European Union: Negotiations (European Union Committee Report)

Lord Hain Excerpts

Monday 16th March 2020 Lords Chamber

[Lord Hain (Lab)]

My Lords, without any scrutiny apart from the excellent report from the European Union Committee, since the election the Government have been rushing to an extreme hard Brexit which will simply compound the profound economic damage already triggered by the coronavirus into quite unnecessary and reckless national self-harm. Incredibly, the Prime Minister has unilaterally committed—come what may and way before he needed to—to leaving the transition period at the end of December, meaning the spectre of no deal is once again on the horizon, with immensely damaging long-term consequences for the UK’s economy. With respect to the noble Baroness, Lady Noakes, it would also be an outcome that was not foreseen or supported by most people at the time of the 2016 referendum.

In recent weeks, the magnitude of the coronavirus crisis has vividly demonstrated the limits of national action and the challenges of an unregulated, globalised world. Contrary to the belligerently nationalist tone adopted by the Prime Minister, Britain alone cannot fight the virus. We need leadership like Gordon Brown’s as chair of the G20 at the time of the global financial crash. The need for internationally aligned standards on isolation, quarantine and contact tracing and for much more investment in public health systems has been demonstrated. For instance, the UK has no vaccine production capacity of its own. As we have exited the EU, this could make us vulnerable to a potential second wave of Covid-19 and future pandemics. The European Medicines Agency, which once ensured that London was the centre for scientific evaluation, supervision and safety monitoring of medicines in the EU, relocated to Amsterdam in March 2019. As David Meek, the CEO of Ipsen, a leading pharmaceutical company, has warned, when it comes to availability of new treatments, pharmaceutical companies will first of all target the far bigger markets of the EU, the US and China. The UK, as predicted by President Obama, will indeed be at the “back of the queue”.

The EU Committee has drawn attention to the extent to which the two sides have diverged since last October’s agreement, which has created a mismatch of expectations on virtually all aspects of the future relationship. This analysis shows that the EU Council’s decision adopts the same structure as the agreed political declaration. As the UK is no longer a member of the EU, it seeks not to maximise trade but to prevent the UK undercutting the single market by lowering standards. However, the UK’s position appears to have changed significantly following the December election. A precursor to this can be found in changes made to the draft in November 2019 by the new Prime Minister’s negotiator. In particular, the words in the protocols relating to alignment of the UK in the areas of taxation, environmental protection, labour standards, state aid and competition were moved from the binding withdrawal agreement into the aspirational political declaration. Then, on 3 February, the Prime Minister announced that there was

“no need for a free trade agreement to involve”

the UK

“accepting EU rules”.

The new approach by the UK’s negotiating draft is also therefore motivated by a desire not to maximise trade but to seek the fullest amount of regulatory independence for the UK, putting Brexiteer dogma ahead of jobs and prosperity. This was confirmed by the Prime Minister’s statement:

“The question is whether we agree a trading relationship with the EU comparable to Canada’s—or more like Australia’s.”


But no trade deal exists between Australia and the EU, and his comments have also been interpreted as “code for no deal” by Ireland’s EU Trade Commissioner Phil Hogan. Even the Canada deal to which the Prime Minister referred—which took seven years to negotiate—would be disastrous for the UK, which already has a sizeable trade deficit on goods with the EU, as competitive EU suppliers could take advantage of zero tariffs in many areas, while services, where the UK has a trade surplus with the EU, would lose access to their former EU markets.

It is now clear that the obsession of Brexiteers with the so-called “sovereignty” of the UK means that the Government now believe there must be no alignment with EU rules. Slashing European regulation has, of course, long been a right-wing article of faith for those promoting a “Singapore-upon-Thames” UK, but the truth is that divergence caused by Brexit will lead to more bureaucracy, not less. First, the UK will need to replicate the functions of the EU regulatory bodies. Secondly, UK exporters will then have to deal with two sets of rules, as they will still need to meet EU standards to trade into the biggest, richest market in the world.

The sectors affected do not want to lose the protection and market access provided by EU regulatory frameworks, which have been developed, with UK support and influence, over the last 40 years. A case in point is the recent announcement by the Transport Secretary that the UK will leave the European Aviation Safety Agency, which enforces safety standards in the airline industry. The trade body representing the British aerospace and defence industry immediately condemned this decision as “unnecessary and unwanted divergence” from EU norms and harmful to the UK aerospace sector. The automotive, food and drink and pharmaceutical industries, among others, have also warned the Government that moving away from key EU rules would be damaging. But there is no sign that their pleas have been heard.

The Government’s own analysis in 2018 concluded that under a no-deal scenario the UK economy might be 6% to 9% smaller. Yet Number 10’s “divergence for divergence’s sake” could be catastrophic for British manufacturing industry and its workers. The industrial heartlands of the north-east and the West Midlands face the greatest potential economic hit—down by 16% and 13% respectively, it was estimated. Their economies are heavily dependent on European-wide just-in-time production found in advanced manufacturing such as cars, aerospace and chemicals. No doubt the Prime Minister will blame the EU for making these regions poorer when his damaging hard Brexit cuts our manufacturers off from lucrative EU single market access. This malign threat now looms over all sectors of the UK economy.

Take fishing and financial services as two very different examples. A bizarre stand-off between the UK and the EU over fishing rights triggered alarm that the Government were thinking of sacrificing the UK financial service industry’s access to the EU market in order to “save” UK waters for the British fishing fleet. Financial services account for around 7% of GDP, 11% of UK tax take and more than 1 million jobs, over half of which are outside Greater London. Fishing, while deserving of full support as it is important, especially to coastal communities, employs fewer than 10,000 people and is worth a fraction of 1% to national GDP.

The Brexiteers do not understand how this industry works. After years of promises of “frictionless trade” by Brexiteers, on 10 February, Michael Gove was finally forced to admit that this will cease at the end of this year. As one person’s fish is another person’s poisson, the UK fishing industry relies completely on overnight frictionless UK/EU trade. Informed analysis has shown that the most likely outcome of closing the UK’s sea borders would be a lose-lose situation for both UK and EU consumers and for both fishing industries. It would therefore be yet another spectacular own goal if the UK refused a deal on finance, which is critical to the UK’s prosperity, as the price of not reaching one on fishing.

We now learn that the government team negotiating with Brussels has been ordered to find ways to “get around” the Northern Ireland protocol, which includes checks on goods moving from Great Britain to Northern Ireland, measures adopted to protect the balance of the Good Friday agreement and avoid a hard border on the island of Ireland. This would trigger dispute-resolution arrangements in the withdrawal agreement, which in turn jeopardises a future trade deal with not only the EU but the US, where support for the island of Ireland, north and south, in Congress is strong.

When the UK and the EU together ratified the withdrawal agreement last October, it became legally binding under international law, as noble Lords have already mentioned. This means that, regardless of the outcome of the current negotiations on the future relationship, the protocol on Ireland/Northern Ireland is legally in place, and the Good Friday agreement must therefore be fully protected. Implementation of the protocol will ensure that there is no hard border on the island of Ireland and that the common travel area is maintained, to the continued benefit of UK and Irish citizens, and that more practical things such as the single electricity market in Ireland are part of protecting north-south co-operation. The protocol also maintains commitments to ensure no diminution of rights and safeguards equality of opportunity, as set out in the Good Friday agreement. It confirms that people in Northern Ireland who exercise their right to Irish citizenship will continue to enjoy their rights as EU citizens and reaffirms the EU and UK commitment to the PEACE PLUS programme.

The protocol states that Northern Ireland will remain in the UK customs territory but continue to apply the rules of the EU customs code. This means that there will be a need for checks on goods entering Northern Ireland from Great Britain, some of which already exist—for example, on livestock. However, the Prime Minister has insisted there will be no checks on goods moving in either direction. Unless the UK honours its legal commitments in the protocol, we will damage our long-standing and deserved global reputation as a credible international actor and undermine our ability to conclude international agreements of any kind in the future, including free trade agreements and the negotiations on the future relationship with the EU.

The protocol effectively moved the UK/EU customs and regulatory border into the Irish Sea, so that Northern Ireland will be on the EU side of the barriers to UK/EU trade. At the very least, this means more paperwork and administration; it could also well mean regulatory divergence, duties and even quotas. It poses an existential challenge, not only to the UK exporting but to the model of intra-UK business itself. I spell this out bluntly, because the Prime Minister is sailing blithely on, denying that there will be any problem implementing what he has legally agreed to on Northern Ireland, and sooner rather than later he is going to hit a brick wall.

Finally, we must surely insist that, in the light of the coronavirus catastrophe, the Government will face down the hard-Brexit zealots and reconsider the decision to exit the transition period at the end of the year, come what may. Right in the thick of the coronavirus pandemic, the last thing the country will need by then is yet more disruption and instability triggered by the double whammy of a rushed Brexit driven by dogma to meet an arbitrary deadline, especially when so many questions about the Government’s agenda remain mired in confused contradiction.

--- Later in debate ---

[The Earl of Kinnoull]

My Lords, very briefly, I thank the staff of the committee. As I tried to explain in an obviously unsatisfactory answer to the noble Lord, Lord Hamilton, this was done in a tremendous rush, with lots of late-night oil being burned, because we got the Command Paper on 27 February and the staff and the whole committee had agreed to our report by 3 March. I hope the House feels that we performed our duty in trying to do that.

Secondly, I thank everyone who has spoken in our four and a half hours of debate, which I found fascinating. New points and new thoughts have been put to me—I live in this world 24/7 and enjoy everything—and it has been rich in content.

One gypsy’s warning was given. About half the membership mentioned Northern Ireland and I hope the Minister will reread the excellent speech of the noble Lord, Lord Kerr of Kinlochard, which summarised the issues and got to the nub of them. I should say, as a minor piece of advertising, that we worked together in Northern Ireland and have taken evidence both there and here. Our next work will focus in that direction, and I hope we will have the opportunity to consider what we have found out today on the Floor of the House. This is definitely something that needs attention. It is not an unwinnable position at all, but it needs attention; it is a gypsy’s warning.

I will comment finally on whether our report answers our own question on divergence. I am afraid it does not. There are two elements that one is asking for with divergence: an explanation as to what has diverged, and the justification for why it is right to diverge. In our report, through burning the midnight oil, we have been able to do a reasonable job of explaining what has diverged. We will ask Europeans why they are diverging—I tried to point out that there were divergences on both sides. As scrutineers, we will also need to ask the Government to explain and justify why the divergence is taking place, assuming that there will be future divergence. I am afraid that our question on that is still live. I hope that, when the Government respond to our report, we will get some clues.

[Lord Hain]

I very much welcome the committee’s intention to look at Northern Ireland. For some time, the Government said of the Irish border that it would all be all right on the night and we should not worry about it. They then conceded that there was something to worry about—and the agreement protects the open border, provided it is maintained. But there is still considerable denial about de facto checks and a virtual border in the Irish Sea. I very much welcome the committee’s intention to look at that.

[The Earl of Kinnoull]

I thank the noble Lord for that. Here, I point to the very important intervention on that issue by the noble Lord, Lord Lamont of Lerwick. He pointed out that the situation is quite dynamic. If a free trade agreement results, it will greatly reduce, although not eliminate, the list of problems.

This has been an excellent debate and I thank everyone again. I commend the report to the House.