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Brexit: World Trade Organization Rules

Volume 777: debated on Monday 19 December 2016


Asked by

To ask Her Majesty’s Government what assessment they have made of the impact of the acceptance of World Trade Organization standard rules on the United Kingdom’s negotiations for leaving the European Union.

The United Kingdom is a founding member of the World Trade Organization. The UK is fully compliant with all the rules of the WTO and will continue to be as we leave the European Union. This has no bearing on the UK’s exit negotiations.

My noble friend will be aware that air service agreements do not fall within the remit of the WTO. When we come to leave the European Union, undoubtedly there will be major negotiations to ensure and preserve open skies in Europe. Will those be a good example of the negotiations that will have to take place outside the Brexit negotiations and therefore outside the timetable set by Article 50?

My noble friend is right that a whole host of service agreements fall outside the WTO arrangements. The Department for Exiting the EU and the Department for International Trade are aware of those and will work diligently to ensure continuity when we exit the EU.

My Lords, do the Government agree with the Civitas research which finds that, if we are forced to accept WTO tariffs, EU exporters will pay some £13 billion per annum on their exports to us while our exporters will pay only some £5 billion on their exports to the single market? Given that the EU also has some 3 million more jobs through selling things to us than we have through selling things to the single market, is it not in the interests of the people of the EU, as opposed to the Eurocrats in Brussels, not to interfere with any of this but to agree to carry on as we are?

The noble Lord mentions some research. At the moment much research and many figures are bandied around, all based on assumptions about a future which right now none of us is clear about. However, I can agree with the noble Lord that any disruption in trade will be to the disadvantage of people both in Europe and in the UK, of whom there are 500 million. That is why this Government have talked about a smooth path to the new order post-Brexit, and we will work diligently to achieve that.

My Lords, it is exactly six months this week since the referendum and we are still waiting for the Government to be clear about their stance on the customs union. We are also still awaiting urgent clarification, for which last week’s Lords Committee report specifically asked, of the legal position regarding when the UK can start negotiating any trade agreements—while we are discussing the exit terms with the European Union, or afterwards. When will the Government provide that legal clarification? It does not have to wait on any of the politicking we have seen in the last week, with the Secretary of State talking about making a case in Cabinet rather than in Parliament.

My Lords, we are very clear on the position. We are clear that, while we are a member of the EU, we cannot negotiate or sign free trade agreements but we can have exploratory discussions, which we are having at the moment. Once we leave, we will be free to negotiate and sign free trade agreements for the United Kingdom.

When considering the question asked by the noble Lord, Lord Pearson of Rannoch, does the Minister recognise that it is not Governments who pay tariffs when they are imposed but manufacturers and consumers, and that British consumers will either pay tariffs or have to pay higher prices for products if the very unacceptable and unwelcome situation were to arise in which WTO rules had to be applied by default?

My Lords, the Government have set out their position: we do not wish to apply tariffs; we wish to be a free trading nation, and that is what we will work towards. We will try to ensure continuity of approach for our businesses, for the EU and for third-party countries. That is what we are trying to achieve right now.

My Lords, given that the proportion of total UK exports going to the EU has fallen from over 50% 10 years ago to around 40% now, should not our continuing strategy, both as a Government and as an industrial nation, be to continue to increase the proportion of our exports that go to areas of the global economy that have better growth prospects than, unfortunately, the EU does? Has the Minister noticed the noises coming recently from the United States of America, Australia and South Korea encouraging us to do precisely that?

I agree with the noble Lord that our ambition should be to increase our exports. At the moment the UK, regrettably, bats below where it should. We are sixth in the league table, below France and Germany, and we hope to rise above that through a number of initiatives. Pursuing all trade options with all countries should be the Government’s approach, to make it easy and straightforward for businesses to export and to make sure that we are equally open to other businesses, both in the EU and elsewhere, which want to export into the United Kingdom.

My Lords, further to my noble friend Lord Spicer’s question, as we are now told that more than half the total earnings of world exports come from services, intellectual property, information products, digital transfer and shared processes and not from traditional goods transfer, are we not reaching the point where the WTO rules—let alone the more outdated rules of the former single market and the customs union, which belong to past trade patterns—are of decreasing relevance to our trade prospects?

The noble Lord is certainly right that services are an increasingly important part of the UK economy, representing 80% of our GDP and 40% of our exports to the EU. However, I would not want to diminish the importance of goods transfer. The north-east of England is the second largest exporter of cars in the EU—it exports more cars than Italy. It is important for us to hold on to the fact that we produce goods in the UK and export goods from the UK. That must not be diminished as we pursue our agenda to increase our services around the world.

My Lords, I have listened to the Minister carefully but I am still not clear what the Government’s position is. Mr Fox is openly briefing that WTO arrangements would be quite satisfactory. Mr Hammond commented recently that the WTO option would not be the most favoured outcome. Which is it? Can the Minister say precisely?

As the noble Lord knows well, the Government are still working towards their position for Article 50. They take in views from all sides. As I understand it, we have 20 different Select Committee reports coming to the Government in January alone. I have visited 21 countries over the past four months and I have spoken to 200 businesses and over 2,000 business people. We are open to listening to all parts of the debate and I welcome the report from the noble Lord, Lord Whitty, and this House, which was considered and thoughtful.

What capacity does my noble friend’s department have for these negotiations in terms of experienced and competent negotiators?

In June of this year, the Trade Policy Group had 45 people working in it. We have now quadrupled that number, and we plan to increase it further next year to around 300 people. More than 1,000 people from outside have applied to work in the department, feeling that it is an exciting place to work at this time.

My Lords, the Minister said that we would be able to negotiate our own free trade agreements once we have left the European Union. Does that mean we will not be part of the customs union—we would not be able to negotiate our own free trade agreements if we were—and, if so, why did the Secretary of State for International Trade say yesterday that he was rather taken by the Turkish agreement which involves being part of the customs union?

I can only repeat what has been said in the Statements of my noble friend Lord Bridges to this House on a number of occasions, which is that the Government have not reached a position and are considering all options. Until they do so, we will not be in a position to reveal our plans further.

I am aware that Turkey has arrangements whereby agricultural goods and food products are excluded from the goods provision, but that obviously does not include services.

My Lords, is it not becoming increasingly clear that day by day and week by week, Nigel Farage, Michael Gove, and to be fair, Gisela Stuart, have got us into an unholy mess? We do not know where we are on trade, on the movement of labour—or indeed on anything. Would not the billions of pounds we are spending on trying to organise this Brexit be better spent sorting out the crisis in social care?

The people of the United Kingdom were very clear when they voted on 23 June. Harping back does none of us any good and it does not do the United Kingdom any good. We need to move forward in a united way to get the best deal for the United Kingdom.

My Lords, can we move forward in a united way if Cabinet Ministers are putting forward different points of view? I was brought up to understand that the Government speak with one voice. Surely these arguments should be kept within the Cabinet instead of being ventilated publicly?

I come from the world of business and what we believe in is having boards with different experiences and whose members are able to express different views in a measured and considered way. I believe that that is exactly what is happening. Along with input from this House and the other place, as well as from businesses, that will lead us to the most considered and beneficial outcome for the United Kingdom.

Does my noble friend accept that there is nothing the Opposition can teach us about having differing views on one subject or another?