Brexit: Options for Trade (EUC Report)

Lord German Excerpts

Thursday 2nd March 2017 Lords Chamber

[Lord German (LD)]

My Lords, I, too, add my thanks to the two chairs of the sub-committees and to the staff of Parliament who assisted us in making this report. In his opening remarks the noble Lord, Lord Whitty, referred to the picture having moved quite rapidly since the report was written. It is rather like having a snapshot taken out of a moving picture. I will therefore concentrate my remarks on the Government’s response to this report. We could probe many very pertinent issues very deeply.

It seems that the Government have issued all departments with a lexicon of words that they must use in respect of everything to do with our future relationship with the European Union. I will name a few: ambitious, comprehensive, frictionless, phased implementation, and the one that is definitely not my favourite, facilitations—I even have trouble pronouncing that because it does not appear in any dictionary. I looked up one word that has been used frequently: frictionless. The Oxford dictionary defines it as, “Smooth, achieved with little difficulty, effortless”. I wonder therefore whether the Government have given out the wrong book, because they are using these words in their analysis of the huge challenges ahead.

I am somewhat amazed—in fact, absolutely amazed—at the level of ambition, given the timescale in which the Government seek to meet their own objectives. I am also concerned about the way in which the words “return of sovereignty” are used, as an underpinning ambition to be reached. Any free trade agreement involves trading off interests in one area to gain in another. By their very nature, free trade agreements involve losses of sovereignty. The alternative is building barriers. I am reasonably confident that the Government do not wish to build a wall—physical or otherwise—around the UK, not least because that would mean a definite and dangerous return to a hard border between Northern Ireland and the Republic of Ireland.

There is no example in the world of a significant economy that has both market access and absolute sovereignty. So it is appropriate to ask the Minister: how do the Government reconcile their response to the report, which states that they want,

“the freest possible trade in goods and services”,

with their desire at the same time to take,

“control of our own laws”?

In their response to the report, the Government state that our future relationship with the European Union will be very complex. I would say that that is very much an understatement on the part of the Government. They say that it will be wide-ranging and will apply to both trade and non-trade issues, citing justice, defence and home affairs as examples. The House of Lords report looks in detail at the wide spectrum of matters that will need to be dealt with in terms of UK-EU trade. All this is to be agreed within the timescale set by Article 50.

The Government hope that they will not only secure the framework for the new relationship with the European Union but will deal with both departure and future arrangements simultaneously. On the assumption that only the framework will be concluded in the timescale available, given that that is what is actually in Article 50, it would be useful if the Minister could outline in her response the Government’s understanding of how close a framework comes to a fully worked-out set of arrangements, particularly in the area of our new trading arrangements with the European Union.

The timescale for negotiation will not be two years. Given the requirements to achieve the agreement of individual member states and the European Parliament, many months will need to be sliced off the end of the 24 months to achieve the two-year target. Some have suggested that the negotiations therefore need to be concluded in 18 months. As has just been said in the Chamber, there is likely to be some slicing-off at the front end of the timetable as well, as elections and future politics in France, Italy and Germany take their part. So I would be grateful if the Minister could give your Lordships’ House the Government’s view of how many months they think they will actually get to conclude an agreement to exit and a framework for this new relationship with the EU—whatever that framework might contain.

This brings me neatly to the issue of transitioning and phased implementation. I recognise that in their lexicon, the Government have found new words for the period that follows the 24-month exit period. They say that they want not unlimited transitional status but a phased process of implementation. The introduction of the word “unlimited” is interesting, and I would like the Minister to explain what is meant by it. For example, does it mean that the UK does not want unlimited time to complete the new relationship; or does it mean that it will be seeking transition only in a limited number of areas; or does it mean that it wants to limit the need for any changes to be made during the implementation phase? I simply do not understand it, and I should be grateful for an explanation. In all other respects, I think the use of “phased implementation” and “transition” are virtually indistinguishable.

This brings me in turn to one aspect of transitioning that will definitely be needed: our trading relationship with third countries. The committee’s report makes it perfectly clear that the UK cannot conclude trading agreements until we have ceased to be a European Union member state. The report also makes it clear that the UK would be unlikely to be able to retain access to the European Union’s free-trade agreements with third countries. Can the Minister confirm that this is likely to be the case? The question was raised in the report but not answered by the Government in their response.

At the point of exit, we would be facing a cliff edge for our trade with third countries. The Government’s response to the committee’s recommendation on this matter states that they are “exploring ways to achieve” avoiding a cliff edge, but then fails to give certainty that such routes are available to us. So I ask the Minister directly: what ways are available to the Government to ensure continuity of trade with third countries on the day of departure from the European Union? I am asking the Government not to give us their preference but simply to outline the choices available. There is a very practical issue here for which, as the report points out, certainty is required by UK business.

We recognise the need to invest in greater trade negotiation expertise. Unfortunately, the Government’s response to this matter in the report is to provide a set of bald numbers—300, 350—building up in departments. What is needed to understand this properly is what skills the Government now have available to them. By way of example—again, this question was asked in the report—how many new, experienced trade negotiators have recently been taken on by the Government? Where have they come from and what level of skills do the Government now have available?

The Government’s responses on this and other trade matters lead to far more questions than answers. It will be necessary for your Lordships’ House to continue to throw light on the issues which face us. I commend the report and I look forward to the upcoming reports on trade in goods and trade in services which will give another chance for this House, British industry and our people to examine these critical issues for our future well-being as a country.