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Brexit: Trade

Volume 778: debated on Thursday 2 February 2017


Asked by

To ask Her Majesty’s Government what assessment they have made of the comparative advantages, disadvantages and costs to the United Kingdom economy of (1) free trade agreements, (2) membership of the European Union Single Market, and (3) participation in the European Union Customs Union.

My Lords, we want the UK to have the greatest possible barrier-free trade with the European Union, delivered through a bold and ambitious free trade agreement. We continue to undertake a wide range of macroeconomic and sectoral analyses although, as agreed by Parliament, we will not publish anything that might harm our negotiating position.

While I am grateful to my noble friend for his Answer, will he address the Question and the information that I seek in it? The Government are asking this House and the other place to take an awful lot on trust. Given that our main exports are in services, how confident is he that we will reach agreement on financial services, for example, within two years of our having left the European Union?

On the first point, I have little further to add. The Government have clearly said—I answered on it a moment ago—that, as the negotiations continue, we will continue to provide to this House and the other place what information we can without undermining our negotiating position. That is not only the right thing to do, but the right thing if we are to build the national consensus that I said at the start we wished to build as we go forward. On my noble friend’s point about financial services, which is a very valid one, I would like to think that we are moving into a slightly new era as regards the understanding of the challenges and issues we face. There is a greater understanding of the mutual benefit that will be achieved if we come to an understanding with our European partners on financial services—not only to avoid a cliff edge in these negotiations, but to ensure that European companies and European Governments continue to have access to the global capital markets and the wonderful services provided in the City.

My Lords, the Government will be very aware that in the Korn Ferry survey of FTSE 100 chairmen, 88% are convinced that, as it has been decided to leave the single market and the customs union, no trade agreement could possibly provide the current level of access. Does the Minister accept that consensus is now growing that, under the best terms we can get, we will see a drop in exports to the EU of something like 22%—nearly a quarter—and that no deal with the United States, no matter how favourable, could do more than claw back a very small portion of that loss?

I hope the noble Baroness will forgive me, but she is approaching this from a somewhat pessimistic point of view. I approach it from a more optimistic and ambitious point of view. I believe that the United Kingdom has a very strong economic record on which we can build. I believe that we already have fantastic networks, right across the world, on which we can also build. Therefore, while I understand the challenges that lie ahead, I believe that when we put our mind to it and approach it in the way that my right honourable friend the Prime Minister has set out, there is no reason to take the somewhat pessimistic approach that the noble Baroness has outlined.

My Lords, what do the Government think of the latest Civitas research, which can find no discernible benefit from our membership of the EU single market and customs union since we joined it? Is it not also true that the EU needs our free trade very much more than we need its? Is it not also the single market that inflicts Brussels overregulation on the 90% of our economy which does not sell into it, and which has stopped us doing free trade deals with the markets of the future? Is not the single market a pretty good disaster?

There are a number of questions wrapped up in that. From what my right honourable friend the Prime Minister set out in her thoughtful speech at Lancaster House, I shall pick up one point. There are aspects of the customs union that we do not wish to be part of, which restrict our ability to strike free trade agreements with non-EU countries. However, there are aspects of the customs arrangements that exist which we wish to preserve. We wish to try to ensure that there remains frictionless trade across the EU, as far as possible.

My Lords, when it comes to assessing the single market, as suggested in this Question, has my noble friend noticed that the Visegrad four countries—and, indeed, several other east and central European countries—are in a state of considerable dissent and questioning about the structure, character and future of the single market? Are we in touch with those Governments and those countries?

My noble friend makes a very good point, as always. Yes, we are in touch with those countries. We are well aware of the issues bubbling around throughout Europe about the future of the single market. All I say is that the British people decided on 23 June to leave the European Union and therefore the course is the one that the Prime Minister has set out.

Can the Minister tell us how much of a fist-fight the Government are preparing for to protect their position on the customs union?

I am sorry to say that I will not start commenting on language such as “fist-fight”. It does not necessarily augur well for creating the best tone for the negotiations that lie ahead. I will say only that we are determined to protect and strengthen the competitiveness of the United Kingdom economy.

My Lords, will my noble friend reinforce what he just said in reply to the Opposition Front Bench? Would it not be a good thing, in the conduct of these debates, if it was recognised that we are preparing not for a battle but for a negotiation?

I absolutely agree with my noble friend, and I will go somewhat further. It is absolutely in our mutual interest—both that of our country and of the countries of the European Union—that we not only come to an agreement on the issues before us but do so mindful of the fact that for generations to come, just as for generations past, this country has faced similar challenges to those faced by countries right across Europe. We therefore need to be in a position to continue to co-operate and collaborate with our European partners in the years and decades ahead.

My Lords, has the Minister read the House of Lords report on EU financial services, which fears that New York may predominate in the future as the global financial services centre—including, of course, those services which will gravitate to Frankfurt and Paris?

I have seen it, and it is clear that although some thought that it was a zero-sum game between London and the capitals of Europe, that is not strictly true. However, I point to what I said at this Dispatch Box last week—that there is a growing recognition, not just in this country but in others, that London will remain a very important financial centre, no matter what happens.