EU: Trade in Goods (European Affairs Committee Report)

Lord Hannay of Chiswick Excerpts

Thursday 2nd February 2023 Lords Chamber

[Lord Hannay of Chiswick (CB)]

My Lords, like other speakers, I begin by paying tribute to the noble Baroness, Lady Chalker, whose valedictory speech we took such pleasure in hearing, although with such regret on the occasion of it. I worked for her in a number of capacities, first when I was Permanent Representative to the European Community. She had put her name to an Act that set up the single market: the Single European Act, of which I believe she can be proud. It was not only her name but Britain’s too. It is one of the answers to those who say, “Did we contribute anything positive to the European Community when we were a member?” That is one of the conclusive answers.

I also worked for the noble Baroness when she was Minister for Overseas Aid and I was ambassador to the United Nations. Although our contribution in GNP terms was a figure I will not embarrass her or anyone else by giving now—it was lower than what we have now—she put in a great deal of effort to get it on an upward trend. For both those reasons and in both those capacities, she has made a notable contribution to the public life of this country.

It has become a feature of debates in this House on Select Committee reports to criticise the extreme—indeed, sometimes pretty well farcical—delays in bringing them forward for debate. I am afraid this is one of the farcical ones. Trade statistics are always lagging, so if you take as long as this to debate a report, the statistical basis for which was necessarily quite some time before the report itself was written, you ensure that all the figures are out of date.

Since the report was written, those figures have tended to move further and more consistently in a negative direction. I point out that the figures the Government and other speakers have used are of a devalued currency; that also casts some light on their validity. If noble Lords doubt that things have moved, and are still moving, in an adverse direction, just read reports by the OBR, the Centre for European Reform, on whose advisory board I sit—I am sorry that it was responsible for the doppelganger approach, which I think was of somewhat greater validity than the noble Lord, Lord Lamont, would allow—or the King’s College group, UK in a Changing Europe.

My first question to the Minister is: does he stand by the Government’s extraordinarily complacent assertion in its ministerial correspondence with the committee, on which I also serve, that our trade with the rest of Europe is “generally proceeding well”? If he does, I recommend he say that to any of the trade associations or groups that assert the contrary. He would be likely to get what the great PG Wodehouse called “the bird”.

None of this deprives our debate of its validity and topicality. Many of its main themes have been extremely cogently set out by our chair, my noble friend Lord Kinnoull, who has brought such skill to the management of our committee. I will concentrate on two of them: sanitary and phytosanitary rules, and the predicament of small and medium-sized enterprises, both of which have been referred to by previous speakers and make up important components of our trade with the EU. SPS sounds a pretty arcane subject but those rules, applied to us as a third country, contribute much of the friction which has been imposed on our exports of agri-food products since we left the EU. Trade in those products had grown steadily throughout our period of EU membership.

My first question is: should we not seek to conclude an SPS agreement with the EU, as some other third countries have done—Switzerland and New Zealand, for example? In this way, we would alleviate the burden placed on our agri-food exporters. The case is all the more compelling when you realise that such an agreement would remove some 80% of the problems which bedevil the Northern Ireland protocol. Your Lordship’s committee proposed that course of action several times, and every time the Government rejected it out of hand, as the noble Lord, Lord Liddle, has said. Why? Well, they did not really deign to explain that in any detail. So, my second question is this: can the Minister explain why that common-sense solution should not be adopted? In doing so, it might be relevant to recall that, when our committee took evidence last week for our current inquiry in Wales and Scotland, we were told that negotiating an SPS agreement was a top priority for both those nations. That was the view of all parties—all parties—in Wales and Scotland.

Then there is the case of small and medium-sized enterprises. Their trade association said publicly last week that 20% of the companies that used to trade with the rest of Europe had now ceased to do so altogether, and that many others were struggling with increased bureaucracy and costs. Again, your Lordships’ committee recommended that the Government extend the duration of the scheme they introduced when we left the EU to assist small and medium-sized enterprises, in order to help them overcome these problems. Again, this was rejected, without any serious arguments to justify that. So my third question is: does the Minister not think that decision should be reversed before any more damage is done?

It is not impossible that more bad news could be coming down the track so far as our trade with the rest of Europe is concerned—and we must remember, of course, that that is nearly half our trade. Most obviously, if the Government’s efforts to find a negotiated solution to the problems with implementing the Northern Ireland protocol were to fail, some kind of increase in trade barriers could ensue. That is a pretty obvious one. Also, if the EU’s developing policies of introducing cross-border adjustment mechanisms to take account of carbon content and climate change considerations were to result in more friction in our mutual trade, that would be damaging to us too. The application of the EU’s rules of origin could do the same, and they are due to move into a sharper focus and higher gear in the coming year.

I invite noble Lords to reflect that this is all taking place during a period when the sterling exchange rate’s loss of value, as I referred to before, should have been giving our exports a major boost—it clearly has not done so—and when our place as one of the main recipients of foreign direct investment both from outside Europe and within it has been slipping away. I would argue that there is no ground for complacency here—quite the contrary. Perhaps the Minister will tell us that the Government have shifted from their stated view that things are generally proceeding well. I really hope he will do that when he replies to the debate.