Trade Bill

Lord Davies of Stamford Excerpts

Committee: 4th sitting (Hansard): House of Lords
Monday 4th February 2019 Lords Chamber

[Baroness McIntosh of Pickering (Con)]

My Lords, I follow the noble Lord, Lord Liddle, in pursuing the aspect of services, and I have a specific question for my noble friend Lord Bates, who I think will be summing up. This debate is not dissimilar to the one that we had on the free movement of professions, and I am mindful of the fact that my noble friend Lady Fairhead has said on a number of occasions that the Bill before the Committee today is all about continuity. I also have regard to what my noble friend Lord Hamilton said—that there has been precious little reciprocity in terms of setting up and establishing services elsewhere in the European Union to date. So that does not fill me with confidence about what the legal position will be going forward.

There are some very helpful pages on the European Commission website about what the position will be as regards professions after 29 March and in the longer term, but there is precious little about establishing companies. This is becoming a matter of increasing urgency because we can see, in particular if we look at financial services, that the issue is not just free movement of people but free movement of services and capital. We have recently seen an increasing exodus of capital and people moving from the City of London to bases in Dublin, Frankfurt and Holland—and even Paris and Copenhagen are pressing for people to go and set up businesses there.

I would like to ask my noble friend the Minister how we are pursuing this on a reciprocal basis. We saw with professions, in the case of lawyers, that we have adopted the statutory instrument and the necessary regulation. What is the legal position of a UK company that wishes to establish itself and offer its services, first in the event of no deal after 29 March, secondly in the event of a deal during the transition phase, and thirdly at the conclusion of the transition period, whether it is as planned or extended? It strikes me that many of us are focusing on businesses already established in the UK and providing services. My concern is how much the ability of those looking to set up and establish themselves will depend on the right of residence, either now or at some future date in what will be a third country after 29 March.

[Lord Davies of Stamford (Lab)]

My Lords, I think that this is a very good amendment and I will come to the substance of it in a second. I just want to make two points by way of introduction. First, here we are at the beginning of February—a new week and a new month—and we are still in an absolutely ludicrous position, presenting an almost unbelievable picture to the world of a country with a Government doing their best to damage their own economy. Every day we have new evidence of this. Today we had the worrying story from Nissan. Many of us who have focused on the mess the Government are in could speak on the subject for hours.

There is another example from the last few days. We say that when we leave the European Union we want to sign trade agreements with those countries which currently have trade agreements with the EU. One of those countries is Japan. Japan has just signed a trade agreement with the EU. At the very best, I suppose, if the Japanese were to give us exactly the same terms—which is unlikely because our bargaining power vis-à-vis Japan is nothing like the power that the EU has—it would take a minimum of five years, and probably nearer 10, to conclude this deal. So the Government are saying that we are walking away from a trade agreement in order to spend a vast amount of time and money and suffer a lot of uncertainty before perhaps, in many years’ time, finally reaching another trade agreement that may not be as good as the one we now have. I put it to the Government: what kind of reason or logic is that? What a way to run a state. What a way to look after not only this generation but future generations of British people and make sure that they have a viable economy on which they can actually base a reasonable standard of living and a reasonable level of public services.

The Government are already under attack in this place, quite rightly, for their delivery of public services. We had a very interesting series of Questions earlier about the health service. The Government are undermining the future ability of the British economy to deliver the wealth we need to maintain our public services at acceptable international levels. This is quite apart from the impact of their policies on individual wealth and prospects for individuals who want to travel or study abroad or benefit from all the other freedoms we will be giving up. It is a very serious matter. The muddle the Government are in about the damage that is being done makes the whole picture even more disgraceful—that is the only word I can use.

I think my noble friend’s amendment is excellent. I agree with everything he said when he introduced it—and that noble Lords on both sides of the House said—about the importance of services. We all know that they are 80% of the British economy. But I have one question. Why has he not put goods in there as well? It seems to me that exactly the same principles apply to goods. I just looked at the amendment, and if you were to add the words “goods” wherever “services” are mentioned, you would not produce any particular anomalies or logical or linguistic problems. I do not know why goods have been left out of this particular picture. As I said, exactly the same principles apply. We want there to be no new barriers—that sums up everything. “Barriers” includes tariffs, quotas and non-tariff barriers, so the ground would be covered quite well by doing that.

My noble friend rather implied that he was putting forward this amendment in order to have a debate on an important subject—which is a very worthy thing to do in this place. Perhaps I have that wrong, but it sounded as though that was what he had in mind, and we are of course having that debate at the moment. However, it seems to me that it would be even better if we got this proposed new clause on to the statute book. We would be doing a very good day’s work for the country if we could manage to do that. Therefore, I ask my noble friend why he came to his decision. I am sure that there must be a very good reason, which perhaps I am being foolish in not anticipating, but I do not understand why we do not include goods.

These debates are becoming extremely unreal. One likes to think that one’s service in Parliament, whether in the Commons or in the Lords, is based on being clear in one’s mind and discussing and working out with colleagues what is the best policy for this country. But we have a Government who are not pursuing the objective of the best policy for this country. We have a Government who are destroying British industry and commerce where they can—so it is a very unreal situation. I do not know how much longer this country can go on in the hands of people who take that attitude when they have in their charge the very considerable, and in my view very important, responsibility of governing the United Kingdom to the benefit of our citizens both of today and of tomorrow.

[Lord Lansley (Con)]

My Lords, in following the noble Lord’s remarks, perhaps I may say that the unreality of debates in Committee on this Bill will be exacerbated if we not only have amendments that, quite properly, raise relevant issues that are not presently included in the Bill but we then use them as the basis for a wide-ranging debate on every occasion. Let us not do that. On occasion, we in this House look broadly at what the resolution to our current impasse might be, but we also have a responsibility to use our time well on this Bill to try to ensure that it is effective legislation, because we might need it.

In that context, there is a very simple reason why trade in services is not in the Bill: the General Agreement on Trade in Services is multilateral, not plurilateral, so there is no need to legislate for this as it is something we are a party to only by virtue of our membership of the European Union. That is why the government procurement agreement has got into the legislation. If that were true for the General Agreement on Trade in Services, that would have to be included as well, but it is not; every member of the WTO is a member of the GATS.

However, the question is: do we want to legislate to mandate the Government in the negotiation on a future free trade agreement to seek to provide for a continuing and complete reproduction of our current relationship with the European Union, or at least to the extent that the amendment asks for that? As far as I can see, it asks for it up to mode 3—it does not include mode 4 arrangements, which allow for natural persons to be present in other member states—thus excluding the free movement of individuals for the purpose of the delivery of services in other member states. Therefore, it is not a continuity amendment, or at least it cannot be presented as such.

From the point of view of Ministers, broadly speaking at the moment it is important for us to understand to what extent free trade agreements that might be reproduced by way of continuity agreements in the event of a no-deal exit might lead to the perverse situation whereby we have greater service sector access to third countries than we do to the European Union, which would mean considerable dislocation for service industries in this country.

Finally, much as I wish that we were staying in the European Union and continue to argue that we should be in a customs union with a degree of regulatory alignment—we will come on to that briefly later—I certainly would not go as far as the amendment implies, which is that effectively we should be rule-takers on services with the European Union. That could be a very unhappy place for us to be, given that services make up 80% of our economy, as has been said. The fact that we are in a customs union for goods will therefore not preclude us from engaging extensively in discussions on trade in services with third countries, which is where much of the action may well be in future trade negotiations.

--- Later in debate ---

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

My Lords, on behalf of all those who have spoken, I thank the noble Lords, Lord Stevenson and Lord Purvis, for bringing forward Amendment 45, the purpose of which is to provide an opportunity for the Government to put some remarks on the record about our approach to services which, as we all agree, is of crucial importance. So, before coming to some of the specific questions that have been raised during this short debate, I will take advantage of that opportunity to set out the Government’s position as it now stands.

As my noble friends Lady McIntosh and Lady Neville-Rolfe, and indeed the noble Lord, Lord Stevenson, said, the UK’s services economy is a global success story. Our internationally competitive industries play host to world-leading firms as well as thriving small and medium-sized enterprises, and we have undertaken significant engagement with the sector on issues related to EU exit.

I would like to reassure the House that the Government are seeking arrangements for services and investment that cover all modes of service supply—my noble friend Lord Lansley correctly referred to the variations; that provide substantial sectoral coverage, including measures on professional business services, which my noble friend Lady McIntosh referred to; that go well beyond both sides’ WTO commitments as set out in the General Agreement on Trade in Services, which my noble friend Lord Lansley also mentioned; and that build on the provisions in existing EU agreements.

Moreover, through the political declaration we have secured a commitment from the EU 27 that our future trading relationship will be ambitious, comprehensive and balanced, and will include market access commitments to ensure that service suppliers and investors do not face quantitative restrictions such as monopolies, economic needs tests or joint venture requirements, which my noble friend Lord Hamilton expressed concern about; national treatment commitments, to ensure that UK service suppliers and investors are not discriminated against by the EU 27 and vice versa, as my noble friend Lady McIntosh referred to; new arrangements on financial services, grounded in economic partnership, providing greater co-operation and consultation than is possible under existing third country frameworks; appropriate measures on the recognition of qualifications, as referred to by the noble Lord, Lord Purvis, to support UK professionals practising in the EU 27 and vice versa; arrangements that allow for temporary entry and stay in each other’s territories for business purposes, including visa-free travel for short-term visits, as the noble Lord, Lord Liddle, rightly identified from his extensive work examining the internal market as a member of the Select Committee; and mechanisms to promote voluntary regulatory co-operation to guard against the introduction of unnecessary barriers to services, trade and investment, to which my noble friend Lady Neville-Rolfe referred. I pay tribute to the work that she did at BEIS in seeking to remove those barriers.

We have also been clear that after we leave the EU, the UK will have an independent trade policy covering all aspects of goods and services. To deliver that objective, it will be important to retain regulatory freedom where it matters most for the UK’s services-based economy.

I turn to some of the points that have been raised.

[Lord Davies of Stamford]

Before the Minister moves on to detailed points, perhaps this might be a good moment for him to tell the Committee, out of all the countries with which we would like to have our own free trade agreements after we leave the EU—if we leave it—how many have indicated that they wish in principle to negotiate and sign such an agreement with this country; how many have said that they would do so on terms identical to their existing free trade agreement with the EU; and how many have indicated that they would not want to pursue such a negotiation at all?

[Lord Bates]

The noble Lord will remember from day three of Committee last week that one of the questions asked was whether we could provide the Committee with some running status on where we are with all those free trade agreements. That is a perfectly reasonable approach and it is something that my noble friend Lady Fairhead agreed to take back to look at and come back on ahead of Report. Rather than using this opportunity to rehearse that, I will say that it is something that we are looking at. Specifically on the EU and Japan, I was going to come to that topic and say that there is a working group with Japan to seek to replicate its effect as part of the continuity arrangements.

--- Later in debate ---

[Lord Lansley]

I am grateful for this opportunity to raise the issue of free zones. I thought I was likely to end up moving this amendment at about 10 pm last Wednesday, so it is a pleasure to have it on in prime time but, recognising the value of this time, I will be as brief as I can.

The point about this amendment is that free zones were legislated for way back in 1979. Indeed, they featured, not least during the 1980s, as part of a broader industrial strategy. I do not propose today to debate the merits or otherwise of free zones, because there are arguments that cut both ways. They are, by their nature, a distortion: they distort the customs and regulatory framework in favour of specific geographical locations. None the less, there can be significant benefits associated with that happening in circumstances where one needs to advantage certain geographical areas. That is why, for example, they have been used in the past, and are used widely around the world, in relation to some more disadvantaged economic areas, and specifically in relation to ports of entry—not just seaports but airports and the like. The reasoning there is that the ports of entry to an economy are often in competition not so much with other parts of the geography of that country as with other ports in neighbouring areas.

The European Union has a general disinclination towards free zones because the single market effectively creates one single customs territory. Arguing against myself, if we were to be in a single customs territory with the European Union, the question of free zones would probably not arise at all—but if we are not to be, it ought to arise. Under these circumstances, it would be good to legislate in the Bill to encourage Her Majesty’s Treasury to bring forward both a consultation allowing the merits of free zone designation and its use in this country to be debated, and proposals to Parliament about how that designation might be deployed.

There are ports that are interested in this, and the Treasury’s approach—that it is happy to consider free zone designation under the 1979 legislation—is understandable. But it is for the ports themselves to decide whether they wish to do this. I understand some ports may wish to; Teesport and Humberside are interested, and Associated British Ports is interested. If we leave the European Union and do not form part of a customs territory with it, they may well bring forward proposals. In the interests of the legislative approach to this, we should have something that encourages that to happen as quickly as possible in an ordered way. That is why the deadlines in the amendment are swift: to initiate a consultation within three months, and to report on that consultation within six months. In quite short order after exit day, we in this country could see to what extent our ports would need and benefit from free zone designation to enable them to compete more effectively with other ports—not least those on the other side of the North Sea or the English Channel.

That is the reason we should think about this. Those bringing their goods to Europe have never previously had to think about customs or other formalities, or the imposition of duty on those goods if they are brought to the United Kingdom and then re-exported elsewhere in Europe. Unfortunately, they may have to think about that.

[Lord Davies of Stamford]

I am grateful to the noble Lord for giving way. As he rightly says, free ports are distortionary by definition. If you create a free port close to another port, one will survive and the other will probably disappear altogether. Does he think his Government would be tempted by the thought that they could say, “If we have a local MP who votes for us and supports this Government, we will make the port free; but if we have an MP who dares to vote against us, we will make the port unfree and ruin it”?

[Lord Lansley]

The noble Lord will observe that the amendment seeks a consultation on the part of the Treasury, and that consultation would undoubtedly enable these issues to be explored on an even-handed basis. In the scenario I was describing, any port would be free to come forward and seek designation. It is not something that would be handed out on the basis of any partiality; rather, it would be done by examining the cases made by those ports. The point is that whereas in the past we may have concluded that there was no basis for introducing such a distortion into our economic activity, if and when UK ports are principally having to compete in international trade with other European ports, we may conclude that it is not a distortion to trade inside the United Kingdom. Actually, it is an aid to competitiveness for the United Kingdom in relation to ports elsewhere in Europe. I beg to move.