Future Free Trade Agreements

Debate between Marcus Fysh and Emma Little Pengelly

Thursday 21st February 2019 Commons Chamber

[Mr Marcus Fysh (Yeovil) (Con)]

Future trade deals must be part of a coherent trade strategy, and it is imperative that, as part of that strategy, we rapidly set out what our tariff schedules will be in all eventualities, and our attitude to tariff-rate quotas. Many people in business throughout the land are looking for that guidance. It is a key part of their preparations as we leave the EU, and I think we owe it to them to make clear what the position will be, particularly as the lead times to import are quite long in the case of some products. If products will have to go into catalogues in the future, businesses really need to know what their margins will be, and it seems unfair that they have not, as yet, been given that guidance.

Today’s debate is a classic that has been heard in this place for the last 150 to 200 years: the age-old debate about protectionism versus free trade. It is an argument that has proved to have the potential to split parties, communities and families right down the middle. I think that, in the modern era, it would be wise to try to go about these matters in as well-informed a way as possible, because we owe it to the people on whose behalf we are making our decisions to understand fully what we are talking about.

People in the trade world talk about offensive and defensive interests in negotiations, but, in many circumstances, the attempt to reach mutual agreement means that it is not really a zero-sum game. Approaching negotiations with the right partners and in the right way can bypass such oppositional characterisations of trade and of our own interests. That is not to say that we should not be mindful of the impacts that different trade arrangements might have on our people—our businesses and our farmers, for instance. I am keen to champion the maximum supply of information and the maximum involvement of communities in the preparation of trade strategies and trade policies along the way.

[Emma Little Pengelly (Belfast South) (DUP)]

Several Members have expressed concerns about the NHS today. We have probably all been contacted by constituents about the need to protect it, which is close to the hearts of many people throughout the United Kingdom. Does the hon. Gentleman agree that it is important not only to protect it and issue strong statements to that effect, but to provide transparency so that people are clear that what is agreed, what is to be negotiated and the negotiating mandate do not include things that are precious to them and that they do not want to be compromised?

[Mr Fysh]

The hon. Lady makes a good point. The earlier the involvement in these conversations, the more confident communities can be about a mandate that the Government can take to a negotiation, and the process of ratifying whatever comes back from the negotiation can then take place in a timely manner, which I think is essential. I shall talk about the NHS in a bit more detail later, but I see no reason why there should be those fears about it. Indeed, I can see reasons for it to benefit, and for its users to benefit, as a result of deals with, for example, the United States that might allow earlier and cheaper access to drugs than is possible now.

This debate is, of course, about future free trade agreements, but those agreements, and the trade strategy, are inevitably coloured by consideration of what our potential relationship with the EU might be, and what obligations we might enter into in order to acquire it. I now want to say a little about the impact of the restrictive nature of the proposed withdrawal agreement, including some of the prejudices to our future trade policy and strategy that it sets up.

The withdrawal agreement commits us to paying a lot of money without real limits, and with oversight by the European Court of Justice of the exact obligations that will be required. It allows the possibility of an extension by up to two years of the transition period that is being contemplated. We do not know at this point what sort of competition or anti-competition legislation the EU might produce in the next four years, but it might affect our economy, and might have an impact on what we could or could not do with future trade partners, either during that time or afterwards. The agreement gives the joint committee very wide powers of interpretation of what it says, and, in fact, powers to change what it says, as if it had the effect of law and Acts of Parliament. That means that the position in another two to four years’ time is very uncertain.

It should be noted that the agreement proposes the acknowledgement and implementation of the current EU system of geographical indications. I am not necessarily opposed to their being implemented in the same way in the future, but that really should be a matter for the future trade negotiation, which we have been told all along cannot take place during the article 50 negotiation period.

What is slightly more worrying for us in this discussion of future trade policy is that the agreement strengthens the current requirement for “sincere co-operation” within the common commercial policy to which we are subject as members of the EU, which effectively means that we are obliged not to undermine the EU’s interests in any international forums. I do not think we should be in the business of trying to undermine its interests, but that requirement may well restrict what we can discuss with future free trade partners during the transition period. That, I think, adds to the uncertainty that already exists about the transition period, and about what has or has not been agreed by the EU and the UK. Whether and how the EU’s existing free trade agreements with the rest of the world will apply to the UK during the transition period remains opaque, as does the extent to which the UK is able to sign free trade agreements during the transition period in the context of that sincere co-operation.

Within the backstop provision for after the transition period should nothing be agreed, there is a hard veto for the EU on any superseding agreements. Article 20 of the protocol is very clear that there needs to be a joint decision by the EU and the UK for future alternative arrangements to succeed the backstop. So whatever the best endeavours clause does or does not do, that is still a hard veto that needs to be dealt with.

The reality of the operation of the backstop as written for the UK is very dramatic from the point of view of trade and competitiveness. For example, the EU will be able to increase state aid during the period after 2019, but the UK must maintain it at current levels. If that happened for four years, it could really undermine the competitiveness of some of our domestic producers, which is exactly what we have said we need to think hard about in future trade agreements. Because of how the annexes operate, state aid provisions would effectively be applicable to our defence manufacturing industry for the first time in a way that they are not in the EU. That would enable the European Commission to take cases in our courts against defence manufacturers and/or the Government in instances that were considered to be state aid to the defence manufacturing industry.

Those are the sorts of hostages to fortune that are lurking in the backstop, and that is one reason why I am against it. We need to be very mindful of that sort of leverage over our future arrangements with the EU, whether on the status of Northern Ireland within our constitution, if our fishing is open to European actors, the status of Gibraltar, or our defence capability and sovereign ability. Those are all potential hostages to fortune in the current backstop arrangement, which is a big part of the reason why I am opposed to the current proposal and want those backstop arrangements to be replaced now, or at least to have full legally binding guarantees that they will be replaced over time.

As the backstop is currently written, it envisages a customs union. There has been much talk about whether that means frictionless trade.