UK businesses … Non-tariff barriers—such as rules of origin—would be more difficult to resolve. The Government’s stated intention to leave the Single Market and the EU customs union would mean that additional non-tariff barriers would apply to all the sectors considered in this report … We conclude that compliance with rules of origin requirements would introduce a significant additional administrative burden, with a particularly negative impact on sectors with a highly integrated EU supply chain”.


The report is absolutely unambiguous and clear. This debate has gone on for several hours. Of course, we have heard people trying to defend the Government in different ways but we have not heard any attempts to address those criticisms. Are we going to hear the Minister address those criticisms? Will she tell us that everything is actually all right? Will she say that these criticisms are misconceived? They are not misconceived; we are heading for a real crisis, with open eyes and doing absolutely nothing about it. I cannot think of a greater measure of irresponsibility. I also think it extraordinary that some of the people responsible for this like to talk about themselves as patriotic. I do not believe there is anybody in the world who wills us anything like as much harm as we are imposing on ourselves by the policies we are currently adopting.

It really is time Parliament did its job, which is to warn the public of perceived dangers before it is too late. It is enormously important that we do not allow ourselves, because of some misconceived party loyalty or a feeling that we do not want to depress people and have to make upbeat, complacent speeches—we heard an excellent example of an upbeat, complacent speech from the noble Lord who chairs the Commonwealth trade commission—to be seduced by these temptations to not speak the truth as we see it. To speak the truth as we see it requires us, I am afraid, to use some pretty blunt language. I have been using some pretty blunt language. I just hope that I have convinced the Minister that she really cannot avoid responding to these matters in this debate. We do not want just a bland summing-up at the end. Precisely because the Government have not given us a written response, we need an oral response to the very real concerns that have been raised by this excellent report.