Brexit: Domestic and International

Lord Livingston of Parkhead Excerpts

Thursday 27th October 2016 Lords Chamber

[Lord Livingston of Parkhead (Con)]

My Lords, I first thank my noble friend Lord Leigh for tabling this important debate. I also welcome my noble friend Lord Gadhia to this House. I have known him for a number of years, and I know that he will be a great addition to this Chamber. His powerful maiden speech highlighted his background, experience and expertise, and what he will bring to this House.

Often in these debates we tend to decry the UK’s export performance, and of course we do have a trade gap. But it must be remembered that the UK is one of the world’s leading exporters—not just in services, although we are the second largest exporter of services across a range of service industries. That includes not just financial services but creative industries—the publishing industry deserves a good mention—and sectors such as the car industry. We are now the second largest producer of motor cars in Europe. We are also the second largest exporter in the world in the aerospace industry. Therefore, our exporters do a good job but, of course, we would like to see more exports.

However, whichever side of the Brexit debate you are on, I think there is widespread agreement that the uncertainty of Brexit certainly does not help. The notion that we will exit the EU in 2019 with a range of trade agreements with a number of countries is appealing but, regrettably, I believe that it is unrealistic, even verging on the fanciful. It is not that there are no interested countries: there are plenty of countries interested in doing a deal with the fifth or sixth largest economy in the world. However, there are still legal issues regarding the ability to negotiate during Brexit. The Australian Trade Minister made that point very recently, and Australia was already starting to talk to us. Moreover, it is very difficult to have meaningful conversations with the UK until we sort out our position with the EU. Mike Froman, who heads the US trade commission, and who I knew very well during my time as Minister of Trade, made that point very clearly. He would be willing to talk to the UK but we have to work out what our relationships are going to be. We can, over time, reach trade agreements, and they can be comprehensive, good and quick. Unfortunately, they cannot be all three of those things. It is important that we do not sacrifice the quality and breadth of a trade agreement on the altar of time. That will not be in our country’s long-term interests. Therefore, we need to play for time.

I loudly supported staying in the EU and regret the decision that was made. However, we have made this decision and it is not helpful for us to go through the arguments for and against Brexit. I agree with my noble friend Lord Tugendhat that we must get on and make the best of it for the UK. I also think that a message was sent out about taking back control. In the long term we will need to exit the single market and the customs union. People talk about Norway and government by fax machine, but being in the single market would create new rules for us over which we had no say. I think that would be very difficult. When I visited Turkey, people always complained to me about its inability to participate in trade agreements when it was part of the customs union.

Therefore, we need to buy ourselves time. I suggest we do that by agreeing with the EU to establish beyond the two-year Brexit period a further period in which we will stay part of the single market but after that period—say, another three years—that will stop. We should use that period to negotiate a proper, deep free trade agreement with the EU. In addition, as we would know our end status, we could start negotiating with other partners. We can debate whether that involves having a CETA-plus deal or is something new but it must include deep free trade and tariff cuts; non-tariff barriers; availability, for instance, for local procurement; and, critically—most trade agreements do not have this in depth—it must include services. Services account for 80% of the UK’s economy and without them we will struggle to increase our overseas exports.

As we negotiate these agreements, we must look to certain countries. The US is our largest trading partner. We will see who the next President will be but the US will prioritise. As regards Canada, there is a basic agreement under CETA regarding what we should do. There is also Australia and New Zealand. But we are going to have to focus because we cannot address all countries together.

I would like to say a lot more about exporting but time will not allow me. Suffice it to say that I have been on both sides of this issue. I have been a Trade Minister and I have been responsible for companies that export around the globe. I know that in both cases exporting is not easy. It is government’s job to reduce these barriers, not increase them. The Government must look forward and try to give certainty to our exporters. They must also try to buy some time so that we can have a long-term deep trade agreement with many of the major trading countries around the world. In that way we can look forward to the future with some confidence and make the best of an otherwise bad decision regarding Brexit.