European Affairs

Debate between Mark Garnier and Antoinette Sandbach

Wednesday 14th March 2018 Commons Chamber

[Mark Garnier]

My hon. Friend is right to raise the issue of non-tariff barriers. The World Trade Organisation itself identified that there were 300 non-tariff barriers in 2010, and the figure rose to 1,200 by 2015. Does she agree that Great Britain can be a strong advocate of free trade in the WTO and can try to drive a reduction in not only tariffs, but non-tariff barriers?

[Antoinette Sandbach]

Of course there is nothing to prevent us from doing that at the moment. In fact, the number of non-tariff barriers has increased during our membership of the WTO, even though we are also a member of the EU. That is a real and significant danger to the UK economy.

I hope that we will look in detail at sectors such as the three that I want to address: digital, insurance and legal. The digital sector covers a huge range of industries. They are not just new tech businesses; they cover a wide range of services for many companies. They are exposed to the same risks as many other service industries, but they also have to contend with data protection rules that will impact on data flows after Brexit.

TechUK says that digital makes up 16% of UK output and 10% of UK employment. It is a significant export sector, and about 96% of output and 81% of exports are in services. That is key. It is vital that we look at an agreement that deals with cross-border data flows with not only Europe, although 75% of our data flows are with Europe. We are one of the most advanced countries for trading online. Our consumers are extremely educated in and knowledgeable about buying goods and services online. It is important that we look at how we address these issues in a future deal.

Even if we maintain identical regulation with the EU, there are questions regarding the legal basis on which companies can transfer data between the UK and the EU27. It would be for the European Commission to assess whether we had achieved adequacy. Failure to achieve adequacy could force localisation or the redirection of an EU citizen’s data. That fragmentation could create significant costs for UK businesses, which would have to implement alternative legal structures. According to one study, cross-EU data localisation could cost between 0.4% and 1.1% of GDP, and lead to significant drops in private investment and a drop in service exports. The uncertainty over whether a deal will be struck could see companies restrict the amount of data they store and process in the UK in the short term. Clearly, we welcome the Prime Minister’s recognition that we will seek more than just an adequacy arrangement and that we want an appropriate ongoing role for the UK’s Information Commissioner’s Office, but it is vital that we actually deliver on that and do so quickly.

The second area I want to address is UK legal services. The UK legal services industry has made it absolutely clear that the CETA model does not provide a comprehensive framework for professional services. I would argue that the Government need to be looking at Norway-minus, not Canada-plus-plus-plus. It is clear that the impact of no deal on services in the legal industry would be more dramatic than it would be on the insurance industry. That is because a widely established series of EU directives has created a really well functioning market in legal services in the EU. The sector is worth £26 billion to the UK, which is the equivalent of 1.5% of GDP, and employs more than 3,800 people, often in highly paid and high-skilled jobs. In 2016, there was a net export of £4 billion from the legal services sector into Europe.

It is vital that, when we look at the customs union, the EEA should be the plan B. I agree very much with what my hon. Friend the Member for East Renfrewshire (Paul Masterton) said. We absolutely support the Prime Minister in going out and getting that deep and special partnership and deal, but if for any reason we cannot achieve that deal, the plan B should be an EEA/EFTA-style deal. That should be the fall-back, not WTO arrangements. If any of my constituents wonder how I have reached that conclusion, they should look online—it is on the parliamentary website—at the analysis that has been produced across Departments indicating that an EEA-style departure or agreement would be the least damaging option for the UK economy. That would still allow us to go out and strike trade deals—there are trade deals with 57 other countries—and to go into a potential market of 900 million people. We could still do fantastic trade with the Chinese, because when the Prime Minister returned from her recent China visit, she had signed £9 billion-worth of trade deals. I would argue that that option needs to be very seriously considered by the Government as a plan B.