Brexit: Deal or No Deal (European Union Committee Report)

Lord Teverson Excerpts

Tuesday 16th January 2018 Lords Chamber

[Lord Teverson (LD)]

My Lords, perhaps I could point out that neither Mr Juncker nor Mr Barnier write the script; it is written by 27 member states’ Heads of Government. They are the people who decide what is right or wrong, and they are chosen by their electorates.

I agree with the noble Lord, Lord Hamilton of Epsom, that the EU committee should look at the other side of this argument as well. That would be a very useful report. He also said that perhaps we should speak to one of the European Commissioners. However, he is probably aware that, particularly during phase 1 of the negotiations, neither the Commission nor national Governments would enter into any discussion because they were maintaining their one-channel negotiation through the Commission representative. However, I agree with him entirely that perhaps the EU committee could look at the other side of this argument.

Where I disagree with the noble Lord completely is on negotiation strategy and leverage. The clear thing in my mind and in my analysis is that our Government gave away their position, their negotiating plan and all their advantages at the very beginning of this process because they declared all their red lines. They said to the EU, before it even asked, “We’re not going to be in the single market; we’re not going to be in the customs union; we’re not going to ask for any help from the European Court of Justice; and we are going to be out by 29 March 2019 whether you like it or not. We are setting our own deadline for coming out of this organisation”. I ask myself what the European Union would have said to us if it really wanted to punish us. It would have said straight after the referendum, “You’re not going to be in the single market; you’re not going to be in the customs union; we’re not going to give you any resort to the European Court of Justice; we’re going to have a deadline of 29 March 2019; and by the way, if you don’t co-operate, we’re not going to give you any deal at all”. That would have been the punishment that the EU would have inflicted on us.

It is those red lines and declaring that strategy at the beginning that has caused us to self-mutilate in the negotiations that have taken place since. Of course, the EU’s response is, “Okay, guys, if that is what you want, that equals a Canada deal. Done”. In fact, I disagree with my colleagues. The Government have not been in any way vague about the outcome that they want. They have been completely clear: they want a Canada deal, which includes a deal on free trade but no services. That is what we have gone for.

But what have we done in the negotiations? I suggest that we have agreed to everything. First, we have agreed the phased agenda, which we said we did not want. We have agreed that the timetable has to be completed by October this year. We have effectively agreed the financial payments. We have given a completely open agreement on the Irish border—that if we cannot solve it, we will stay in the single market and the customs union ever after. And we have said that we will probably agree to end transition by December 2020 at the end of the multiannual financial framework, rather than give ourselves even two years. I have tried to think of another negotiation that has been more one-sided and the only example that I can think of in history is the Delaware native Americans selling Manhattan island to the Dutch, although at least in that instance they got $24 in goods in return, which is more than we have.

To be quite honest, the most important thing has been the time pressures. On the day after the referendum, we might as well have sent an email to Mr Barnier saying, “We agree everything. Let’s get on to phase 2 of the negotiations around the final deal”. If we carry on with this level of performance, then once we go out into the real outside world and start negotiating with the hard-nosed trade negotiators of the United States, Australia and China, let alone India, we will be like lambs to the slaughter. We have had an atrocious negotiation in which we have given away our strategy and all our cards and have agreed to everything that the Commission has asked of us so far. I do not see that as acceptable, and it has not done our reputation internationally a great deal of good.

In terms of there being no deal, I am privileged to chair the House’s EU Energy and Environment Sub-Committee, which looks at agriculture. I remember that when we produced our report on agriculture, we had as a witness one of the main representatives of one of the farmers’ unions, although not the NUF. One of the first things that he said to us was that there is no deal that is worse that no deal. He went on to give a strong justification for saying that, particularly in relation to the agricultural industry. As the noble Lord, Lord Liddle, rightly said, if we get no deal, that will not mean going back to the status quo, as would be the case in most other areas of our life; it would mean something far less than that.

I was also privileged to lead the House’s delegation last year to meet Mr Barnier and Mr Verhofstadt—the first such occasion for this House. One thing that came over to me very strongly was that Mr Barnier is the sort of person who wants a deal, partly because that is his remit but also for the sake of his reputation of being able to do such deals. Particularly in December at the end of the phase 1 negotiations, one thing that was illustrated was that perhaps the Brexiteers were right—that the EU was desperate to get phase 1 sorted out. Despite the shambles of the DUP torpedoing the Prime Minister earlier that week, the EU found a way of dragging the Prime Minister over the finishing line to make sure that we could move on to transition and an overall deal. That is how it seemed to me to work.

I agree with the noble Lord, Lord Kerr, that there is now a lesser risk of no deal, but there are potential roadblocks out there. One could be the DUP. Will the DUP support the process all the way through? If it does not like the Irish outcome, will it vote with the Government when the time comes? Will the Cabinet be able to agree on the details into the future? I wonder. However, the issue that I really do question is the Irish deal as decided thus far. As I conclude, perhaps I may remind the House what the agreement on Ireland says:

“The United Kingdom remains committed to protecting North-South cooperation and to its guarantee of avoiding a hard border. Any future arrangements must be compatible with these overarching requirements”.


It goes on to say:

“In the absence of agreed solutions, the United Kingdom will maintain full alignment with those rules of the Internal Market and the Customs Union which, now or in the future, support North-South cooperation, the all-island economy and the protection of the 1998 Agreement”—


effectively an open cheque. As I can see no short-term solution technically to the Irish border issue, that agreement seems to lock us into the single market and the customs union until we can sort it out.

This has been a shambolic negotiation—a disgrace to this country. A Government who I do not think even understand how to do negotiations gave away all their cards at the beginning of the process, and I can only hope that they can recover. However, as I said, may the Lord help us once we try to negotiate further free trade agreements outside the Union in the wider, real world.

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[Baroness Deech (CB)]

My Lords, I am rather pleased to join the small band of dissenters in this House. As a lawyer, I believe that the adversarial process gets to the truth and it is often the case that the dissenting judgment in a case is the one that echoes down the years. Obviously, one hopes for a good deal, but the report was predictably gloomy, reflecting the majority of its selected witnesses. It was surprising that there was no reliance on the significant body of economists and commentators who are analysing no deal and who have come up with constructive views. The committee assumed that being outside the EU was de facto disastrous, taking no note of the situation of other countries outside the EU which have good quality of life and good regulation and which trade successfully. As a result, the report could have been written by Eeyore. Today, I present the Tigger response.

The only goalpost placed before the UK by the 27 is that the UK must not be seen to gain by leaving, lest others follow suit. What sort of organisation is this whose only purpose is to maintain itself in its present position by threats? How unacceptable is the reported attempt by President Macron to use the Calais refugees as the price of a deal? Where is the statesman or stateswoman in Europe who can draw a portrait of what the organisation will be in a few years’ time, what its attractions and benefits might be? Nothing except “more Europe”. A great leader, which it manifestly lacks, would not want to inflict harm on European citizens, including the British, for the sake of it, which is the tenor of the discussions now, but would have sufficient confidence in the EU’s future to be able to say goodbye to one of its partners handsomely and generously. The attitude of the EU does not bode well for its future, and it has given us no idea what that is. It uses fright tactics—apocalyptic views of being out of the single market, punishing the renegade—rather than focusing on the well-being and prosperity of its citizens.

The EU’s intransigence over its own citizens’ rights, apparently unconcerned about what might happen to its own 3 million, and its intransigence over the divorce bill and the Irish border amount to self-harm. If the EU were reasonable or acted in the best interests of its citizens it would seek a free trade deal and give a degree of certainty to the troubled and unhappy economies of the 27. If in the end there is no deal, it will be the EU’s doing.

[Lord Teverson]

To set the record straight, the EU is about to offer a free trade deal. That is where it is desperately trying to get to. It is not preventing it; it is trying to get it, and it is offering Canada, which is a free trade deal.

[Baroness Deech]

My Lords, it does not sound like it.

When we contemplate no deal, it means a default position of reverting to WTO rules. It does not mean that, in the event of a vote in Parliament on the final deal going against it, we would then seek to revoke Article 50 and be readmitted to the Union. That latter scenario is obviously what is sought by those who table elephant-trap amendments about a final vote. They want to stop Brexit by rejection of the deal. We should be clear about that. The EU, by putting forward a bad deal to provoke rejection by such a vote, would get what it wanted: a return by the UK, with its tail between its legs, and possibly Schengen and the euro to boot. It would be an affront to democracy and a permanent stain on this House.

The UK was a founder member of the WTO. Lots of countries trade with the EU under WTO rules; others have dealt with that. We might be free to set low or zero tariffs on what we import from the rest of the world and from the EU, with a consequent benefit to UK consumers, who would pay less in many instances. This would not stop trade—far from it. All nations have access to the single market provided that regulatory standards are met, which we do. The US and China conduct billions of dollars of trade with the EU without a free trade agreement. We could accompany that with massive deregulation, and there are lawyers who can reshape our laws and regulations in that event.

As for the dreaded scenario of grounded flights, many European airlines use our airports. They need a deal or their tourist trades would collapse. Memoranda of understanding could hold the position until new agreements are reached. The use of phrases such as “cliff edge” and “crashing out” are not merely inaccurate but designed to scare and confuse. Predictions made recently about losses that might occur in 2030 if we are not in the single market do not seem to be any more reliable than the inaccurate predictions for finances right after the referendum.

Set against the positive view of no deal is the refusenik approach:

“And always keep a-hold of Nurse

For fear of finding something worse”.

But clinging on will risk paying a great deal of money for an arrangement worse than the present one, stuck in the prison of the customs union and the single market without a say in them, and still under the ECJ. It is a mistake to pay a great deal to gain access to the single market, let alone for an extended transition period—like a couple who are divorced but remain together because they cannot afford to sell the house. Countries all round the world have that access without paying for it.

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[Viscount Ridley]

Surely the answer to the question of the noble Lord, Lord Wallace, is that the EU is a single market but it is also a fortress. It is a tariff-protected zone which prevents free trade from outside, to a surprisingly large extent.

[Lord Teverson]

My Lords—

[Baroness Deech]

No, I am not giving way. I have only a few minutes. I thank the noble Viscount, Lord Ridley, for putting it better than I could.

Leaving with no deal will not be a disaster, as many have said. So how can it be used as a negotiating tactic? We should say sincerely that we will manage very well if there is no deal. Our confidence in that would weaken the likelihood of the EU pressing a really bad deal on us, because it would know that we had a future elsewhere without its approval. I do not believe that the EU will want us to leave with no deal, unless its penchant for self-harm is even more marked than I can envisage. It would leave it with a financial gap to fill, problems with exports to us, and the loss of our defence and security assistance, which are so very valuable to it. After all, we are its biggest single export market, and European industries are under threat. Self-interest points overwhelmingly to a good deal being offered. It is just the priority that the EU gives to punishing us for ulterior reasons that is holding it back.