Trade Agreement between the United Kingdom of Great Britain and Northern Ireland and the Swiss Confederation

Lord Stevenson of Balmacara Excerpts

Wednesday 1st May 2019 Lords Chamber

[Baroness Kramer (LD)]

My Lords, I cannot pretend expertise on trade Bills. We have heard brilliant speeches here today, but I want to raise four issues with the Minister.

The first is services. As the noble Lord, Lord Whitty, explained, financial services is the second largest arena in the services sector. Excluding the treaty on long-term insurance, many other sectors are governed by a number of equivalency agreements between the European Union and Switzerland, many of them designed with the City and the UK market in mind. I am completely unaware of what has happened to those and what the consequences of that could be. I would normally have seen any SIs concerning the financial services sector and I do not recall having seen SIs in this area, so I am quite worried, particularly as all this work was done with the expectation that we would have left the European Union by now and that those would have kicked in.

The second issue I want to pick up on is one that a number of noble Lords have spoken about: accumulation. If I were sitting in the Swiss position and allowing only a three-year period for accumulation triangulation to continue before it came up for review, I would be expressing the expectation that it would take three years for most companies to reorganise their supply chains in order to make accumulation in the triangular mode unnecessary. That would seem to greatly disadvantage the UK in the long run. Does the Minister have a reading on why that particular deadline was put in place?

The third area is mutual recognition agreements. I recognise that only about 10% of trade in goods between the UK and Switzerland is governed currently by mutual recognition agreements, but the continuity agreement basically covers only three-quarters of that. So about £500 million of exports from the UK to Switzerland each year are not covered by the rollover of mutual recognition agreements. Can the Minister tell us what the consequences of that are and whether she thinks that the additional cost of becoming certified in two jurisdictions is de minimis, or whether she sees that trade disappearing or transferring over to the EU? There is nothing here to give us any sense of the impact of that.

The last area that I wanted to pick up on was the authorised economic operator, but from a slightly different angle from that of my colleague. As I look at the document that was helpfully produced in February by the Department for International Trade, it says, interestingly, although most of the trade between the UK and Switzerland is indeed governed by firms which have taken out authorised economic operator status or have been awarded it, that,

“Switzerland applies broadly the same checks to AEO and non-AEO traders”.

I raise this because that coincides with most of the information that I have had from companies, that getting authorised economic operator status is exceedingly expensive, both to get in the first place and then to maintain, and it makes not the slightest difference when you get to a border—you are held up for just as long. Since this is the structure on which so many Brexiteers are building their expectation of how we would deal with the Irish border, will the department look at its own experience and understand that this mechanism does not work well at present and that no one seems to have come forward with any way for it to work efficiently or effectively in the future? It is evident from the department’s own document that this is not an answer to the Irish border problem.

I will make one last comment and then sit down. My attention was originally drawn to this trade deal by the press releases at the time, and I was pleased that they were so positive, as was the press coverage: no disruption in economic and trade relationships between the UK and Switzerland. Yet when I dug into this—which others have done far better and more forensically than me—it was full of holes. I ask for there to be much greater consciousness of giving a full picture when reports are made both to the public and generally to this House. We all understand that these are difficult, but the pretence that they are easy, complete and deliver no change is a poor message to give the companies that will bear the burden of the loss of opportunity and access that is consequent on the shift from the current circumstance to this continuity arrangement.

[Lord Stevenson of Balmacara (Lab)]

My Lords, this has been a very good debate, and, not the first time, your Lordships’ House owes a considerable debt of gratitude to the EU Committee, and in particular to this sub-committee, for the hard work it has done in trying to bring together the arguments, the pluses and the minuses and the difficulties that we face in relation to this agreement. In addition, through this Motion today, my noble friend the chairman has been able to bring forward a much broader context within which we have to think harder about the processes and procedures we will need to have in place if we are not to repeat the mistakes that he has drawn to our attention today.

The regret in the Motion before us today is about the fact that the trade agreement that has been given to Parliament to consider does not have sufficient on services—all the arguments have been made clearly about that. However, in addition to the points about the specificity of services, is there not a slightly bigger worry behind all this? It must have been obvious to those negotiating on our behalf that, even though the figure of 80% of our economy may be different in practice, the relationship we have with Switzerland is based on a substantial volume of services activity.

If we have been unable to agree anything on services in this relationship, what does this say about our future ability to negotiate in a much broader context with all the countries of the EU, if we have to? What about the US and other countries for which our services, although valuable to us, may not stand in the same arrangement? Our failure to do it with a supportive friend—a country that has always been engaged with the UK—raises wider questions and leaves uncomfortable echoes for future arrangements.

When we look at the detail that the committee has pointed out, we see the omissions, changes, adjustments and disapplications. Although what we have today is a substantial document—my goodness it is; if those who have read it right through to the end are not concerned about how it distinguishes between the customs duties that will be applicable for gherkins, fresh or chilled, while aubergines go free, they are not doing their work, and I am glad someone else did it for me because I would have given up at that point, although it is quite late on—surely the issue here is that we are not getting what we think is the complete package. It is just a trade agreement, not the trade agreement that should be there. Therefore, my second worry is that we have been given something which is more to satisfy the vanity of those responsible for the department in relation to the promises given about the ability to do trade deals than it is about the specificity of our exporters and importers in relation to the country of Switzerland. That leaves me a little concerned.

The wider context of this is the question of scrutiny. Others have raised all the points and I do not need to go back through them again. We are still stuck trying to use 19th century resources and processes, relying on the royal prerogative, to try to take forward our treaties, when we need to replace them with a system that engages with the obvious interests in this House and the other place, the wider world and the devolved Administrations, to make sure that we can do something positive with our trade. That concept was debated at length on the Trade Bill, and I shall not go back over the issues. As has been pointed out, that Bill awaits Commons consideration of Lords amendments, but the irony is that if the Commons were willing to accept, at least in part, what has been put forward today—and we are certainly happy to talk about that—we would have a system that would set mandates, require Parliament to be kept abreast of developments and changes in the negotiations and recommend whether Parliament itself should ratify the end conclusion.

The Minister may reflect on the following question when she responds. If our EU Committee—or whatever committee structure is set up in future—had been given the chance to look at the mandate for this trade agreement and given periodic reviews of the discussions and debate and had the power to recommend whether it should be ratified, would we really be in such a mess on this issue as we are?

[The Minister of State, Department for International Trade (Baroness Fairhead) (Con)]

My Lords, I thank the noble Lord, Lord Whitty, for drawing the House’s attention to the UK-Switzerland continuity trade agreement. I add my thanks to him and the committee for their work. Just to read a synopsis of the report shows how much work has gone into this one agreement, so we owe a genuine debt of gratitude.

I also thank all your Lordships for contributing to this debate, which has been insightful and challenging. I welcome this debate and informed discussion about some of the details raised. As I understand it, the Motion did not engage the process under the CRaG Act, but I am keen to address the questions that have been put.

As for the committee’s detailed examination, I am thankful to the noble Earl, Lord Kinnoull, for saying how helpful DIT and other officials have been. I will definitely take that back because that is how this has to work. The report created complements the explanatory materials we have, and will continue to, put alongside the agreements.